Become-A-Philanthropist™
Discover how to protect your assets, preserve wealth, and lower taxes on several fronts by incorporating a private foundation and embracing philanthropy in your business and life
Discover How You Can Do Well, By Doing Good.
In 1889, Andrew Carnegie published the "Gospel of Wealth", where he asserted that any surplus funds beyond one's personal needs should be treated as a trust fund to benefit humanity.
This philosophy has transformed the manner in which American corporations, entrepreneurs, and investors have redirected their business earnings and personal wealth to not only uplift their families, but also further medical, social, charitable, religious, sport, research, education, and other humanitarian and socially beneficial causes.
In 1917, in the midst of the WWI, a few years after the Internal Revenue Code (IRC - "the tax code") was passed (1914), the treasury department realized that charitable donations were at an all time low, while tax rates were at an all time high, especially for the wealthiest individuals.
Senator Hollis, one of the proponents behind incorporating the "charitable tax deduction" into the tax code, argued that:
People generally donate after all other expenses, living, education, etc. have been fulfilled, and if there is a surplus, they donate. If the government incentivized them to donate a portion of their taxable income or assets to lower taxable income, it would increase charitable giving, and that would be mean up to 100% of proceeds would reach the intended charities, as compared to 5, 10, or 15% if it were to go through the government bureaucratic process.
The Senate agreed with this logic and the "Charitable Tax Deduction" was incorporated into the tax code.
The business and tax strategy of earmarking a portion of earnings and assets for charitable investments and donations has evolved over the past century - you can find almost every large corporation and entrepreneurial leader pursing philanthropic work and measuring both bottom lines: financial and social impact.
In 1969, the word "private foundation" was coined, which is a recognized as a type of 501(c)(3) tax-exempt nonprofit organization, that is primarily funded by a one corporation or an individual/family members.
Private foundations are the legal structures that allow a corporation or a family to not only formalize and indoctrinate philanthropy into their core financial model, but also develop and manage a "charitable trust fund" that family members can manage, generation after generation, bypassing estate, gift, inheritance, capital gains, and income taxes at the same time!
Our mission is to empower, inspire, encourage, and facilitate the transformation of entrepreneurs and investors into purpose-driven philanthropists and community superheroes, who are using their wealth to benefit their families AND benefit humanity.
20 unique advantages of starting a private foundation and earmarking a portion of your wealth to benefit humanity...
Asset protection: Donated assets belong to the PF and are protected from the donor's personal lawsuits
Wealth preservation: Donated assets can be protected from "spendthrift" heirs and beneficiaries
Corporate Social Responsibility: Corporations can reduce taxable income by 10% every year by donating to a PF
Reduce AGI by 30% for cash: Individuals can reduce taxable income by 30% (AGI) by donating cash to a PF
Reduce AGI by 20% for assets: Individuals can reduce taxable income by 20% (AGI) by donating assets to a PF
Carry-Over Deductions: Excess deductions can carry-forward for 5 consecutive years (on personal returns)
Reduce estate size: Lower estate value by donating assets to the foundation (remove from the estate)
No probate process: Donated assets do not go through the donor's probate proceedings
No gift/estate tax: Avoid Donations to a PF are not subject to traditional gift or estate tax laws or limits
Upcoming Tax Changes: Circumvent upcoming 50% reduction in gifting limits (Tax Cuts and Jobs Act)
Align with estates & trusts: Unlimited charitable deduction limit for estates and complex trusts
Control, Don't Own: Maintain control without ownership (control = ownership for other trusts)
Tax-Free Growth: Tax-free growth of donated assets (PF is a tax-exempt entity)
Change more lives: Structured approach to charitable giving (5% donations required annually)
Good for business: Boost goodwill, trustworthiness, and brand perception (Google, Walmart, Amazon)
Philanthropic estate plans™: Align with corporations, wills, and trusts seamlessly
Empowering the next generation: Transfer knowledge about entrepreneurs, investing, and philanthropy to heirs
Reasonable salary: Pay family members who work for the foundation and perform different functions
Personal fulfillment: Find personal satisfaction, lower stress, find purpose, and discover your true passion(s)
"Become the change you want to see": this mode of operation allows you to do just that
There are several other benefits that can be leveraged by entrepreneurs and investors in addition to these, but I believe you understand the core benefits - there's a FINANCIAL advantage to focusing on NON-FINANCIAL goals and objectives that are charitable and philanthropic in nature!
Compliance Matters:
With Great Power Comes Great Responsibility (Spider Man)
In order to ensure the board members do not abuse the extraordinary powers granted under the "philanthropic operating model", specifically through a private foundation, it's important to ensure all members truly understand the rules and regulations that are placed on private foundations.
