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Private Family Foundations - Charities or Tax Evasion?

By Bob Barney:

      Almost everyone wants to help those in need, and I am no exception. Part of the "tithe" I give to God is in the money that I give to charities and food banks. Jesus said that when you help the poor and hungery, you are actually helping him!  It is our duty to give to the needy. God expects it. However, there is also a warning that I want to shout from the rooftop! Is it really a charity you are supporting, or is it just a tax evasion scheme, devised by clever lawyers to keep rich people RICH!  When the Federal Government is $14 trillion in debt, you should be paying extra attention to those so-called charities that are actually robbing from you in tax dollars and giving to the owner of the charity and not to those needy people you think you are helping.

The Plain Truth, and our sister site RaceRap.Com has helped raise over $150,000 in the past 10 years for charities which we have checked out throughly. We asked the tough questions, and frankly have found many charities that we have refused to help. There are guidelines that one should follow when donating or supporting a charity.

Does the charity???

  • devote at least 75% of its budget to program??  (I would actually look for over 85%)
  • Have a mission statement on the organization’s Web site to see that the group has clear goals and the ability to execute them?
  • Have published finanicials?
  • Have results? To know this, you will need to know what the mission statement is and if it has clear goals. For instance, if it is a program to help abused children, see how many children or childrens' facilities have been assisted in a given amount of time.

Just because a celebrity puts their name on a charity doesn't make it worth anything!

Madonna wants to sue the director of her foundation, Raising Malawi, to recover $3.8 million in squandered donations meant to build a school in the impoverished African country. Staffers of Raising Malawi are suing Madonna for lost wages.  (Read more:

Consumers should try to vet any charity, celebrity run or otherwise, that they donate money to. But Art Taylor, President and CEO of the Better Business Bureau’s Wise Giving Alliance, says that celebrity charities deserve an extra dose of skepticism and donors should be careful about being wooed by a famous face.

“Celebrity in itself shouldn’t ever be the sole indicator of a charity’s reliability.  Look for information about the charity, not the celebrity,” Taylor advises. “Be wary of newly established charities with as yet little to offer beyond the celebrity connection.  A good organization may be in the making, but only a track record can give assurance.”

The Charitable Family Trust: Just who gets the charity money?
         Are you aware why many celebritities and millionaires set up charities, known as family trusts?  The shocking answer may make you mad! Are you aware that they government doesn't require much of the charity's money to be spent on the charity! JUST 5%!!!!!   Look at this example:

Let's suppose you leave (or raise from others) $2,000,000 for your Private Family Foundation. The IRS says you must distribute at least $100,000 (or 5%) to recognized charities in order for the Foundation to qualify for its special tax advantages. Of course, you can select a higher payout if you choose. But five percent is the absolute minimum.

The annual payout is established when you first sit down with a qualified estate attorney who has experience working with large estates. And the difference between what the assets earn (e.g. 6% per year) and the mandatory payout can be put back into the Foundation.

What advantages does this millionaire get?

  • Special Tax Advantages:    Private Family Foundations have special tax advantages, because they are considered "charitable organizations" themselves. Because of this classification, any earnings on Foundation assets are tax-exempt, and can be distribute to the charities you choose.  If established properly, a private family foundation can often avoid capital gains taxes on highly-appreciated assets. In addition, interest and investment earnings that are not slapped with an income tax can instead be used to help the charities or causes you support.
  • Immediate Tax Benefits: If you have highly-appreciated assets that you're holding to avoid steep capital gains taxes, a Private Family Foundation could help. Any appreciated assets that you transfer to a Private Family Foundation can be sold by the Foundation with no capital gains taxes. This is because of the Foundation's charitable status.   Second, you can get an immediate tax deduction for any money or property to grant to the Foundation. This deduction can equal up to 30% of your adjusted gross income (20% for appreciated property). Any income tax deduction not used in your contribution year may be carried forward over the next five years.  The valuation of these deductions depends on a number of things, including original cost and the type of property being transferred.  
  •  Estate Tax Benefits:  Every dollar that you contribute to your Private Family Foundation means one less dollar that is included in your estate. Gifts that are regularly made to charities can instead be used to fund your PFF. And if you are in a higher tax bracket, that could ultimately save up to 46% in estate taxes.   Best of all, you can make such contributions to a Private Family Foundation without affecting the $12,000 annual gift tax exclusion or the current $1 million Gift Tax Credit . 
  • Employment for the Family:   You may arrange for your heirs and descendants to receive salaries as "employees" of your Foundation. Simply name family members as replacement trustees to succeed you after death or resignation.  Many Foundations pay their directors using the difference between their required distributions and their annual income. If your Foundation is earning 10% annually on its assets, but only paying 5% annually to charities, the difference can be distribute for legitimate expenses, including salaries for the directors of the Foundation. 

Private Family Foundations can also be combined with Charitable Remainder and Charitable Lead Trusts. By doing so, you may able to draw a significant income for your lifetimes and earn significant tax savings, while still maintaining a large degree of control of your assets. (SOURCE:

So friends, beware of supporting charities without research, especially those with celebrity names attached to them. RICH PEOPLE DID NOT GET RICH GIVING THEIR MONEY AWAY!!!! Buyer (or giver) BEWARE!


Read our other expose's on Charities:

Why are billionaires giving away fortunes?

Gates Foundation Acknowledges Flaws in Report

Gates Foundation Invests $10 Million in Vaccines Developer


Bob Barney's Reasearch on Charities for