1. What is a Family
Foundation?
It is a simple ongoing charitable
account at The American Foundation™ under its Family Foundation Turnkey
Program. All contributions to the account are tax deductible. Each
foundation can carry the namesake of the donor’s family, such as the Bill
and Mary Jones Foundation, or any other name the donor chooses. The
Family Foundation then distributes part or all of the annual growth or
income to family selected charities.
Family
Foundation charitable accounts with The American Foundation operate as
perpetual charitable program accounts. They are not endowment
accounts, but rather they are totally unrestricted gifts to The American
Foundation for its family foundation charitable program. We
promote the preservation of principal. This is a much more effective and
successful way to financially benefit charities and charitable programs
over time. It also becomes a more meaningful family endeavor. We
are helping families to build their own “Family Charitable Legacy” that
provides never-ending financial assistance and philanthropy to worthwhile
family causes.
2.
Are many people establishing foundations?
Yes. There has been a phenomenal
growth in foundations during the last decade. Over two-fifths of
larger foundations were formed during the last ten years. There are over
60,000 grant making foundations. Assets of all active U.S. foundations have exceeded $500 billion. This
increase is attributable to people becoming more aware of the advantages
of foundation planning and the tremendous amount of good that can be done
through a foundation.
Many foundations are expensive to
set up and require a large amount of money to get started. One of the
many benefits of planning with The American Foundation is that our
Turnkey Family Foundation Program can be established for $300 and funded
with as little as $5,000 (both amounts are tax
deductible).
3. Who should
consider "Family Foundation Planning"?
People who want to do any of the following:
·
reduce their income tax burden
·
sell assets without incurring
capital gains tax
·
reduce or eliminate potential
estate tax
·
protect their assets from
creditors
·
sell appreciated property
(stocks/mutual funds, real
estate or a business interest)
·
increase personal cash flow from
low or non-income
producing property (stocks/mutual funds or real estate)
·
sell a business or parcel of real
estate
·
receive a sudden increase in
income (windfall)
·
transfer wealth to heirs in the
most tax-efficient manner
·
benefit their community or support
their favorite charity or
cause
In truth,
anyone who is financially secure, or is exposed to high income or capital
gains taxes, even with assets of under $1 million, should consider having
a Family Foundation to take advantage of the tax saving opportunities
related to charitable giving.
4. What is different
about The American Foundation?
The Family Foundation Advantage™ can be defined as the creation of a
charitable "endowment like" account within The American
Foundation. The Donor or his/her family retains the ongoing right
to direct the annual income, as grants, to the charity they choose.
This format provides for a charitable account that operates similarly to
a private foundation while receiving the greater tax benefits associated
with donations to a public charity.
The Tax Advantage. This new and improved format provides greater
tax benefits than a private foundation. Our public charity status (which
all new component Family Foundations qualify for) gives the maximum
available charitable tax deductions (better than private foundations).
The Charitable Legacy Advantage. In addition, when a Family Foundation is
established with The American Foundation, principal is preserved so the
Family Foundation will continue to operate indefinitely. This
allows the Family Foundation benefits to be passed to future generations
so the name and the wishes of the original donor will be carried forward
and continued in perpetuity.
The Paperwork Advantage. The American Foundation does all the
administration for each individual Family Foundation. This includes
all accounting and tax reporting, making annual grants to qualified
charities, overseeing, delegating, or implementing the investments, and
maintaining compliance with IRS policies.
The Cost
Advantage. There is no
cost to establish a Family Foundation with The American Foundation.
By doing this we hope to encourage anyone that wants to, to become a
philanthropist, or take advantage of our Turnkey Family Foundation
Program and Family Foundation planning.
5.
What are the benefits of "Family
Foundation Planning" with The American Foundation?
· Reduce or eliminate taxes (income tax, capital
gains tax, and estate tax)
· Protect assets (creditors cannot access
Foundation assets)
· Leave more tax-free wealth to heirs (pass 100%
of your estate tax-free using a Wealth Enhancement Trust™ in conjunction
with a Family Foundation)
* Any such Wealth Enhancement Trust planning is done
outside and independent of The American Foundation
and is an idea that we promote to the extent that it allows
donors to increase their philanthropy.
