convert a private foundation to a named fund

Convert a Private Foundation to a Named Fund

Clients with an existing private foundation may find that there are several benefits to transferring it to an advised fund with The Community Foundation. Through a simple transfer process, your client may be able to avoid some of the hassles (and costs) of private foundation management.

There are two options to consider: The Named Fund Option and The Supporting Organization Option. Each approach allows your clients to remain involved in grant making, if that is their desire. At the same time they will be able to ensure that their intent, name and pattern of charitable giving are maintained — in perpetuity if they wish.

We are ready to guide you and your client through the private foundation transfer process. Please contact us for more information.

The Named Fund Option

Assets of a private foundation may be used to establish a donor advised fund, unrestricted fund, field of interest fund, scholarship fund or designated fund. Depending on the type of fund that is established, the private foundation's Board of Directors often stays involved in setting grant-making priorities, advising on grant awards and assessing grant success.

The Supporting Organization Option

It is generally possible for a private foundation with $5 million in assets, or the potential to reach $5 million in the future, to become a supporting organization of a community foundation. Besides easing the administrative and cost burdens of managing a private foundation, transferring it to a community foundation permits the private foundation to take advantage of many aspects of our public charity status.

Section 507 of the Internal Revenue Code permits termination of a private foundation in either trust or corporate form with distribution of its assets to a public charity. The two primary requirements for the termination of a private foundation are that the private foundation must distribute all of its net assets to one or more tax-exempt organizations and that each organization has been in existence for a continuous period of at least five years preceding the distribution. Our community foundation fulfills both of these requirements and the private foundation's assets typically form a permanent donor advised fund under a similar name.

If you are considering establishing a supporting organization through The Community Foundation please make an appointment to discuss options with Executive Director Teri McNally and our Board of Governors Executive Leadership at 540-373-9292 or terimcnally@cfrrr.org

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