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The right mix of philanthropic legal structures is different for everyone, so it’s no surprise that one of the most common questions philanthropists have when ramping up their giving is “what structure or combination of structures should I use?” The question is at its core a financial and technical one, but there are important strategic considerations to keep in mind. This guide is not intended to replace more specific tax, estate, or legal counsel, but instead offers a walk through a few of the options and some considerations when making this decision.
How to make your decision
So, how to go about choosing from among the growing number of options? Like so many choices in philanthropy, the decision of which structure to pursue (if any) is an intensely personal one. Your decision should be the right choice for you at this moment in time, and it might be subject to change.
Also, consider that the right solution might be to operate through multiple structures. None of these structures are mutually exclusive.
In addition, you may not want to choose a giving structure without consulting tax and/or legal professionals.
- Donor advised funds are charitable funds managed by a third-party organization. Commonly, these sponsoring organizations include mutual funds, investment advisors, or community foundations.
- Giving circles are vehicles that allow you to pool your charitable investments with other donors for the purpose of investing in an anchor of shared interest.
- Charitable remainder trusts are funds that allow the donor to convert assets into a stream of annuities for a period of time.
- Operating public charites are 501(c)(3) nonprofits that receive contributions from many sources, like the public or government.
A private foundation is a 501(c)(3) nonprofit organized to make grants with a charitable purpose. Unlike charities, which get their money from public sources, a private foundation is organized with money from an individual, family, or corporation. In the United States, private foundations must pay out 5% of their assets annually or pay an excise tax.
Read the full article about choosing legal structures at The Bridgespan Group.