· Create a family legacy
· Benefit society with a Foundation under your
family’s perpetual direction - provide annual support to family-selected
charities, religious organizations and/or causes
·
Increase cash-flow (receive
increased tax-favored cash-flow from a CRT Advantage™ trust).
6.
How does a Family Foundation reduce
or eliminate taxes?
·
First, any asset (cash, stock, or
other property) transferred to a Family Foundation account at The
American Foundation receives a 100% income tax deduction
(especially beneficial for taxpayers in higher income tax brackets who
receive the highest charitable tax deductions available – up to 50% of
Adjusted Gross Income [AGI] for
contributions of cash, and 30% of AGI for donations of appreciated property. Excess
deductions above the 30% or 50% limits per year can be carried forward
for five years).
·
Second, any asset (cash, stock,
other property) transferred to a Family Foundation account is removed
from the donor’s estate, completely avoiding potential estate taxes
attributable to those assets.
7.
How does a Family Foundation
protect assets from
creditors?
A Family
Foundation account (which is creditor protected) is no longer
"owned" by the donor. However the donor retains
charitable direction of their Family Foundation. This is known as
having “charitable ownership”. Creditors cannot attack charitable
ownership.
8.
How can 100% of my estate pass tax-free
to heirs?
All assets transferred to your
Family Foundation are removed from your estate – thereby avoiding any
possible estate tax on those assets.
Since most people don’t want heirs
to feel left out or disinherited, a Wealth Enhancement Trust™ is
established to replace the value of those assets transferred to your
Family Foundation. This strategy provides your heirs with an inheritance
equal to the value of the assets that were transferred.
The *Wealth Enhancement Trust™ is an
irrevocable trust that is funded with a type of life insurance policy up
to an amount equal to the value of the assets transferred to your Family
Foundation. Because the life insurance policy is owned by an
irrevocable life insurance trust (ILIT), it is also out of your estate.
Since life insurance proceeds are not subject to income tax, the life
insurance proceeds (that are equal to the value of the assets transferred
to your Family Foundation) are received by heirs both income and
estate tax-free.
The end result
is that you have been able to establish a family legacy in perpetuity in
the form of your own Family Foundation. Your heirs can receive their full
inheritance even if you transfer all of your assets to your Family
Foundation (which many wealthy people do to eliminate all taxation). You
are able to pass the full value of those assets transferred into your
Family Foundation to your heirs without incurring any taxation for you,
or for your heirs. And in addition, you receive an income tax deduction,
and possibly an income for life (if a CRT Advantage Trust is used).
* Any such
Wealth Enhancement Trust planning is done outside and independent of The
American Foundation and is an idea that we promote to the extent that it
allows donors to increase their philanthropy. This information is
included because it makes it more attractive to those who do want to
become philanthropists.
9. How can I receive increased
tax-favored cash-flow from a
CRT Advantage™
trust?
Many taxpayers that we work with have assets such as real estate, stocks
or mutual funds, a business interest etc. that have appreciated over the
years. In many circumstances these assets generate little or no
income, but the owner doesn't want to sell because he/she doesn't want
to have to pay the capital gains tax on the appreciation. This is
known as "capital gains lock".
The CRT Advantage trust provides the solution to
"capital gains" lock. After the CRT Advantage trust is set up, the appreciated
property is transferred to the CRT Advantage trust at The American Foundation,
then the property is sold by the Trustee. Because the CRT Advantage is a tax-exempt trust, the property
is sold without incurring capital gains tax. One hundred per cent of the
value of the property sold is now available to be invested into income
producing assets (to provide the donor(s) with a lifetime income).
The CRT Advantage will usually
distribute anywhere from 5% to 10% (a minimum of 5% has to be paid in
order to qualify as a charitable trust) annually to the income
beneficiary (usually the donor, or donor and spouse). These income
payments can be structured for a term of years (not to exceed 20 years),
or they can be for the lifetime of the owner and spouse (the usual
option). Whenever possible, The American Foundation structures this
income stream to be paid out as capital gains income which is taxed at a
lower rate than ordinary income (especially beneficial for those
taxpayers in higher income tax brackets).
