Everything You Need To Know About Private Family Foundations

 So we're going to be starting a series where we dive into the Elon Musk of the world, the Bill Gates of the world, but just looking at interesting people and what they're doing with Private Family Foundation, but I think it's important to set the stage or set the foundation up on intended of like, what is this? You know, it seems like all these billionaires and people have this, this is the neat part. If you look at the 100,000 or so foundations in this country, the vast majority of them have assets of less than a million dollars. We're looking at, you know, 55 percent, so more than half of all of them have assets of less than a million. And so the size of the fund does not necessarily correlate to the size of the impact that's possible. Family relationship is one of the only things that wealthy people can't solve with money. And that's where being able to use something like the foundation to start having that concept of what is the family legacy, what does that look like, what do we care about? I think it's really important. Hence, you know, again, here 70 percent of wealth transfers fail. If your foundation had a hundred thousand dollars of assets, on an annual basis, you would technically have to expend or spend five thousand dollars. So for most foundations that are growing more than five percent, that's a non-issue. You know, every major sports person, politician, actors, you name it, pretty much everybody that has a major tax liability and or wants some public goodwill in their image, they have a foundation. I like to think of it as these three questions is, first of all, do you even want the added benefits of having a private foundation over an alternative giving vehicle? Mr. Zuckerberg, he donated two billion dollars of Facebook stock to the Chan Zuckerberg foundation. He's avoiding $660 million. He's getting a $2 billion tax deduction and he still controls the stock. Saving $660 million in capital gain stacks. So with all this great responsibility and cool things that you can do with the foundation, there are certain rules in place. Basically, the premise of the foundation is ideally the majority of the income derived from the foundation is going to be of passive sources, so passive income. You learn this thing about private family foundations and like within that, there's a lot of different characters all across the board. There's people that are maybe being a little too abusive or not doing the right things around this entity. Once you contribute money or assets to the foundation, that's an irrevocable gift for charity. Hit Warren Buffett. Over the last 20-some odd years, this is 17 years, he's been giving a ton of money and really it's been giving a ton of stock, Berkshire Hathaway. I just find it fascinating that he's sitting on the board of the foundation that's receiving billions of dollars of his own stock. Hey Dan Kaminsky, welcome back to the Better Well Podcast. Thank you. It's a pleasure to be here. The OG, the OG man, we've done lots of content together. We've been roommates. We've been in each other's weddings. We helped found better wealth solutions. I'm wearing the OG sweatshirt. I don't know if you recognize this. I did, of course. So make a long story short because you could probably spend a whole episode talking about all the things that we've learned. We've been by each other's side for six plus, is it over seven years? Lots of things that we've learned around starting businesses, successes, failures, all things life insurance and delving into some other areas in the business. Anyone that knows you knows that you go all in and you're obsessed about excellence. And so we're learning things about taxes and you get your EA, which is one of the most prestigious abilities to be able to file and represent people in all 50 states around taxes and we're learning all that. And then within the tax code, you learn this thing about private family foundations. And like within that, there's a lot of different characters all across the board. There's people that are maybe being a little too abusive or not doing the right things around this entity. But you became super obsessed about like diving first in and like wanting to know everything about how these things work and you become really excellent at it to the fact to the point that you've actually started a business called foundation launch that helps people set up private family foundations. And I'm really excited to share just like what you're up to and all things like people ask difference between what's a private family foundation versus a donor advice fund. Do you need to be a multi billionaire to do this? Like does it work for me if I'm not a billionaire? The answer is yes. And you're going to share where it makes sense where it doesn't. And then there's also just fun stories of like people that are making moves, making mistakes, making waves around private family foundations. So we're going to be starting a series where we dive into the Elon Musk of the world, the Bill Gates of the world, but just looking at interesting people and what they're doing with private family foundation. But I think it's important to set the stage or set the foundation up on intended of like what is this? Because I think for some people this will be an amazing thing and for