Although the charity is not up-and-running yet, I’m going to go ahead and start posting my book summaries for the month of September.  So, here is the first one.  I think you’ll understand when you see the title!

 Title: Creating a Private Foundation – The essential Guide for Donors and Their Advisors

Date Completed: 9/8/09

Author(s): Roger D. Silk & James W. Lintott

Copyright: 2003, Bloomberg Press

# pages: 186

Genre: Business/Finance

 The focus of this book is on explaining the nuances of creating a personal foundation.  The Rockefeller’s have one, the Pew’s are all over public television and radio, and, well, you’re probably familiar with the Gates – you know – Bill and Melinda.

I learned a lot from the book, even though I will probably never have my own personal foundation.  Some of the things I learned:

  • You can set up and fund a foundation while you are still living.  I never really thought of this before, but I guess it is obvious (see reference to Mr. and Mrs. Gates)
  • A foundation is required to distribute 5% of its value each year.  This is a required minimum distribution.  The book didn’t address what the actual average distribution is.  I’d guess about 5%.
  • The assumption going into a foundation is that it will be a perpetual entity.  So, basically, it is all about money management.  Donate a big sum of money, invest it and earn more money, donate some, but not as much as you earned.  This way, the fund keeps growing and you can continue to give long after you are gone.
  • Here is a mind-boggling example (although, keep in mind this book was written in 2003, so the numbers are outdated): The Rockefeller Foundation was funded in 1913 with $250 million ($2.5 billing in 2000 dollars).  Through 2000, it has contributed $11 billion (in 2000 dollars) to charities.  At the end of 2000, it was worth $3.5 billion (page 100).
  • You should not be too specific regarding the mission of your foundation.  The book points out an example of a guy who set up a foundation to assist travelers through Missouri whose covered wagons broke down.  Covered wagons when the way of dial-up internet access, and there was no place else to distribute the cash.

 A good portion of the book covered the tax implications of all aspects of foundations.  I’m not going to cover them here since 2003 tax laws are probably not accurate.  However, my key take-aways were:

  1. A foundation is a mojor tax shelter and estate planning tool for the wealthy
  2. If you are going to have a foundation, you need to have a good accountant and lawyer to be able to stay on top of all the nuances of foundations.

 The book also covers:

  1. Why foundations are good for your children (a family who gives together stays together)
  2. Why foundations are good for Financial Planners and their Clients
  3. Alternatives to family foundations