10. How is the
CRT
Advantage trust different from a Family
Foundation?
The CRT Advantage is a trust with its own tax
identification number. It is usually used for people who have
appreciated assets and don’t want to pay capital gains tax when the
appreciated assets are sold. The CRT Advantage provides a lifetime income stream to
the donor or donor and spouse.
A Family Foundation account comes
under the public charity status and tax identification number of The
American Foundation and provides an income stream to family selected
charities. This income stream to charities is designed to be
perpetual in nature so the wishes of the donor can be carried out
for many generations to
come.
A Family
Foundation charitable account is usually set up whenever a CRT Advantage is established.
11. What happens to the assets in the CRT Advantage
when the owners are no longer living?
Usually, if a donor has a
traditional (older version) Charitable Remainder Trust (CRT), after the owners are no longer living, the
remainder interest (assets that still remain in the trust) goes to
charities. And that’s it, the END. The income stream to any and all
charities stops.
In the new CRT Advantage with The American
Foundation, when the owners are no longer living, the remainder interest
is transferred to their Family Foundation account at The American
Foundation. This results in the creation of a family legacy for
future generations. Their Family Foundation account will be guided by
their heirs to carry out their wishes and continue to benefit worthwhile
philanthropy in perpetuity.
This is another of the many unique
benefits that you and your family receive when working with The American
Foundation for your Family Foundation planning - perpetual philanthropy
in your family name.
12. Why
is our charitable remainder trust called the CRT
Advantage?
Because the CRT Advantage is used in conjunction with a
Family Foundation at The American Foundation. This results in
the creation of a perpetual Family Foundation which we feel is more
advantageous than outright gifts to charities.
13.
How do I set up my own Family Foundation?
Setting up a
Family Foundation account at The American Foundation is as easy as
setting up a bank account. After completion and submission of a Donor Application (along with
$5,000 to fund your foundation). Your cash or assets are
transferred directly into your Family Foundation account at The American
Foundation. Your Family Foundation is now funded and
operating.
14.
Who is The American Foundation?
The American Foundation is a
qualified 501(c)(3) non-profit public charity. All of our Family
Foundation components (such as your component Family Foundation account)
qualify under our public charity tax status (the same status as a church,
the Boy Scouts, a university, or a hospital, etc.). Donors qualify for
the highest charitable tax deductions available – the same as mentioned
under FAQ Number 6.
Using our public charity status, we
help individuals, families and corporations create foundations that give
financial support to their communities and/or favorite charities, causes
or religious organizations. Unlike many other charitable organizations in
the nation, we strive to make the entire process of philanthropy easy and
rewarding by: 1) making it very simple and inexpensive to set up; 2)
having a low minimum amount to fund a foundation; and 3) providing a
great amount of donor direction in recommending charities that will
receive grants from the foundation.
The American Foundation can be
traced back to 1982 when its founder Ben L. Schaub originally established
the Interstate Community Foundation. Mr. Schaub later
established the Interstate Support Foundation (ISF) in 1985. Ben
had a vision of creating an expanding network of foundations that would
provide ever-increasing financial assistance to charitable organizations.
He knew that without private capital, many important social, educational,
scientific, and religious programs or entities would not survive.
Acting under these ideals, the
Interstate Support Foundation experienced considerable growth since its
establishment. In 1996, the Foundation received generous
contributions from two principal donors who recognized and wanted to
support the vision of ISF by designating large amounts of funds to
promote that vision. This allowed ISF to increase its services and
presence nationwide.
At this same time another
foundation, simply called The American Foundation was created. The
American Foundation has become our parent and primary foundation. It was
created to assist in new foundation development and act as an umbrella
foundation to all other affiliated foundations. The American Community
Foundation and the World Foundation are sister foundations that fall
under this umbrella.
The American Foundation has since
facilitated the establishment of hundreds of charitable trusts and Family
Foundation accounts through its Turnkey Family Foundation Program.
The American Foundation provides not only administration, but also
compliance with the complex IRS rules and regulations governing
foundations.
We hope that you will soon join The
American Foundation family and help us in our quest to promote new
philanthropy that will help support the charities of the world.
We appreciate,
and thank you for your interest.