others, it will be a great goal for them to be able to maybe make a goal of, I want to be able to get to a place where this makes sense for my for my life. So without further ado, the world's longest intro, what's new? Welcome. Thank you. Yeah. I first heard about this back in 2019 and it was something that just kind of stuck with me of it seems really interesting And I've always kind of heard the concept of foundations and things like that. I think people are most aware of public charities like the Red Cross and the United Way and things like that. But it's, I think with foundations like most things, once you start seeing them and start learning about them, you start to see them everywhere. And that's kind of what we'll show here in a second. But you're 100% correct. There seems to be a lot of confusion around, you know, what is a foundation? Do I qualify? How can I benefit? Hence, you know, that today's topics are going to cover all of those things. But, you know, after 2019, it just, it was something where I'm like, man, I got to, I got to learn as much as I can. And unfortunately, this is not something that you can just go Google, which, you know, there's enough good information. But it's like, how are people actually utilizing these things? Because I think even with it, when it comes to other things that you talk about on this channel, it's, there's a lot of high level information that you can get, but it's the actual real life applicability. And then that's been the whole point of trying to bring that to the forefront of how are everyday people utilizing something like foundation? How are they using it for their family legacy? How are they using it to instill their values and things like that? And so that's what we're going to talk about. I love it. And I asked you to put together a presentation in Dan fashion. We got 60 plus slides. And so we're going to, we're going to dive right in. And what I'm going to do is like, let's, let's, let's roll. And then I'll pipe in because in full transparency, I have a private family foundation. I should say our family has a private family foundation. And Dan, you're the one that has helped to set that up and helps us stay compliant. And I'm very grateful already. It's been cool, but it's also cool to just, you make goals within a foundation of like how we can start using this for our family, how we can be generous and all the things. And so I'm going to be taking notes as well because we're all, we have a lot to learn. But without further ado, let's, let's jump in. Yes, so the, the first piece that I wanted to talk or touch on is why I even got into the phase of wanting to, to get into the foundation space. And it came actually, there's a slide right here. I've actually had a conversation with your wife a number of years ago and she had just gotten back from Uganda. And she told me about this organization, global hands of hope in life song for orphans. And she basically explained to me that for $68 a month, food, water, clothing, shelter, education, medication, all provided for. And this was something that it, it just touched my heart because this is the type of environment that these kids are living in. And this is not cherry picking. This is truly, you know, like daily living situations. And for $68 a month, they're able to be alleviated from all of this. And I'm like, man, you know, that I had this idea of what I call first chance for kids. Because people talk about second chances all the time of giving somebody a second chance or they could just use a second chance. But if you look at this situation, there's so many kids around the world that don't even have a first chance. And that kind of a soon after I had that conversation with her, I immediately went home and I ended up sponsoring two kids, Paul and Newton here. And this has been really my why ever since then is to figure out how I can help people help people to be able to create new initiatives, new experiences, new ways to alleviate poverty, you know, hurt, whatever it may be. And that's where, you know, being able to get letters from kids like this is, this is something that going through this program, you get letters from the kids. And it's just so neat. Like you, you know, after going to Guatemala and doing some of the mission trips that you've done. Once you get the experience that feeling, you want to figure out how to recreate that. And that's where is, you know, I went to the high, high of I'm so pumped that I'm able to sponsor these kids. I quickly realized if you look at the top left corner of the screen, there's 200 and one kids, you know, at the time that we're still able to be sponsored. And this is even talking about all the kids, you know, that are available. It's just through this program. And so as excited as I was for sponsoring too, I was quickly kind of discouraged in how many other kids were out there. And that's again, where this concept of first chance for kids of what if I started a foundation, what if I utilize the benefits that we're going to talk about in this. Being able to increase my impact by just doing what I'm currently doing better. And that phrase, you say all the time is how do we be more efficient? How do we find the better way? In my opinion, this is the better way. And so now my wife and I, we have, it's not called first chance for kids, but