Private Foundations -- Are You Ready to Create Your Own Foundation? A Quiz

Author: Thomas Quinlin

Author: Thomas Quinlin

Would you like to create a private family foundation? It can be the most rewarding thing you'll ever do -- or not. Take this quiz to find out if you're ready. To find out if creating a foundation is right for you, mark the following statements as either true or false. 1. The main reason for creating a foundation should be the resulting tax savings. 2. Setting up a foundation is similar to setting up a corporation. 3. A private family foundation would make a terrific Christmas present for my family. 4. If I don't like my foundation anymore, I just close up shop. 5. Done correctly, a foundation can be very rewarding and bring the family closer together. 6. It's important to focus on political correctness when picking a purpose for the foundation, whether I like the activities involved or not. 7. A private foundation is private, so there are few if any reporting requirements and administrative hassles. Answers 1. False. Tax savings may be one of the benefits, but you should focus first and foremost on what you're passionate about and make that the mission of your foundation. To make your foundation work rewarding, you need to find a way to integrate it with your own passions and your life. Many of the tax savings actually come from your being able to pursue your passions on pretax dollars. 2. True. Setting up a foundation is very much like setting up a corporation. In fact, a foundation is generally set up as a corporation. There's also a significant amount of legal and administrative work that must be done on an ongoing basis. 3. False. A foundation is a huge commitment. Unless your family has been closely involved in the decision making process, and is deeply committed to the foundation, it won't work. "Surprising" your family with a foundation is a very bad idea. 4. False. A foundation, like a corporation, is a long-term commitment. It becomes an entity of its own. You can't just start and shut them down at will. 5. True. If your foundation is truly built around your passions and those of your family, and is well integrated into your life plan, it will likely be very rewarding. And working together on a shared passion is bound to result in a closer relationship between you and your family. 6. False. Absolutely not. You must create your foundation around your own passions, not around what you perceive to be the politically correct issue of the moment. If you don't, you will lose interest very quickly, and your foundation will become a chore, and maybe a nightmare. 7. False. The name notwithstanding, a private foundation is subject to numerous requirements. For example, there are reporting requirements, legal and administrative requirements, as well as requirements about disbursing funds to charities or for charitable activities. The Results How did you do? If you have answered at least 6-7 questions correctly, you may be ready to take the big step. Be sure to get all the fact, though, so your foundation will become the rewarding experience you deserve. If you answered fewer questions correctly, you may want to get more information on private foundations. You need to find out more about how they really work and what is involved. A private family foundation can do far more for you than just save taxes -- and you get to make a real difference in the world. But you have to make sure that you integrate it with your passions -- and your life.About the Author:

Get a free excerpt from the ultimate guide to using private family foundations for wealth management by wealth management advisor Thomas Quinlin. Here's more on foundations.

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