Private Foundations in Estate Planning: Overcoming IRS Scrutiny, Structuring Tax-Efficient Charitable Legacies

Estate planners and advisers are increasingly turning to private foundations as a legacy tool for charitably minded clients. Long considered as reserved for wealthy donors, the increased control over distributions and enhanced income and transfer tax advantages have fueled the rise in private foundations as an estate planning vehicle.

Setting up a private foundation involves creating a separate exempt organization and contributing assets to the foundation. Once established, contributions to the foundation remove the assets' value from the donor's gross estate and qualify for a current-year charitable deduction.

For some assets, particularly IRAs and other retirement accounts and those that generate income for a decedent, the tax impact is significantly reduced compared to assets passed through a will or trust.

Operating a private foundation does not lack burden or risk: the entity must file an annual Form 990-PF return. The foundation may be subject to excise tax on unrelated business taxable income.

Additionally, there are rules against "prohibited transactions" and "self-dealing" with related persons. However, structured correctly, a private foundation may pay compensation--even to family members of the donor--so long as the compensation is "reasonable."

Listen as our experienced panel provides a thorough and practical guide to the operations, benefits, and potential risks of using private foundations as estate planning tools. The panel will offer techniques in avoiding and managing IRS audits relating to private foundations.

1. Income and transfer tax benefits and treatment of contributed property
2. Ideal assets to contribute and not contribute to a private foundation
3. Establishing a private foundation
4. Reporting requirements, operational risks, and opportunities

The panel will review these and other key issues:

• Which asset transfers provide the most income and transfer tax benefits when gifted to a private foundation?
• What are the tax treatment differences between private foundations and donor advised funds?
• Scenarios for post-mortem planning using private foundations to lessen the impact of income in respect of a decedent
• What are the operational challenges for a private foundation?
• How to overcome increased IRS scrutiny and potential audit of a private foundation

Learning Objectives

After completing this course, you will be able to:

• Identify which asset transfers provide the most income and transfer tax benefits when gifted to a private foundation
• Recognize the tax treatment differences between private foundations and donor advised funds
• Understand how to lessen the impact of income in respect of a decedent in post-mortem planning

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.