it is called the Kaminsky Family Foundation. We sponsor kids all over the world and our goal is to increase the amount of kids that we sponsor on an annual basis. And that's also why I started foundation launch is to take all of the minutiae, all of the information that's out there and distill it in a way that can move people to action, but also provide a solution for them that really all they need to do is dream about their philanthropy. And we take care of everything else. It's really as simple as that. And that's the point is I want people to be able to focus on their impact. So as we've been describing what is a private family foundation. It's a type of private foundation set up by a family and funded with family assets. So there are other types of foundations. Private foundation is basically the top level type. And then you have a family foundation, which would be like this in this case, set up by a family. You could have a corporate foundation, which hence the name is set up by a corporation. There's some other ones as well, but those are really the two main ones within a private foundation. For the purposes of this video, we're going to be talking specifically about a private family foundation. And the key component here is the tax exempt status. So under IRS 501C3, most people are familiar with 501C3 is considered to be a nonprofit. Which even that name, I've grown to not be a big fan of because we're saying what it's not first and with a negative commentation. We're thinking of it as a charity creating social impact. And the exemption comes under any of these ones underneath. So charitable educational or religious scientific literary that's really broad. They actually look at the law of what charitable means. You can almost consider anything to be charitable in the grand scheme of things, you know, within reason. So we're setting up a completely separate entity. We're going to fund that and then we're going to create grants from that. And we're going to explain that here shortly. But part of this is what I want people to realize is the even though there's like one and a half million nonprofits in the country, only about 100,000 of them are private foundations. But they are growing on an annual basis. This is you're starting to see it just in our communities and society of wanting to give back, but also hoping or finding a way that finding their purpose, finding the reason for why they do what they do and how they can give back. And even in their employment, hoping that what the company I'm working for is doing this for more than just profit or the bottom line. It's actually creating a social impact. And so foundations have been growing, you know, pretty much since they became part of the tax code. And so of the assets, there's now, I think it's at 1.5 trillion in this day and age. And we're talking about tax-free 1.5 trillion. And that's again, the 501c3 tax exempt. This is a bit like the reason this isn't a compound interest curve is because they're actually making grants. But if we just looked at the asset growth, it would be a compound curve because we're foregoing the eroding factors. This is basically meant to show, you know, these are some of the big end names. And this is why people think foundations are only for billionaires because you get to see these. One of the most interesting ones to me is in the top left corner, the Bill and Melinda Gates foundation. It's probably the most notable one. And what's so fascinating to me is back in the 90s and early 2000s, Bill Gates was like one of the most hated persons because he was involved in Microsoft. And there was all the monopoly, capitalism's bad and all those things. And so what he's doing, he spins up the foundation. And suddenly he's this big time philanthropist going around the world, saving all these people. And they totally forget about what's going on in Microsoft. And of course, we'll get into that. There's as much good as these foundations do, there is a lot of undertones of dark stuff that happens as well. And that's... I'm sure people are raising their hands saying, hey, let's do some deep dive in the investigation of what's going on with the Bill and Melinda Gates foundation. And I have a funny feeling that could be a video that a lot of people are interested in. Absolutely. I mean, the same thing with Rockefellers. They think of John D Rockefeller, one of the most hated men in the early 1900s because of his wealth and his monopolies. And it spins up the foundation. Everybody starts thinking differently. You know, every major sports person, politician, actors, you name it. Pretty much everybody that has a major tax liability. And or want some public goodwill in their image, they have a foundation. Yeah. And I would just encourage you to now that you're listening to this or watching this. You're just going to start hearing things like football players, Patrick Mahomes. Like it just, it seems like a lot of people have foundation. And sometimes you just look past that. But it's like they're doing something like this for their, for their, you know, personal family. And I don't, yeah, I don't want to say like the only reason they're doing it is for their personal benefit. They definitely like they had charitable underpinnings ahead of time. They're just finding, they're, they're working with their professional