9 Benefits Of Establishing A Family Foundation

hey guys it's Toby Mathis with the Anderson business advisors podcast and today I have Kareem hanafi on uh Kareem welcome first off thank you it's great to be here and uh and and I'll let you do your introduction but I'll just give the the broad Strokes cream heads up a very busy philanthropic division at Anderson business advisors and oversees all the non-profits that gets formed but before he became uh one of our attorneys he actually worked as an attorney for the service that is in the IRS um so why don't you give us a kind of a two-minute summary of your career and what you focus on and what you do for us all right yeah so I basically as Toby says I was working at the IRS I was there for about five years when I started off my career coming out of law school thinking I wanted to work for maybe a big five accounting firm which is the big five at the time thinking I'm gonna do you know corporate tax returns or at least you know make recommendations regarding corporate structures and corporate entities but then it turned out there was a position available at the IRS in the tax exempt division basically just working with non-profit organizations 501c3 organizations reviewing applications for exemptions and reviewing the tax returns so I've just applied for that position was offered the position so I worked there for about five years and of course just involved in viewing applications hundreds and hundreds of applications to all types of 501c3 organizations and then after that I went to private practice and I've been there for about 15 years I joined Anderson two years ago in 2021 and since then I've been working with close to about over 500 organizations for sure maybe close to a thousand non-profit organizations and we've done applications for exemptions for over 500 non-profit organizations at this point so a heavy workload a lot of clients that we're working with and dealing with but it's very very rewarding to say the least so work with a lot of different types of organizations all over in terms of the range of type of activities they'd like to do and it's been extremely challenging but very interesting too to learn about the types of things that they want to do the types of missions they want to carry out and accomplish and and just the things that they've been doing out there in the public sector trying to help those who are in need of some type of help or assistance and uh I mean yeah we are one practice there's millions of non-profit organizations I think they get underutilized my personal belief is that if people understood how powerful they they are that they would actually gravitate towards it there's a there's a reason you cannot find a wealthy family that that does not have a foundation I mean it's really tough and it's because it's one of the few tools out there where you can actually do social change you get a lot of personal benefit too and a lot of personal satisfaction so that's what I want to dive into today uh you gave me a wonderful list and so I'm going to call this the nine advantages or benefits of establishing a family foundation and I want to be really specific about this because we're talking about a family foundation not a public charity under this circumstance right you're talking about hey I'm setting something up that's going to be a giving organization are you using them as both well it could be both because you know we we work with a lot of non-profit organizations and a lot of clients who use the term Foundation their whole family is part of the foundation but they're actually public Charities so they could be a public charity they could be a private Foundation you know it doesn't really make a difference what you're going to be what matters is you will be a 501c3 and what we want to advise the clients is what's going to be the best thing for you considering what you want to do in terms of your activities so we're kind of looking at your goals and your objectives and then we're going to recommend exactly how it should be structured to make it easy on you because the only thing that they want to do and we've heard this time and time again the only thing they want to do is do charitable good do do a charitable you know serve a charitable purpose and and just go out there and do the work they don't want to have to deal with any of the administrative work the the paperwork that's going to be involved in it we want to do it for them but we want to make it easy on them as well so that's kind of our goal and our objective with it whenever we're working with the clients well let's dive into some of the benefits before I do I want to do the 10 000 foot view that whenever we look at these things we look at them from an asset protection attack standpoint and a legacy planning this actually checks all three boxes I know I know we're going to focus primarily on the tax benefits because they're so massive but the beautiful part about foundations guys is that you technically don't own them which means they can't be taken away from you and that's in in there's a whole variety of reasons and cream's going to get into I think we're going to focus on nine benefits Kareem I think I think that's the uh that's the magic number for today but uh but they really are quite a phenomenal piece that a lot of folks think it's the realm of only the wealthy do you think that's true cream do you think that only rich people use foundations do you think that there's a place for it for everyday Americans do no we we've seen all you know it's it's all shapes and sizes it's not just for the