Why Christians Should Not Use Private Foundations

I’ve seen it many times. A Christian family decides they want to formalize their giving. They go get advice from their lawyers and accountants who often are not Christians. Those advisors have the frame of reference of starting a private foundation, so off they go.

The first few years may be bumpy as they learn the ropes of minimum distributions, excise taxes, the types of organizations they can support and, of course, filing the tax return. But the problem they miss–and their advisors miss–is what happens when the founders pass away.

When the founders pass away, the foundation typically will have a set of bylaws allowing for the appointment of new board members. New board members are appointed, who realize that they are sitting on top of treasure. In other words, they have the opportunity to support organizations. The first generation successors are often kind to the wishes of the founders and tend to generally support the same organizations.

However, as more board members get added and as more generations intervene, the wishes of the founders get muted. Everyone tends to forget why the founders supported a particular organization. Accordingly, the wishes and desires of the foundation fall away, and values shift through generations. The foundation often morphs into something other than Christian.

Certainly, some wise founders associated with Christian council may wisely put in enough road blocks and provisions in the bylaws to keep the foundation Christian. But few do. If they make these protections, then it can be an appropriate vehicle.

One of the best solutions is using a Christian community foundation. A donor advised fund can be set up, which operates much like a private foundation. The tax benefits are higher, and the administration is simpler. But one of the key safeguards stems from the fact that the foundation is organized as Christian: it cannot distribute to anti-Christian organizations. To do so would put its own tax exempt status in jeopardy.

Thus, a Christian family engaged in family giving can rest assured that no matter what beliefs subsequent generations adopt, their original purpose of Christian giving will remain. I find it interesting that of the 100,000 private foundations in the country only 4,500 are Christian foundations which take applications. (See www.christianfoundationgrants.com). It causes one to wonder how the remaining 95,000 started out and then where they ended up.

William F. High is the President/General Counsel of the Servant Christian Community Foundation (www.servantchristian.com). Servant’s mission is to inspire, teach and facilitate revolutionary biblical generosity. He may be reached at whigh@servantchristian.com.

Posted in For Advisors, For Givers. Tags: , , . Comments Off on Why Christians Should Not Use Private Foundations
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