advisors to do it in a more efficient way. Yeah. And a more established way. So these are the three most common questions. You know, what is the foundation? How does it work? How does it compare to other giving vehicles? So I like to think of it as the most basic sense is that it's your personal 501c3 or it's your personal charity. And it doesn't mean it's your personal piggy bank, but it is your charity. It is you get to direct it, you get to manage it, you get to decide how it runs, where it gives to. And you have full control over that. That's one of the hallmarks of a private foundation. It gives you flexibility. I already mentioned control. It gives you these tax advantages and it gives you the personal and family benefits, which we'll also touch on. But it wraps all those together and in a neat little package. So most people are, they understand typical giving. And this in this case, you know, the I think in 2022, there was like 500 billion dollars that were given by Americans. Being philanthropic is a very American thing actually. And 500 billion dollars of that, the vast majority came from individuals. I want to say it was like 250 to 300 billion dollars. And this is what people are most familiar with because it's the most common. Anytime a natural disaster happens, the Red Cross pops up and says, hey, give to this organization. This is going to be your religious giving. This is going to be to, you know, really anything in your local community. You write a check or you provide cash or now you can, you know, all kinds of different ways. You can give assets and things like that. But it's, it's very simple. You give dollars or you give, you give some sort of contribution and you get a tax deduction for doing so. With the private family foundation, we're basically adding a step where now you're still making that contribution. But you're contributing it to your own charity, to your private family foundation, which is still going to give you that tax deduction. But then you have the ability to grow those dollars that you contributed or can grow those assets that you contributed and then decide at some point in the future what organizations you want to grant to. So you're just adding that second layer of now having your foundation before giving to those other charities. And that's basically the function of the private family foundation is to grant to other public charities. So your role in that is basically three things. It's to give, grow and grant. So by giving you get that tax deduction, you get to grow those assets tax-free and then you get to grants to other nonprofits. And what we'll get to later is this concept of a sustainable giving system when you have that growth in a tax-free environment really cool things can happen. And what can you contribute? Pretty much anything. You know, we got the cookie monster here because the foundation I like to consider it as the cookie monster of charitable vehicles because you can give, like I said, anything from cash down to crypto to arts to interest in businesses, life insurance policies for those of you on the show that like life insurance policies, that would be a further conversation because there's a lot of minutia that goes into that but you definitely can do it. And anything in between people get really creative in this arena here. Can't donate your firstborn. That's one thing that's on the list though they could work for the foundation. Absolutely good. I actually just talked to somebody who is on staff of their family's foundations so that she can get health insurance. So you know, there's always there's always a way. That's super interesting. We'll have another video breaking down how a foundation could own real estate and some of the pros and cons of having that own real estate. So with all this great responsibility and cool things that you can do with the foundation, there are certain rules in place. It is one of the most, you know, in the in the tax code. It's actually what I would consider the most empowering section of the tax code because it allows you all this flexibility and then gives you clear guidelines as to what you can and cannot do, which is not the case in other places. This is actually good. Another reason why I got into the foundation space is it's only like four or five code sections and it actually makes a lot of sense. The tax law in relation to that, that's a little bit of a different story. But on left hand side, these are the things that you can and should do or are compelled to do is to receive donations. Everybody knows how to do that. We're basically working from our left pocket to our right pocket. We're going to write a check from ourselves personally to our now family foundation. Manage the foundation assets. This for a lot of people, they like that concept of they have full control to manage that or they can absolutely hire a money manager or an investment manager or somebody to grow those assets for them. Making minimum distributions. So this one is basically the foundation needs to expend, meaning it needs to spend 5% of the net assets on an annual basis. Those expenditures include grant making, include administrative expenses. If somebody works with me, the cost to work with me becomes an expense of the foundation. Anything related to the administration of travel expenses, office space if