wealthy I think once upon a time especially when I started working out and even when I was with the IRS number one the private foundations seem to be for the wealthy but the public Charities seem to be for a large group they were primarily wealthy people as well but I've noticed you know over the years especially over the last 15 years seeing a thousand organizations that's not the case at all certainly the ones that are at the top and the ones that you hear about the most are the wealthiest ones but you know we're over a million and a half non-profit organizations so it's not just a Bill and Melinda Gates Foundation there are a million there are over a million other organizations and and they're just you know many of them in terms of the size and and the the funding that they receive it's all over the place and the founders and the donors who are part of it are not wealthy individuals it's just those who have a passion for what they want to do they've had a dream of doing this and wanted to carry something out so they've decided this is what they want to do by setting up a non-profit and carrying out those charitable machines well let's let's talk about the benefits and uh do you have a list there yeah let let let's knock out what what are the big benefits let's go over number one obviously the biggest and the best you know the most important for many is that it does reduce your taxable income so you know obviously if you have adjusted gross income you're gonna probably have to end up paying some taxes to the government so by making a contribution to a 501c3 organization then your contributions are tax deductible so you know many of us are going to have to pay taxes you have that adjusted gross income and it shows exactly you know it translates to what your taxable income is going to be and for many of us you'll have to pay taxes rather than give it to the government who knows what's going to happen with that money why not give it to a charity give that money to a non-profit organization one that you have formed one that you've set up it can reduce your taxable income and then you can have some control over what's going to happen with the money that goes into that charitable organization what are the limits of how much I can donate on an annual basis to my own charity so if you give to a public charity any cash that you make a donation to it you're limited to sixty percent of your adjusted gross income if it's a public charity and it's for cash if you make a donation to a private Foundation a cash contribution you're limited to 30 of your adjusted gross income now if you give non-cash contributions for example stocks it could be real estate it could be crypto you're limited to 30 percent of your adjusted gross income when you're donating to a public charity and it's 20 if you're donating to a private Foundation yeah and so if somebody's been like let's say they've they have a ABC Incorporated stock you know maybe they got some vested stock interest from an employer they've been holding it for 15 20 years and now it's with a lot more so let's say that that you know you got it for a hundred bucks and now it's worth a thousand that you don't have to sell that and then donate the proceeds you could get a thousand dollar deduction just by donating that share right yeah absolutely so if you were to sell the stock first you would have to pay taxes and then you would make the contribution so it reduces the amount that's going to go to the non-profit organization the flip side is you can just give it directly to the non-profit organization you can deduct the fair market value so you get the benefit of it you don't have to pay taxes on that capital gains or the appreciation of the stock so you get to you can deduct it um the full amount and the non-profit gets 100 of that instead of getting an amount after you've paid your taxes on it so they get the full benefit you also get the full benefit so it goes it works both ways so I think you may have just hit benefit number two there because it is what is number two so it avoids at high capital gains so you can donate appreciated stock to a non-profit or an appreciated asset to the non-profit you avoid having to pay capital gains taxes on that and you can get a deduction instead of instead of having to pay taxes you would get a deduction for the fair market value of what you've contributed to the non-profit yeah and let's just use our example let's just say you had a piece of real estate you've had the home for 30 years you've fully depreciated it you bought it for a hundred it's worth 500 000 now and you're like oh Jimmy Christmas you know maybe I'll give it away maybe I'll give it maybe I'll sell it to somebody if you give it to your charity first let's say you do a it would be worth a five hundred thousand dollar deduction but you may not be able to use that all you can carry some of that forward right for how many years yeah for five years you can care to work for five years so you don't lose it it's just defer so yeah so let's say we gave away a five hundred thousand dollar property you'd get a five hundred thousand dollar deduction and would be limited to thirty percent of your adjusted gross income if it was to a public charity it would be twenty percent of your adjusted gross income if it's to a private Foundation we'll get into what the differences are in a little bit but the most important thing is you have no recapture and no for you know you don't have to pay any capital gains so you're just getting a flat out deduction all right number three what's what's the third benefit let's