Clients who established private foundations years ago may find that vehicle no longer suitable or convenient. Perhaps no family members or friends are available to run the foundation as volunteers. Maybe the administrative burdens have become a nuisance. Or the size of the private foundation now makes it difficult to justify the operational costs. Whatever the situation, working with The Dallas Foundation is a great alternative.
The private foundation may transfer all of its assets to The Dallas Foundation and then elect with the IRS to terminate both its private foundation status and legal existence. The private foundation could then create any type of fund at the Foundation, such as a field of interest fund to continue grantmaking in areas important to the private foundation, or a Donor-advised fund with family members or trustees as donor advisors.
The private foundation may transfer all of its assets to the community foundation without electing to terminate. Through this method, the private foundation avoids excise taxes and the obligation to file a tax return, since it has no assets and no income. But the private foundation still exists as a legal entity in order to advise the community foundation on disbursements from the fund.
Clients who have private foundations may occasionally have difficulty meeting the foundation's annual federal payout obligation. Perhaps the private foundation has not received sufficient applications within its focus area, or a favored project is not quite ready to proceed.
In these situations, the private foundation can create a Donor-advised fund at The Dallas Foundation and contribute all or part of the current year's required distribution to the fund. Because the Foundation is a public charity, this contribution to the Foundation is a "qualifying distribution" that counts towards the federal payout requirement. The private foundation's trustees can then recommend grants from the Donor-advised fund as needed.
With more than 1.5 million public charities in existence nationwide, and thousands locally, it can be difficult for private foundations, particularly those with no staff and few volunteers, to identify the most worthy agencies. In such a case, the private foundation could create a fund at The Dallas Foundation and then ask our grantmaking staff to develop a portfolio of charities for the private foundation's consideration and recommendation.
For any number of reasons, a private foundation might want to support a nonprofit anonymously. If so, the private foundation could establish a Donor-advised fund at The Dallas Foundation, then recommend that a grant from the fund be made anonymously to the ultimate beneficiary. All of a private foundation's grants are public information. The Dallas Foundation's grant lists are also public, but the Foundation is not required to specify which fund was the source of a particular grant.