Here are some of those rules and regulations that ensure the integrity of the process is maintained:
Governing Instrument: The board must follow the organization's governing documents and mission, or risk losing tax-exempt status, facing penalties, and being taxed at corporate rates.
IRS Code §4940: Excise Tax on Net Investment Income: Charitable organizations face a 1.39% excise tax on net investment income. Non-payment can result in additional taxes, penalties, and potential revocation of exempt status.
IRS Code §4941: Prohibition of Self-Dealing: Self-dealing with insiders is prohibited, with initial taxes of 10% on the transaction and 5% on approving managers. Failure to correct can lead to a 200% tax and board member removal.
IRS Code §4942: Required Payouts for Charitable Purposes: Organizations must distribute 5% of assets annually for charitable purposes or face a 30% tax on undistributed amounts. Continued non-compliance can lead to revocation of exempt status.
IRS Code §4943: Limits on Business Holdings: Organizations are limited to holding 20% of a business's voting stock, with a 10% tax on excess holdings. Failure to correct can result in a 200% tax and potential loss of tax-exempt status.
IRS Code §4945: Prohibition of Taxable Expenditures Prohibited: activities include lobbying, political campaigning, and non-charitable grants, with a 20% tax on such expenditures. Persistent violations can lead to revocation of exempt status.
These rules and regulations are not hard to maintain if you perform your role as the trustee of the charitable trust fund (private foundation) with honesty, integrity, and transparency.
Given the plethora of benefits and advantages that you get to enjoy for doing the things that most of you are already doing (investing, donating, preserving wealth, growing your portfolio, teaching values to your heirs, transferring wealth with certain checks and balances in place)!
Overall, the benefits of venturing down the path of philanthropy clearly outweigh the rules and restrictions to ensure you're not "cheating the system".
The Law Is Changing In 2026, And Private Foundations Will Become Even More Important And Relevant...
We truly believe private foundations will have a much more important role to play as the "old" tax rules kick-in once again in 2026.
The Tax Cuts and Jobs Act expires on December 31, 2025, and this change will impact the manner in which individuals and their families will experience, preserve, and transfer wealth from one generation to the other, especially those individuals who have assets in excess of the new "gifting" limits, which will be reduced by 50%.
What this means in a nutshell:
The current GIFT/ESTATE law allows each individual to "gift" or "transfer" up to $13.6 million in their lifetime or after their death (through their estate - wills or revocable trusts) to another, before they have to pay a "gift or estate" tax. This tax is owed by the donor (person making the gift) and not by the recipient.
That limit will drop by 50% in 2026. Any gifts or transfers in excess of the new limit ($7 million per person) could be subject to estate and gift taxes, which is 40% at the highest level.
When does "gift/estate taxes" this tax kick-in:
For example:
Let's assume a person, Cliff, an unmarried man with 2 kids, is worth $10 million in 2024 (now), and the new estate/gift limit is set to drop to $7m in 2026.
He has equity in a home (500K) , 2 rental properties (3m), 401K/roth (500K), Stock/security (3m), insurance policies (3m), and savings/gold/art/vehicles (100K).
He decides to "gift" shares of the real estate/insurance/stock - collectively worth $9 million, about $3 million each, to irrevocable trusts for the benefit of his/her kids.
GIFTS before 2026:
If he transfers these gifts before the "TCJA" expires in 2025, he will face $0 gift taxes as the current limit allows $13.6 million per person. Even if passes away with revocable trusts and wills, his estate will not face an estate tax.
GIFTS after 2026:
After 2026, his gift of $9m will be in excess of $2m over the new limit of $7m.
He faces a tax of 40% on the $2m that's in excess of the limit (1.8m in gift tax).
If he dies with a revocable trust and will, his estate will face a 40% estate tax on the 2m that's in excess of the limit of $7m.
So - what can many of folks do??
:)
You might have guessed it - $2m excess may have to be donated to the foundation strategically in order to maintain control, but not ownership.
Donations to the foundation do not face gift tax or estate taxes - tying in the foundation with the wills or trusts ensure there's always an alternative pathway to ensure you "redirect" what would have been tax dollars into charitable donations.
I think it's a fair trade!
If you're still reading - well, clearly, the "path of philanthropy" is for you!
Schedule a call to see how our program, Become-A-Philanthropist™ works, and how you can develop a "Philanthropic Estate Plan" that transcends death & taxes!
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The testimonials showcased on this page are authentic accounts from our clients. However, the outcomes depicted here are not typical and should not be construed as guarantees. Your personal results may differ depending on factors such as your skills, experience, level of motivation, and other unpredictable variables. Our company has not conducted comprehensive studies on the results of our average clients. Therefore, your outcomes may vary.