assume under the scenario you know you have a hundred thousand dollars in stocks when you bought it you paid a hundred thousand now it's worth or let's say let's say you paid fifty thousand now it's worth a hundred thousand dollars so you're gonna donate the hundred thousand in stock you're going to avoid paying taxes on it when you do that you donate it to the non-profit now the non-profit gets one hundred thousand dollars and imagine it grows to two hundred thousand dollars so now it's doubled in value so you never pay taxes when it was donated and you don't pay taxes when it goes up from one hundred thousand to two hundred thousand dollars so you get this benefit as well so it grows tax efficiently it grows to two hundred thousand and you decide to sell the stock you don't pay taxes on any capital gains whether it's stocks whether it's real estate exactly whether it's crypto you don't have to pay any taxes on that when you sell those assets and the beauty of it is let's assume that it's two hundred thousand dollars if you were to pay taxes that could be the equivalent to let's say twenty thousand dollars for example you may have to pay taxes instead of doing that and giving it to the government now you can take that money and use it for whatever charitable reasons that you want whether it's going to be to pay someone to come and work for the organization or whether it's to distribute it and make distributions or spend money to help you know to serve a charitable purpose so there are many there's many benefits of getting this and growing it tax-free when you sell it tax-free and then you can use it for a charitable benefit as well fantastic and we'll get into some of those I'm sure there's lots of questions being posed right now but let's go to number four what's the fourth benefit the fourth is you can invest in stocks crypto real estate and again the profits are tax-free so it kind of goes into what was mentioned before about growing attack growing the assets tax efficiently so again imagine that you you're you're it has doubled tripled or quadrupled in value let's say you want to you receive the assets at in stocks and it's worth two hundred thousand dollars and you sell it you don't pay taxes and now you've decided that you want to use it safe for affordable housing you want to use it for housing for real estate investing you can take the 200 000 and put it into that you can generate rental income it's tax free you can sell and if you end up selling it at a profit it's also tax free so all this money is going to be recycled basically it's going to be used within the non-profit so the the return on your investment is going to be much higher it's much more efficient again you know you get a better return on your investment by being able to do that and not having to pay any taxes on that you have many options as to how you can invest that money yeah and uh easy math there's the rule of 72 which means if you have an interest rate you're gonna double I mean it's going to double divide that interest rate into 72 and that's that's the period of time it'll take to double so the s p annual growth is just over 10 percent since its Inception in the 1920s I think it's what it was um so that means it's doubling every seven years so you put a hundred thousand in 14 years from now that's four hundred thousand it doubled in year seven to two hundred thousand that 200 double to four hundred thousand twenty one years that 400 000 is 800 000 but you haven't paid any tax you're not having to pay tax you could be selling and buying throughout that entire time it does not matter anymore because you do not have a taxable event inside of an exempt organization that's why these endowments like at Harvard and Prince and all these things they get so huge because they're not taxed the growth is absolutely uh compounding with no tax on it it's just massive and that you get to unlock that benefit hey I think that was for so what's number five what's the fifth benefit the fifth is your family can serve as board members so you know many of our clients keep talking about this where they want to start this non-profit it's been their dream maybe they've been working so hard you know many people have this dream of what they want to do when they retire or when they're financially secure and many of them they talk about that non-profit they want to set up but not only for themselves but they want to create that family Legacy you know again we all look to the building Belinda Gates and we see what's what's been done and the impact it's had in society both globally internationally and many people have that dream of wanting to do that even if it's at a local level but they want their family to be a part of that so they want to get their families to be involved with it so that it'll have a lasting impact you know again everyone dreams of starting their own non-profit or working for a non-profit so this is their chance to do that you know because they want to be able to give back and they want their family to be a part of it because anything that you see the people that you help and that you benefit it's certain only has an impact and it's something that you're going to remember especially for your family or for your kids so they want their family to be a big part of it so creating that family Legacy is a big thing and so the so that's taxable though like if they're getting a salary they're going to get paid money that's taxable to them but the exactly who can pay I mean again I always look at this and think of it it's exempt just like an IRA or a 401k right it's but when