Private Foundation

A private foundation is the family's own charity. Unlike a public charity that raises money from many donors, a private foundation is typically funded by a single family, individual, or corporation. The family retains meaningful control — they decide which causes receive grants, who sits on the board, and how the foundation operates. That control is also accompanied by a set of legal duties, required filings with tax authorities, and ongoing compliance obligations that families should not underestimate. Readers exploring philanthropy as part of a broader wealth structure will find it discussed in the context of why family offices exist in the first place.

Several concepts appear repeatedly in conversations about private foundations. Minimum distribution requirement refers to the rule that private foundations must generally distribute a minimum percentage of their assets for charitable purposes each year or face an excise tax; the exact figure is set by law and can change, so families must verify current rules with qualified attorneys and CPAs. Self-dealing rules prohibit certain financial transactions between the foundation and its "disqualified persons" — typically the founders, board members, and their close relatives — to prevent the foundation from being used for private benefit.

Imagine a couple who built a manufacturing business over thirty years and sold it. They establish a private foundation, contribute a portion of the sale proceeds, and over time make grants to education nonprofits in their region. Their adult children join the board, creating a multigenerational philanthropic identity. The foundation requires annual tax filings (Form 990-PF in the United States, as an illustrative example of the administrative layer involved), investment oversight, and grant documentation. Families often weigh a private foundation against the simpler administrative profile of a donor-advised fund before deciding which structure fits their goals.