Private Foundations: Considerations for UHNW Philanthropy
When charitable giving becomes a major part of your wealth strategy, structure matters. For ultra-high-net-worth (UHNW) individuals and families, a private foundation offers the opportunity to shape your long-term philanthropic vision while retaining full authority over how and where grants are made.
But while the opportunities are significant, private foundations also come with complexities and responsibilities that require careful planning.
A purpose-built structure for giving
A private foundation provides a formal, enduring structure for charitable giving. Unlike Donor-Advised Funds and some other vehicles, foundations allow donors to establish their own grant-making agendas, fund specific initiatives, and set governance policies tailored to their values and vision.
For many families, foundations also serve as an important educational platform, giving younger generations a way to gain hands-on experience in stewardship, leadership, and philanthropy.
Control is another defining feature. From selecting board members to determining where and how grants are made, families retain complete decision-making authority. This autonomy can be empowering, particularly for those seeking to tackle complex social challenges or support underfunded causes.
Navigating the challenges
While private foundations offer maximum control, they also come with a set of obligations that donors must be prepared to manage, such as:
- Mandatory distributions. Each year, foundations are required to distribute at least 5% of their net investment assets for charitable purposes. Meeting this distribution requirement, especially in years of market volatility, can require active portfolio and cash flow management.
- Administrative responsibilities. Running a private foundation is not a passive endeavor. It involves ongoing governance, meticulous recordkeeping, annual tax filings, regulatory compliance, and sometimes staff management. The administrative burden can grow significantly as the foundation’s assets and activities expand.
- Tax complexity. Private foundations are subject to unique tax rules, including excise taxes on investment income and restrictions around self-dealing, jeopardizing investments, and taxable expenditures. Navigating these rules demands careful oversight and, often, specialized legal and accounting support.
- Mission drift. Over time, the mission and activities of a foundation may drift from the founder’s original intent. Changes in family dynamics, evolving social priorities, or external pressures can make it challenging to maintain alignment with the foundation’s founding vision unless proactive governance structures are put in place.
Alternatives and complements to private foundations
While private foundations offer a unique level of autonomy, they are not the only option for sophisticated philanthropy.
Donor-Advised Funds (DAFs)
For those seeking a simpler, more streamlined approach, DAFs offer many of the same tax advantages without the administrative burden. Grant-making can still be strategic and flexible, making DAFs an attractive standalone or complementary option. In some cases, families may choose to maintain both a private foundation and a DAF to balance control and efficiency across different philanthropic initiatives.
Community foundations
Families looking to tap into local knowledge, simplify administration, and collaborate with other philanthropists often turn to community foundations. These organizations provide built-in expertise, robust back-office support, and opportunities for donors to connect with those in need as well as other like-minded givers. Most community foundations offer DAFs as well as other types of charitable funds designed to meet community needs and achieve donors’ goals.
The expanding role of UHNW philanthropy
Philanthropy is a defining feature of the UHNW landscape. Today, nearly one in five ultra-high-net-worth individuals maintains a private foundation—and among those with net worths exceeding $100 million, that figure rises to nearly 30%.1
As private wealth grows, so too does the responsibility and opportunity to create a meaningful, lasting impact. Whether through a private foundation, a DAF, a charitable trust, or a combination of vehicles, strategic planning can ensure that philanthropic efforts are as enduring as the wealth that fuels them.
Building a legacy that lasts
Choosing the right charitable structure is not just a financial decision, but a personal one that’s rooted in values, goals, and vision. Private foundations offer unmatched autonomy, but also demand active engagement.
If you are considering establishing a private foundation, or exploring whether another vehicle might better suit your philanthropic goals, speak with your Corient Wealth Advisor. Together, we can help you build a legacy of giving that reflects your family's priorities today and for generations to come.
1 https://altrata.com/reports/ultra-high-net-worth-philanthropy-2024?
ABOUT THE AUTHOR
Laura Godine
Laura is a Partner, Wealth Advisor and Regional Head of Wealth Planning in our Boston office. She is responsible for estate and financial planning for individuals, corporate executives, business owners and families. In this role, Laura works with clients and their advisors to develop and implement estate planning, wealth transfer and charitable planning strategies. Laura applies her expertise in the areas of estate and gift planning, charitable giving, and estate and trust administration to accomplish client goals and objectives, and she advises clients on the integration of their investment, financial and estate plans. Prior to joining the firm, Laura was senior director of Professional Advisor Relations at the Boston Foundation, where she partnered with other trusted advisors to identify philanthropic giving strategies for affluent clients. Previously, Laura practiced as an estate planning attorney in Boston, focusing on strategic analysis and planning of estates for individuals and family groups.
Laura earned her Juris Doctorate from Northeastern University School of Law and is also a graduate of Brandeis University. She holds a Chartered Advisor in Philanthropy (CAP®) designation from the American College of Financial Services and has been awarded the Accredited Estate Planner (AEP®) designation by the National Association of Estate Planners & Counsels (NAEPC). She is also a certified 21/64 trainer, equipped with tools to help families successfully navigate planning across the generations. Laura resides in Newton, Massachusetts, with her husband, Steve, and their little ones, June (human) and Opal (canine).
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