the money comes out there could be a tax implication if you pay it out here you pay it out by having somebody work for the organization and then they would get a salary right yeah so it and that's the thing if you're going to get paid for it then you you will you will have to pay taxes on it because you're just basically like an employee um whether it's W-2 or 1099 as an independent contractor you're going to have to pay taxes but many of them start off really small you know at the very basic level where their kids are going to be working and serving as a volunteer possibly but again you can't pay yourself if you want either way but what they just want more than anything is for their kids to be a part of it or their family to be a part of this charity or this Foundation yep you know they get it all right so what what's number six six benefit six is that the family can maintain control of the foundation's purpose the grant making or its future so many people think that you can only do this within a private foundation and that's not the case you can also do this within a public charity perhaps you want to be permanent directors you can always have some clause or some provision in there that allows you or your family members to be permanent directors of the non-profit it gives you a veto power you know and it prevents others from trying to remove you without you having a say in that of course our caution always is and this isn't usually a problem but we tell the clients make sure that your number one purpose is that you want to you're carrying out the fiduciary duties on behalf of the non-profit you're not being a permanent director and you're exercising your veto power just because you want to have the control but you do have a vision that you want and you're doing it on behalf of the non-profit as well as the fiduciary of it as well and that's typically how it is but they do want to be a part part of it because you know it is their baby this is something that they started with they funded it they helped it to become successful the last thing that they want is for some other board members who are unrelated outside parties come in and remove them from it after they work so hard to make it successful yeah this is a good time to talk about kind of what a non-profit could be set up for because you could be you know scientific educational social benefits Animal Welfare amateur sports like there's a lot of things that that are covered by charitable activities the low-income housing moderate income housing residential Assisted Living recovery housing just in the real estate World on on on the education side just about everything like I have almost every university in the United States is an exempt organization just about every hospital is probably an exempt organization the NFL for for Jiminy Christmas was a charitable organization for a long time Green Bay Packers still are right there's Major League Baseball National Hockey League these are charitable organizations and uh and you have those types of flavors that are actually doing something and then you have the other flavor which is the Family Foundation where you're not doing anything other than giving to those organizations right yeah yeah so most private foundations if you're a private Foundation are typically Grant making so you're just going to make country you're going to make distributions to other 501c3 organizations you are required as a private Foundation to do that you have to make distributions to other 501c3 organizations but there are some like a private operating Foundation Oregon public Charities may decide they want to carry out their own activities instead so you imagine something like you mentioned about say animal you know animal shelter or um you know um anything that's going to be educational like we see museums for example as an example they are carrying out their activities themselves rather than doing grant making so they're carrying out these activities um and and so that's another option we have a lot of you mentioned about affordable housing and shared housing for example you know these are organizations that are carrying out their own activities rather than doing grant making which is giving out to other organizations that are providing the affordable housing so you can either do it directly or indirectly so Kareem um do I have to give money to other Charities every year if I am a probably if if I am a operating public charity no you don't you you're not a private foundations you're required to make to there's a payout requirement basically five percent it has to go out of your total assets that you have if your investment assets so when you imagine that you're you know an organization you're you're a foundation like the Bill and Melinda Gates and you're talking about you know anywhere from let's say it's 10 million dollars I mean you're talking about 200 million that you have to make in terms of um you know or I'm sorry it's 500 million that you have to make in terms of distributions and payments that's a lot of money you know that you have to do and so it's five percent of your investment assets but a non-profit public charity you're not subject to that same requirement so if you have 10 billion in assets you don't have to do that our recommendation has always been do some sort of spending do some sort of payout you know you can do it again giving to other organizations or you can do it directly through your activities that you're spending as we mentioned again let's say the museum anything that you spent with that if you have an animal shelter for example