Private Foundations: A Legacy Strategy for High-Income EarnersPrivate Foundations: A Legacy Strategy for High-Income Earners

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Lars Johnson

Lars has over 20 years of experience working with business owners and entrepreneurs. He graduated with honors from Brigham Young University and has applied his knowledge, expertise, and training to build exceptional businesses alongside some of the brightest business minds. His knack for quickly uncovering the root causes of issues aids him in putting together effective strategic solutions.
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Private Foundations: A Legacy Strategy for High-Income EarnersPrivate Foundations: A Legacy Strategy for High-Income Earners

Contributor, Lars Johnson on November 11, 2025
1 min read

For ultra-high-income individuals, charitable giving isn’t just about writing checks. It’s about creating a lasting impact—one that carries their name, values, and vision for generations. That’s where Private Foundations come in.

A private foundation allows you to establish your own charitable organization, giving you control, flexibility, and tax benefits that go far beyond traditional giving.

What Is a Private Foundation?

A private foundation is a nonprofit entity funded and controlled by an individual, family, or corporation. Unlike public charities, which receive broad community support, a private foundation is primarily supported by one source—you.

Key features include:

  • You control the board and set the mission.
  • Initial contributions are tax-deductible.
  • Assets grow tax-advantaged inside the foundation.
  • Annual distributions (usually 5% of assets) must go to charitable purposes.

Why This Strategy Matters Now

With tax laws shifting and estate tax exemptions under scrutiny, private foundations allow high-income earners to:

  • Reduce taxable income through large charitable contributions.
  • Retain control over how funds are used.
  • Build a legacy that reflects family values and priorities.

Unlike one-time donations, a foundation creates a permanent vehicle for giving—ensuring your resources continue to make an impact long after you’re gone.

Who Can Benefit from Private Foundations?

This strategy is best for:

  • Families with $2 million+ in assets they want to dedicate to charitable purposes.
  • Entrepreneurs selling businesses and seeking large deductions.
  • Philanthropists who want to create a recognizable charitable legacy.

How It Works in Practice

  1. Establish the foundation with legal and tax professionals.
  2. Fund it with cash, stocks, real estate, or other assets.
  3. Claim deductions for your contributions, subject to IRS limits.
  4. Manage and grow assets within the foundation.
  5. Distribute funds annually to qualified charities, scholarships, or programs.

Pros and Cons of Private Foundations

Pros

  • Large, immediate charitable deductions.
  • Full control over mission, grants, and distributions.
  • Legacy-building for your family name.

Cons

  • Requires setup, legal fees, and annual filings.
  • Must distribute at least 5% of assets annually.
  • Subject to ongoing IRS oversight.

Deadlines to Keep in Mind

  • Foundations must be established by December 31 for contributions to count in the current tax year.
  • Annual filings (Form 990-PF) are required to maintain compliance.

Final Thoughts

Private foundations are one of the most powerful tools available for high-income earners who want to combine charitable impact with tax efficiency. By setting up your own foundation, you can reduce current taxes, protect family wealth, and build a legacy that lasts for generations.

If you’re serious about leaving a mark through philanthropy, a private foundation could be the cornerstone of your giving strategy.

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