Upper Middle-Class Exploiting "Rich Man's" Tax Break?
Now it's not just multi-billionaires like Rockefeller, Getty, Ford, and Gates who can take advantage of a sophisticated but perfectly legal "tax shelter" --- ordinary people can, too. The tool: private charitable foundations.

Private Foundations Critically Important to Society
Although not well known or understood by the general public, private foundations provide much critically needed funding for all aspects of charity. For example, according to Dr. Steven Simon of Harvard University, private foundations play "a vital role in solving a number of important public health and medical issues. There is much critical research -- research that could lead to the cure of many diseases, the easing of much suffering, and to longer, healthier lives for all of us -- that is under-funded or not funded at all. Private foundations help fill that gap."

A Loophole You're Encouraged to Use
Congress created three important tax loopholes to encourage people to set up private foundations. First, donors to private foundations get an immediate tax deduction for contributions to their foundation. They can use this to slash their income tax bill by up to 30%.

Second, a foundation's assets grow free of income tax. This tax break goes totally to charity, so founders have more money available to fund their most cherished causes.

Third, no one -- donor, heirs, or foundation -- ever pays any gift or estate taxes on assets contributed to a foundation during life or upon death. Of course, as intended by Congress, this leaves much more available to make the world a better place.

Additional Benefits
In addition to the tax benefits, people create private foundations for a number of other reasons.

Ego is one. A founder gets the satisfaction of putting their name and personal stamp on an institution that will live forever.

More altruistically, founders gain a unique opportunity to teach their values and share their vision for a better world with their children and grandchildren. They do this by involving them actively in charitable activity and teaching through a hands-on, participative approach with their children or grandchildren.

Flexibility is another reason. A private foundation gives founders maximum flexibility to change their charitable goals and activities as their priorities change.

Control is a fourth reason people create foundations. A private foundation allows founders to retain total control over their personal philanthropy -- including how the money is invested, who gets it, and when. Founders can maintain control over the assets in the foundation throughout their lives, and can keep perpetual control of the foundation in their family after they die. Alternatively, they can designate other chosen successors to carry on the work and the name of their foundation. Founders also get to decide how the foundation's assets are invested, when to distribute funds to charity, which charities to give to, and how much.

Finally, the greatest reason people create foundations is the pure satisfaction of making the world a better place through effective giving, because a private foundation helps create focus, structure, and continuity for a well thought-out charitable plan.