something like that the money that you're spending to operate it you know to to hire staff for that all of that would be the the the same thing as spending it five percent making it pay out to other organizations so you can do it that way but there is no requirement that you give five percent but you know the IRS will look and see if you have a lot of Assets in there and you're not spending any of it that could be an issue so the recommendation is to spend something you just don't have to do five percent like private foundations do you have a lot more leverage leeway you know a lot more discretion of what you can do within a public charity than you can within a private Foundation yeah the rule of thumb is public Charities do stuff for the benefit of society private foundations don't do anything except give money to the organizations that do stuff for the benefit of society and they have that five percent that they have to give on an annual basis if in doubt contact us and we'll explain it and then there's a hybrid the private operating Foundation that sits there in between that still does stuff that that again there's ways around those rules so make sure you're talking to a professional like Kareem which will post his information here uh to make it really easy all right we're on to number seven I believe yeah yeah so number seven is you can work for the foundation once you retire and again as I mentioned before many people who are working have the 40-hour work weeks 60 hour work weeks or even 70 or 80. many of them just are dreaming of what they can do once they can relax and for many of them besides traveling what they want to do is they want to set up their own charity they want to set up their own non-profits and they want to go out there to make a difference whether it's through their own personal experience where they've worked or where they grew up you know there's always something that's had an impact on them and now they want to give back and it's interesting some of the clients that we meet even one of them just recently that I spoke to just just last week he wants to give scholarships to those who are in nursing school because he was a nurse and he understood the challenges they had to face of having to work full-time jobs to be able to pay for their student loans and to pay for their tuition so he had said that one day whenever ever he makes it what he wants to do is he wants to provide a scholarship for everyone in that same University where he attended and where he graduated so that they don't have to carry that burden of having to work full time while also working at the hospital and having a full-time course load as well and a family to take care of it was just too much for them to handle so he saw that he saw a problem he found the solution and what he wants to do is he wants to fix that so many people have that sort of dream whether it's their own personal experience or where they grew up as well what they want to do is they want to do this and focus on this full-time and if I'm hearing you right that means that during their Peak earning years they might be giving away assets or cash to their charity and charity might be there to do these grants to individuals to scholarships to help individuals but that doesn't mean that you can't take a salary out of it when you retire and give yourself an income no absolutely you can work there and and that's what many of them want to do as well they they want to work for the non-profit at some point once they retire because they've all said the same thing too is that you know I'm still gonna need to receive an income at some point even when I'm at retirement age even though I'm going to be collecting some sort of benefits to my retirement plans I'm still going to need to pay myself so you can certainly do that um which kind of brings up to you know the point number eight which is you can pay yourself and your family and perhaps do it through a Deferred Compensation Plan so rather than paying taxes on this stuff now you can defer it you know through a Deferred Compensation Plan and then once you are reaching retirement age maybe at that point you can pay yourself through the foundation or the charity yeah so you're getting paid for work you're doing now but you're deferring it to later there are some rules to follow I think it's 408 or one of those sections that says hey you actually have to kick more money and you actually have to give somebody a reason to defer it and there has to be some risk a loss of that some things like that but I'm sure that's what you guys handle but that just means that I can work now and I can get paid later so if I say hey I'm in a high enough tax bracket I don't need the money what I really want is to know that I have an ironclad future and I can get paid for the stuff I'm doing now at some point when I retires is that accurate yeah that's correct and you know into your to your point you you may be in a higher tax bracket now so you want to defer that salary which when you take that salary out chances are you're going to be in a lower tax bracket at that point so you will be paying less taxes if you wait until later to take the money out when you need it and not now when you may not need it at this point so and and of course you know as we all realize in life is that one thing you learn is that you wish you had more money at retirement so this is certainly a way that you can do that deferring that compensation because you don't necessarily need it now it will it will come in handy because you know we're all living longer as well so this would be a good