they have it, really anything, just like if you think of a for profit business, what would be an expenditure could potentially be an expenditure in the nonprofit side and your foundation as well. So that would count against that 5%. But just for argument's sake, if your foundation had $100,000 of assets on an annual basis, you would technically have to expend or spend $5,000. So for most foundations that are growing more than 5%, that's a non-issue, not even considering the fact that they're going to lessen that amount through grant making and other expenditures. And then the last one is complying with all filing requirements. And that's again, that's a burden that I take on for people, the annual 990 PF tax filing, which we'll look at one of those briefly later in this, and anything else throughout the year that would be necessary. So then the right side, the very clear aspects of what you can't do, is you can't engage in self-dealing. And so basically what this is saying is, like I mentioned previously, you can't make it your own personal piggy bank, because once you contribute money or assets to the foundation, that's an irrevocable gift for charity. And that's not to say, like you already said, not to say you can't take a salary or do you reasonable expenditures just like you can within a for-profit business, it's just saying you couldn't, for example, say start a foundation and then provide a grant to your brother or sister, basically like handing out money because you basically got that tax deduction and you can't, there's no private enermy, no private benefit within this. The second one is not making jeopardizing investments. This one's pretty clear. I'm a big fan of GameStop right now. That's probably not a good investment for the foundation because of the volatility of it. The classic example is don't go to Vegas with the foundation assets and put it all on the table. And this is just good prudence and good investments here. And then, a careering excess business holding is basically the premise of the foundation is ideally the majority of the income derived from the foundation is going to be of passive sources, so passive income. And the reason being is the IRS doesn't want or Congress doesn't want a foundation engaging in a for-profit venture essentially because that would give it an unfair advantage over other for-profits. So in most cases, a really odd example is a foundation invested in a laundromat. And that was fine because it was a passive investment, but the IRS disallowed the vending machine in the laundromat because that was considered an active trade in business. So there are some pitfalls and random things that pop up with that, but in most cases, it's not a problem. And then the last one, not making taxable expenditures, this is basically saying don't get involved in politics. And that's, you know, one of the- You can't, if you want to donate to a political campaign, you can't do it through a private family foundation. That's correct. The only way that you could, it would be for something that was basically promoting voter turnout or voter registration, something that is very like- But even super PACs, like you can't donate to a super PAC, you know? No. Okay. So because then they would find- Because I'm sure there's a reason why. That's the case because it's maybe, means probably a good thing. Well, so just foreshadowing, I think that's something we can cover later, especially with a being an election year. Yeah, sounds good. So how do they compare? Well, we basically have the three main ways that people give the most popular are through the direct gifts, through a donor-advised fund, which are becoming very popular, and then of course the private foundation. So with the direct gift, like we already discussed, it's the simplest, easy, you get the tax deduction, but you lose control. As soon as you write that off, you know, you give that contribution to the foundation or to the nonprofit, that money is in their control, and you don't really have any say of what you can do with it. With their donor-advised fund, these are the most popular right now as Fidelity Schwab and Vanguard. There's another one that, you know, you would be familiar with like the National Christian Foundation, which is actually a donor-advised fund. Basically, what you do is you contribute cash or assets, you then get a earmark, a fund that says, you know, it's the the Williams Family Fund within the donor-advised fund, and you get to advise, and that's why I have underlying here, is you get to advise without the legal right to actually direct. And so they are simple to set up. They're pretty, you know, pretty easy to set up. You do get a tax deduction. They actually qualify for the public charity deduction, which is a little bit higher than the private foundation, but you do lose control. There's pretty much no investment flexibility because they end up getting whatever you contribute. If it's an asset gets liquidated and then invested in their own mutual funds, and then you also have the donor-advised fund fees as well as the management fees. Yeah. And oh god. No, go ahead. No, go ahead. And I would just say to play Devils Advocate, like, yes, you do lose control and that investment flexibility and fees, but a lot of times they're pitched as, you know, you can advise, like, if it's long as