Cost-effective Alternative to a Family Foundation

A fund at the Community Foundation is a cost effective way to achieve all of the advantages of a private family foundation without the hassle, the cost and on-going administrative work.  Here are a few of the advantages of a Community Foundation (CF) Fund compared with a Private Family Foundation (PFF):

  • Setup time is reduced to one day from 2 to 3 months.
  • There is no cost to establish a fund with the Community Foundation.  PFFs require thousands of dollars of legal and accounting fees.
  • CF Funds have a low annual administrative fee typically ranging from 1.5 to 2% per year. PFFs require substantially more in annual legal, accounting and administrative fees.
  • Tax advantages of a CF Fund are substantially greater than a PFF which are limited.
  • PFFs are required to file annual federal tax forms. None are required for a CF Fund.
  • Investment management is provided automatically with a CF Fund.  PFFs must hire their own investment managers.
  • PFFs are required to pay out at least 5% of their fund each year regardless of income.  There are no such requirements for a CF Fund.
  • Grantmaking services are included with all CF Funds.  PFFs must do their own research and grant management activities.
  • PFF income is subject to excise tax (1 to 2%). CF Funds are not.

For more information on the advantages of establishing a Fund at the San Juan Island Community Foundation call: (360) 378-1001 or contact us.

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