time to be able to take the salary out it's kind of like a 401k or IRA then you're getting the deduction now it's invested it's growing in theory you're growing that money by investing inside the exempt organization and then you just take it out later yeah exactly yeah I have the same rules exempt organizations all right what's number nine what's the big number nine our last big benefit to creating your own Family Foundation the last one is you know for those who are wealthy and you will be subject to a state and give taxes it can eliminate those potential estate taxes yeah so you know and and you think about as you mentioned before um you you highlighted this before is that um once you put it in a non-profit it's owned by the non-profit so now it's in a separate asset it's in a separate entity it's not owned by you it's not owned by your estate it goes into separate non-profit so even though you can be a big part of it you can be a Founder for this you can have control you can be a permanent director your whole family is part of it you can take a salary out of this you can control the direction of what you want to do with the organization including the grant making activities that you're going to do the funding whatever you're going to do you can do all of these things and yet it's not in your estate it's going to be in a separate entity that falls outside of your estate yeah and if you think the estate taxes are not and they could be 40 percent right now we have the exclusion it's up to what is it about 13 million are thereabouts 12 12 points something million per spouse but a lot of people are going in excess of that and then it also may go back down to when I first started it was six hundred thousand dollar exclusion and there was no portability between spouses so your total amount that you could exclude was 600 grand for a married couple it was really frustrating they would lose the house they'd lose assets this way you could avoid that completely yeah but you know but keep in mind as well it is high now but you know it's it's set to expire at the end of 2025 so and not making a political statement but typically if you have Democrats in Congress and they're controlling Congress you know chances are they may not be pushing for this to be extended whereas if you have republicans in Congress that typically do want to extend this so it's all going to depend on the political parties that are involved too but my feeling is it's probably going to go back it could be 5 million for example in 2026 and I don't see it going back up again for a little bit so this is a good way to get it out you know people use irrevocable trusts and they do some gifting during their life and things like that but here's a way where you could actually not use up your gift exclusion but you can donately get a tax deduction while you're donating you can still get it out of your state and again play a large part of what you can do with this Foundation as well you have a lot of control and discretion as to what you can do too yeah there's a ton of benefits we just listed nine we could probably do you know even more as you start diving into the nuances but but let's talk about the stuff that's probably on people's minds which is hey I'm thinking about this what are my next steps well your next steps are pretty simple to be honest you know come up with a purpose or a mission what is it that you want to do and as Toby as you'd mentioned before you know our clients do all types of work from the affordable housing to the shared housing to educational organizations you know they want to help children who are basically they want to break the cycle of poverty to help them you know give them opportunities so they want to teach them for example stuff like STEM Science technology engineering and math because they believe that's where the future is going to be so if you're teaching this at an early level then you know they could succeed both in high school get scholarships to go to colleges and then they're going to have jobs you know they can choose from so it can break that cycle of poverty so stuff like educational organizations as well is a popular thing there's the humanitarian relief where you provide you know food clothing shelter even You Know cover medical expenses as well to help cover these expenses that low-income families can't afford at this point so this is also a very popular one that we have we mentioned about the scholarships before there's all types of scholarships that are given to individuals it's not just for nursing school but for those coming out of high school it could be those that are applying overseas as well internationally so these are many options too we have many who are international clients and they want to give back to their communities or Villages a common one that we've seen a lot is building water wells and villages in Africa which is quite fascinating you know just learning about this because of the fact that you can put one in a village it can help you know hundreds and hundreds of people kids stay in school rather than having to walk six seven or ten miles to go pick up water so they can't go to school because they have to go there to stand in line to come back with the water it helps with sanitation it helps with cleanliness people don't die because of the the dirty water as well so it's amazing the sort of impact and the things that we learn from the clients of what they can do so there's all types of things that you can do to help um you know because there's no doubt there's a need there's a tremendous need and we always see this