it's a nonprofit, you pretty much, you get to say, but you technically legally, they could disallow that. Yeah, I mean, there was a lot of different, I'll go ahead. Sorry. And then when it comes to investment flexibility, you can invest in whatever their mutual funds or indexes are, but like, we're going to find in a second, like, a private family foundation, you can at own, like, actual assets. And it's my understanding that you would have to sell an asset to put your money in a donor-advised fund. Whereas, uh, whereas a private family foundation, you wouldn't have to do that, but you could still get the step up and basis deduction. So there's, there, these are just things that like, when someone's looking at this, they could be like, oh, that's a little misleading. So maybe they should be yellow, but at the end of the day, I'm just validating what you're saying. Well, just to clarify, you can contribute pretty much any asset to a donor-advised fund, but they cannot retain them in the fund. So they, the donor-advised fund would actually liquidate it and then reinvest it. And that's the other aspect too, is you don't get to choose what they invest in. That that's where selecting your donor-advised fund is also kind of interesting because you need to make sure that they're going to be investing in things that you're okay with. And then there is actually a famous case of somebody who donated, it was like a couple billion dollars to a donor-advised fund. And the, he wanted it to be used for certain purposes. And they basically said, no, because you get to advise, but you don't actually have legal right. And there was a huge court case that dragged on for a very long time and the courts ruled that, hey, you gave up control the moment you struck that check. So, yeah. Again, I'm not, the, the thing I really want to be clear on is I'm not saying any of these things are bad or anything things are good. The whole point is to provide options. Like these are your options. I know for a lot of people, a donor-advised fund is a great opportunity. Yeah. And for other people, it is just directly giving for other people. It's a private foundation. Now, I just said, I'm, it's just about options. Then I say it's the gold standard. Well, the answer is it is the gold standard. I mean, if you look at the Forbes 400 list of the wealthiest individuals in America, 83% of them have a private family foundation. And they may also, in addition to that, have a donor-advised fund. But by and large, they have a private family foundation. Now, they aren't the most simple to set up because you do have you have to create an organization. You have to make sure that it has all the the specific language within the governing document and the bylaws. And you have to get tax exemption and all those things. But again, that's part of what I do to alleviate that burden for people. You do get a tax deduction. You do get to maintain control. So, to your point, yes, when you contribute assets, you maintain full control of those, whether you want to liquidate them or not. You have that ability and you have that investment flexibility. Being able to within the foundation, maybe you want to invest in crypto, maybe you want to invest in real estate, maybe you want to invest in some portion of a business or something like that. You can do that. And the last part is the fees. It is because it is more complicated. It does end up costing more than it would to be due direct giving and potentially a donor-advised fund. There's actually, depending on the amount of assets you have, you can look at a calculation of what the cost would be. And in certain cases, it depends. Like most things. But again, the premise of fees is my whole goal is to reduce those as much as possible for people. I'm making this up on the spot, Dan, but I almost think of it as like, private family foundation is like an entrepreneurial giving path. It's like, I almost look at it as like, I'm okay with there being a little bit more pro, because I like the idea of all of what could be. But a donor-advised fund is definitely an easier step if you're just like, I could care less about a lot of the things. And we're going to talk about in a second about what you get to do with private family foundation. If all you care is convenience and just want to write a check, but instead of like, making sure, because the disadvantage of writing to a bunch of charities is now you have to like, get all those letters and get bring it to your CPA. And so a donor-advised fund solves that problem by just saying, write one check. But then it is period. It's like, that's kind of like done. Whereas like, the private family foundation, like, there's so many other opportunities. And yes, there is some other extra steps that you help with. But some of those extra steps are actually attractive because they should help you with your family legacy in the next generation. And so it's like, sometimes working out is hard, but you like the results of working out. Yeah, like that. Yeah, and it tends to be that a lot of people that I work with are entrepreneurial minded. And so the buzzwords that are floating around now are what are called venture philanthropy or social entrepreneurship. And that's the beauty of when you have that control, you can take whatever you're currently good at in the for-profit