Wealth is shifting from individuals to private and family foundations at a record pace, accelerating the number and size of foundations in the United States and creating both opportunities and challenges for ministries and churches. The number of foundations grew from 22,088 private and community foundations in 1980 to almost 100,000 by the start of 2010. In 2008 alone the number grew by nearly 3,000. In 1998 grant dollars amounted to $19.5 billion. By 2008 that number had grown to $45.6 billion.
Private foundations, which are formed by corporations, individuals, or families, are especially growing in number and size. There are about 40,000 in the U.S. today. About two-thirds are run by families. Private foundation assets amount to $150 billion and they are awarding over $7 billion a year in grants.
Wealthy people have helped fuel the growth by transferring their wealth to private foundations. Last year, to cite just two examples, Stanley and Fiona Druckenmiller donated $705 million to their own Druckenmiller Foundation and John Templeton gave $573 million to his own John Templeton Foundation.
This rapid shift in wealth is fueled by multiple factors including vanishing tax benefits and a desire to have a more organized giving approach. The benefits individuals derive from transferring their wealth to private foundations include, reducing income tax rates, reducing or even eliminating potential estate taxes, transferring wealth to heirs in the most tax-efficient manner, and creating an organized giving strategy.
Operating a private foundation gives people a sense of control and more direct involvement in philanthropy. It allows them to manage investments and donations to benefit the community and the world.
Should you form a private foundation?
There are financial, organizational, legal, and family implications to consider in setting up a private foundation.
Setting up a private foundation will require an initial investment to cover the cost of legal counsel and financial professionals. You will want to pay careful attention to the legal requirements. For starters you must donate at least five percent of the market value of your foundation’s assets every year.
Before setting up a family foundation, your family needs to know that this is the most appropriate vehicle for carrying out philanthropy given your unique circumstances. For your family foundation to work, you need to decide on a purpose for the foundation.
There is a range of purposes your family foundation could unite around. You may choose to focus on funding Christian schools, seminaries, prison ministries, specific denominations, evangelical programs, or particular programs or services for homeless, feeding, children, or discipleship. As long as your family is in agreement, you have overcome the hurdle that has prevented other family foundations from succeeding.
Hostile Political Environment for high Wealth IndividualsA recent quote by Hillary Clinton stated that she feels the wealthy “are not paying their fair share” of taxes. The Obama administration has made numerous indications that they are interested in wealth redistribution and shifting wealth from the top down. There are current proposals to cap charitable donations at a low level. Combine these factors with expiring Bush tax cuts and new tax increases on upper middle class and wealthy families and a clear hostility is apparent targeting individuals of even moderate wealth.
Challenges for Ministries
Many ministries and churches have become quite comfortable relying on individual and major donors to support their ministry. However, this strategy will become more challenging as there are a variety of differences in approaching private foundations instead of individuals. Private foundations usually have a more precise application process, different gatekeepers, and usually employ a more objective giving strategy. A ministry lacking a foundation grant development strategy will likely see donations decreasing as wealth continues to shift to foundations.
Opportunities for Christian ministries and churches
Your interest is probably not in starting a foundation, but in securing funding for your ministry or church. Our country is facing economic threats. But thanks to the trend of people shifting their wealth to foundations, funding opportunities are already much better than many people think they are. And the opportunities for attracting the resources your organization needs to carry out its mission will only get better.