all the time is that we have so many problems in our society that need to be fixed and we always blame the government because they don't do anything about it you know it's severely underfunded in so many areas but this is where non-profits can come in and try to help fix these problems too yep so you can do it so articulate a purpose and then what's once you do that then what's next step so you would want to just set up the entity and it's pretty simple to do you're just going to set it up at the state level um you're just going to establish a non-profit Corporation so it doesn't matter if you want to be a public charity or private Foundation you would just set it up as a non-profit Corporation at the state level and that's something you could do for them if they reach out oh yeah for sure easy then what's number three what's the third step there create a board of directors select your directors and select who the officers are going to be from those directors or can you do it yourself you need to have at least one director in this you know depends on the state where you're going to incorporate so Nevada only requires one director but some other states required so I could set it up if I was if I was just setting something up and I wanted to do it I wanted to you know have a receptacle for a donation I could set it up and be my own director do I need to have a bunch of third parties you could be your own director yeah absolutely you can um the founders the the donors are also become the directors of this non-profit organization and that's very standard most every one of them do that so right so so I I've articulated a mission I am setting up the entity I'm naming a board then what do I have to do so you would you would need to you get an EIN your tax ID number um prepare a set of bylaws internal operations of how you're going to be operating and the roles of the directors and the officers and then we would apply for exemption with the IRS to become a 501c3 now as you do that only now only once you apply for exemption with the with the with the IRS do you have to determine what your classification is going to be do you want to be a public charity or do you want to be a private Foundation which was something that we kind of discussed briefly at the very beginning so you would have to select what you want to be at the state level you're just a non-profit they don't care whether you're public charity or private Foundation you're only a non-profit is all it is contributions are not tax deductible you get no benefits from that and someone just say this as a pull people aside their special language you have to have in your in your organization you do not set this up through one of those legal services online or stuff that it's it's not going to happen you actually have to put special language in the Articles of organization it's almost always going to be a corporation and you want to make sure that you're dealing with somebody who's done this and then even more importantly when you're doing the exemption you're putting in what projected financials and you're doing all that correct yeah yeah yeah and and we're very thorough with the description of the activities of what the nonprofit does because that's an important part of it you know when I when I worked at the IRS I I had to review the activities and then I had to prepare a memo to file and that memo to file to me was probably the biggest hurdle because I have to articulate why this organization qualifies they don't they didn't do it and they don't do a good job of it so I saw that and that was what was causing the delays with getting the exemptions so for my end not only am I explaining the activities thoroughly but I'm explaining why it qualifies and not just saying it qualifies because it qualifies I'm citing Revenue rulings which is the irs's position for similar non-profit organizations that applied and their position is if you do these types of activities you're going to qualify for exemption so we cite these Revenue rulings as part of our reasoning as to why it qualifies so we're pretty thorough and detailed and we use almost every character that's allowed within the application to be able to explain it so I could say that I've been doing this for 25 years and have been around thousands of filings and Kareem and his team right now are getting by far the best results of anybody I've ever seen applying for exemptions and I mean I can say this straight faced it's ridiculous how fast you guys are getting approvals because the average is about six to nine months right to get an exemption approved from the IRS and it's and you're getting exemptions what's your quickest exemption back so they're currently reviewing applications from September right now the beginning of September so you're talking about almost seven months right now this is on the Idaho's website we've been getting applications approved within three days and not just one or two we've had over a dozen that have been approved within three to four days and not just over a dozen over a dozen within the past two months so we are seeing just the the results have been phenomenal and and it's mind-blogging boggling I I'm shocked at seeing the results too but it's not just once it's been happening many times we're seeing three and four and five days right they they know your application and they know you and they're saying they're doing our job for us this is really easy and they're getting the the easy work off and they're going back to the people that are trying to do their own and uh that's bogging down the system for sure I