You struggled hard to accumulate your nest egg. But, because you’ve been a successful businessperson, your attorney and CPA have hounded you to revise your estate tax planning because your potential estate taxes may be large enough for the government to buy a cruise missile.

You’ve always shared with the needy, so you consider including charitable contributions as part of your estate planning, not only for tax benefits but, also, because of your genuine concern for others. Your advisors present you with a number of alternatives. You consider a distribution to charity after the deaths of you and your spouse. You discuss charitable remainder trusts; and you think about other similar tax-planning devices. But, somehow, the thought of writing a future check to charity strikes you as sterile. You’ve never been the type of person to make a passive contribution to charity and then to sit back, clip coupons and watch daytime TV. You also aren’t interested in writing your large check to a charity simply to get your name on a building.    You consider “retirement” to be a change in effort, not an ending of goals. You’re a hands-on person who wants to involve you and your family in meaningful service, rather than having your kids simply inherit all your wealth and, maybe, think of you occasionally as they buy their expensive automobiles.

If this describes you, you may be one of those rare individuals who may consider establishing your own qualified charitable foundation, allowing you immediately to provide funding, to coordinate the use of the funds, to obtain significant income tax and estate tax advantages, and to remain directly involved in the charitable decision-making. This is a section “501(c)(3)” organization, referring to a section of the Internal Revenue Code involving charitable organizations and allowing deduction of contributions to the organization. When appropriately handled, you can get considerable satisfaction in a meaningful hands-on charitable undertaking.

A significant number of people take this approach and enjoy considerable personal satisfaction.  Consider three real-life examples in Utah:

James grew up in poverty. Through hard work and business acumen, he became more successful than he ever dreamed possible, built a business, sold it, and is now financially established. Grateful for his own opportunities, he has always wanted to share with others. Since he has been used to being in charge, and is not one to sit on his thumbs, he established a 501(c)(3) foundation and is now having a ball helping the needy in job creation, housing, financial assistance, and education. Carolyn runs her family’s private foundation, which is qualified to provide funding for improving the status and condition of disadvantaged women in third-world countries, as well as in the United States.

A local foundation established by three professionals has quietly provided counseling, medical and dental care and other meaningful assistance for a broad range of needy people locally and internationally. This gives the organizers the pleasure of privately helping with serious social problems while largely remaining anonymous.
In each situation, these people have the enjoyment and satisfaction in harvesting the meaningful results of their life’s work and providing the opportunity to people not so fortunate.

Before you jump into a private foundation, though, you need to give it careful thought. Such an endeavor is not for the faint of heart nor for the careless. Considerable burdens and disadvantages exist in establishing and operating such a foundation, not the least of which is the considerable expense and procedures in obtaining initial IRS approval. Equally, if not more, importantly, you must also be prepared to jump through the continuing hoops of compliance with the complex, and often frustrating, IRS laws, regulations and reporting requirements. You cannot play games with this. The foundation must be genuinely charitable in its operations and cannot be a subterfuge for shifting tax-free money for you own family benefit. This can be a daunting task for most people, even for a detail person and even with your professional advisors helping you. If you are impatient with details and regulations, or if you pride yourself on standing eyeball-to-eyeball with the IRS, forget it.

But when the right people can handle it the right way, a charitable foundation can provide real satisfaction as well as tax savings.