Terminating Private Foundations

Though most people hope that their private foundations will last for many generations, several factors can limit a foundation’s lifespan, causing many founders to choose to terminate the foundation. One popular method for termination is to dissolve the foundation and distribute the assets to a charity.

Complex tax rules, strict regulations, publicity of charitable donations, and day-to-day details can all factor in a founder’s decision to terminate a foundation. Some attorneys recommend that founders set up a donor-advised fund to use in connection with a private foundation. The donor-advised fund allows the founder to make grant recommendations and then, when the founder dissolves the entity, the remaining endowment passes to the donor-advised fund account.

For more information on termination of private foundations, see Deborah L. Jacobs, Making the Transition Out of Private Foundation, Fidelity Charity (Jan. 2012).

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.