mean that's the only explanation that makes any sense I I can't imagine because it's not happening for others I I can tell you that um what's what's the next step so you set up you get your exemption you can actually start before you get that exemption back right like you could start your business as soon as you file it yeah you know our recommendation is from step one once you've articulated your purpose your mission you know exactly what you want to do you can start taking steps at that point to begin get getting everything ready and lined up rather than waiting until you get the 501c3 um you know you can you can start that from the beginning um you know the funding part you can make a donation at any point that you want to but if the applications are going to get approved as quickly as they have been for us then you could always wait until you get the 501c3 and then fund it at that point if you wanted to many people like to to fund it before usually because it's the end of the year and they want to uh you know make a charitable contribution and get the deduction for that but yeah and just be clear with people if you set up a foundation the exemption the exemption relates back to the date that it's filed with the state so if I set up an organization on December 1st and I file for exemption even in January or February the following year and it gets granted let's say the following December it relates back to the first filing although Kareem's being being straight with you guys too it's it's sometimes better to play it safe are you have you had any get rejected have you had any exemptions where you've applied and you were not successful with the IRS or are you batting a thousand no it's been 100 percent yet at this point so if you pass it through somebody like Kareem and his team and I'm not saying you have to use them but uh anybody who does this for a living could tell you whether you're going to get approved or not and then it's just hey we're they're getting it done we've done thousands we've never had one get get uh rejected uh and then is there any other step that they need to take once they get it they put some money in it or they put some Assets in it then then what do they do just operate yeah but you know we still have the issue or and determining whether you want to be a public charity versus a private foundation and then the other thing would be just to consider sort of the grant making what your activities are that you want to do you know who are you going to Target where do you want to operate do you want to you know look about making connections so you're you're only talking at this point about kind of what your next steps are in terms of operationally what are you going to do so you have all of these that you have to you know kind of focus on at this point and those are probably the most important that sounds like a great video I've set up a charity now what and uh and we'll do that next time uh for this one we've just hit nine benefits to establishing a Family Foundation how you can use it and you learn the steps the next steps you would take if that's resonating with you uh Kareem are there any other final comments you want to get we we went a little bit over but I didn't want to stop I thought this was really good information that people would enjoy it but is there anything else you want to tell people well I want to just say this as a Shameless plug is that you know there may be many questions and issues that you have that may delay you in being able to do this and apply it for exemption or to set it up but none of this is new to us we've done this hundreds and hundreds of times so it may be new to you but it's not new to us so I would say because we have the experience we have the results we have this non-profit q a session that we also hold for only the non-profit clients within Anderson who do it exclusively for them um you know if you're looking for someone that you need to set up your non-profit then please come to us because we do have the experience and we have the results to prove that as well that we can do it for you and get it done quickly and efficiently and as one example we actually got one from the time that it was set up at the state level to the time they got the exemption it was 15 days total is all it took to get it so you know we have that experience we know what we're doing we've done this hundreds hundreds of times well I really appreciate you coming on and sharing this information nine benefits to establishing a Family Foundation we'll have you on again to talk about operating them I really appreciate you know put your information in the show notes so that if somebody wants to talk to your non-profit group that they certainly can but I just want to say from the bottom of my heart thank you for coming in and hopefully giving some people some great ideas and some hope in in implementing some things that will create some social change thank you thank you for having me

Channel: Toby Mathis Esq | Tax Planning & Asset Protection

Views: 35,656

Keywords: family foundation, 9 Benefits of Establishing a Family Foundation, Family Foundation, private family foundations, foundation, charity, financial planning, family planning, estate planning, real estate, finance, financial education, financial literacy, financial planning for beginners, what is financial planning, estate planning basics, estate planning 101, estate planning tips, what is estate planning, estate planning mistakes, estate plan, charity work, act of charity

Id: R7ee9vrQ48o

Length: 43min 19sec (2599 seconds)

Published: Sat Apr 22 2023