The Law Is Changing, It's Time To Act!

Discover whether it's more efficient and economical to keep assets in your estate, gift it to irrevocable trusts or to an individual, or to donate it to a family run private foundation and retain control through corporations, and revocable trusts.

The Strategic Advantage of Establishing a Private Foundation: A Time-Sensitive Opportunity for Entrepreneurs and Investors

As we approach the sunset of the Tax Cuts and Jobs Act (TCJA) in 2025, high-net-worth individuals face a critical juncture in estate planning and philanthropic strategy.

The current gift tax exemption (in 2024, at the time of writing this article) of $13.6 million per individual ($27.22 million for married couples) presents a unique opportunity that savvy entrepreneurs and investors should seriously consider: establishing a private foundation.

Why Now is the Ideal Time

The impending reduction of gift tax exemptions creates a sense of urgency. Post-2025, these limits are expected to revert to pre-TCJA levels, potentially halving the current exemption. By acting now, clients can lock in significant tax benefits and set the stage for long-term philanthropic impact.

Beyond Tax Efficiency: The Multifaceted Benefits of Private Foundations

While the tax advantages are compelling, private foundations offer a range of benefits that extend far beyond mere financial considerations:

• Strategic Philanthropy: Foundations allow for structured, intentional giving that aligns with your values and long-term objectives.
• Family Legacy: Involve family members in foundation activities, instilling values of social responsibility across generations.
• Impact Investment: Treat your foundation as an "impact investment fund," strategically deploying capital for both financial returns and social good.
• Control and Flexibility: Maintain significant control over how your charitable dollars are spent, adapting to changing needs and opportunities.
• Boost Goodwill & Trust: Establish a visible commitment to social causes, potentially benefiting both personal and business brands.
• Tax-Free Investing: Conduct investments from the foundation instead of using your own name or an LLC, allowing for tax-free growth of a diversified portfolio.

Practical Considerations for Establishment

While the benefits are clear, setting up a private foundation requires careful planning and execution. Here are some topics that need to be covered with an expert to ensure its crafted with strategy and precision:

• Legal Structure: Ensure the bylaws and filing accurately capture the foundation's mission.
• Use of Assets: Ensure that income-producing assets directly further the mission of the foundation.
• Governance: Establish clear governance protocols, including board selection and decision-making processes.
• Investment Strategy: Develop an investment policy that balances growth with your foundation's charitable objectives.
• Compliance: Ensure ongoing compliance with IRS regulations governing private foundations.
• Grantmaking Strategy: Define clear criteria for selecting and evaluating potential grantees and projects.

Case Study: Maximizing Impact and Tax Efficiency

Consider the case of an ecommerce entrepreneur who recently sold her company for $20 million. By establishing a private foundation and funding it with $10 million of appreciated stock, she achieved several objectives:

• Avoided capital gains tax on the donated stock
• Secured a significant charitable deduction, offsetting other income
• Removed $10 million from her taxable estate
• Created a vehicle for ongoing philanthropic impact in education and technology
• Created an "investment fund" that grows tax-free
• Increased impact by directly supporting charitable causes in a sustainable manner

This strategic move not only provided immediate tax benefits but also established a platform for long-term social impact aligned with her professional expertise and personal values.

Conclusion: A Time-Sensitive Opportunity

The convergence of current high gift tax exemptions and the impending TCJA sunset creates a unique window of opportunity for establishing a private foundation. By acting now, entrepreneurs and investors can secure significant tax advantages while creating a lasting vehicle for philanthropy and family legacy.

We strongly advise clients to consult with their legal and financial advisors to explore how a private foundation might fit into their overall wealth management and charitable giving strategies. The potential for tax savings, coupled with the opportunity for meaningful social impact, makes this a compelling option for those in a position to act.

Don't let this opportunity pass. We invite you to attend a free workshop where you can meet experts involved in the world of law, tax, and finance, and discover how these strategies can be implemented for you and your family.

Thanks for reading, I hope you leave inspired and motivated to use your wealth to benefit your family, your heirs, and humanity!

Let's change some lives together,

Sid Peddinti, Esq.

ps. If you'd like to watch a detailed webinar that covers the details of wills vs trusts vs foundations to understand how each of these concepts fit into the over all estate and tax puzzle?

Visit this page to lwatch the free webinar: https://www.lawandtax.com/willsandtrusts

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Disclaimer: Disclaimer: No Legal, Tax, Financial, Insurance, and Fiduciary Advice Contained. No Legal, Tax, or Fiduciary Relationship Created With Us. This information is 100% educational and for entertainment purposes only.