world and apply that to the nonprofit world. And so to your point, like being able to work with people that understand the concept of lost opportunity costs, the concept of efficiency, the concept of good investing. And you can now put that, do that in a tax-free environment and do good with it. It becomes a domino effect of creating a huge impact. And so, you know, with this vehicle comparison, you can see that basically the foundation does provide the most benefits. Now, you could say that potentially I cherry-picked some of these things, but by and large, the point is that this is creating those options again. It's not saying that one is one is the best or one is better than the other. It's a matter of saying, here are your options. And based on what's important to you, may drive the choice. Well said. And again, so that's the whole point of what I do. I'm very specific that I work specifically with private foundations. Hence the name, foundation launch. I help people start and manage their foundations. And, you know, like I said, other people also, if they have a foundation and a donor advice fund because they can work in tandem. So getting into some of the benefits, basically here we have tax minimization, you get to maintain control, you're going to hear it over and over again, you get to maintain control. What I like to call a sustainable giving system, which is really cool opportunity, and then the concept of family legacy. And so within tax minimization, we have all these aspects that we're going to get into. But basically, there's deductions on the front ends, you can avoid capital gains tax, you can avoid the state tax, you can grow those assets tax-free, and then there's other unique things that the foundation can do that no other charitable vehicle can. So within the personal income tax deductions, basically we have two levels. We have a 30% and a 20%. What I mean by that is we look at the EGI, the adjusted gross income, you can get a deduction up to 30% for cash. So if you had a $100,000 income, you could contribute up to $30,000 to your foundation. Publicly traded securities is 20% of EGI, as long as they're long term, so you have to own it for at least a year. And you get a fair market value deduction for that, and we'll show an example for that. And then appreciated property, this is going to be cryptocurrency, real estate, art, things like that. You get a 20%, but the difference here is the values at the either the cost or the basis. And so not as advantageous, the publicly traded securities are definitely and cash are definitely the favored, but that doesn't mean the appreciated property doesn't work well because there's some really interesting things you can do there as well. So as an example, if you had a $1,000,000 income, this is just inflated of what I already mentioned, the max contribution you can make is $300,000. And so that would reduce your gross income down to $700,000. And if you lived in a state like California or New York and you had this type of income, you're combined tax rate could actually be higher than this, which is scary. But if it was at 45%, that would save you $135,000 in taxes now. And Dan, I just wanted to because I know I've seen people comment, comment, comment this. If they don't have a million dollars, I know you're going to cover this in a, in later in the presentation, but we're looking at like around 150,000 plus, and you want to be generous for this potentially makes sense. So it's like, you don't need to make a million dollars, but you do, it's not for everybody. And again, those are my words, you can maybe correct me, but that's, I just want to let people know like, again, you don't need to make a million dollars for this to make sense. Yeah, absolutely. And, you know, I wouldn't say anybody should start a foundation, but the idea is to at least kind of magnify the potential benefits because I think of it as units, you know, I mean, for this was $100,000, we're talking $30,000 contribution. And if you, you know, you can scale up or scale down from that and see what the potential benefit is, but the thing that I think is really key here is that you're able to maintain control of that 300,000. So you, you wrote a check to it. And now you still have $300,000 in your foundation account. And you personally saved $135,000 in taxes. Right. Yes. I, yeah, I, I'm agreeing with you on that. Yep. So a really fun one here is avoiding capital gains tax. So back in 2017, and there's a lot of examples of this and we'll do other videos on it. But, uh, Mr. Zuckerberg, he donated $2 billion of Facebook stock to the Chan Zuckerberg foundation. This is the 90, 990 PF, the Return of Private Foundation for the Chan Zuckerberg Initiative Foundation. And you can see, uh, we have $5.4 billion with the Vassettes. This is a big time foundation. And once again, that 5.4 is growing tax-free. Now what's kind of interesting is when you see a foundation like this with all Facebook are probably met a stock now, the wild fluctuations if the stock is volatile is like this foundation could have 5 billion today and 9 billion and two months from now and now swing down the other way. It's really, it's kind of fascinating. Uh, but the, the point we're showing here is we have the public-key traded security, which is going to be again, Facebook or Metastock, $2 billion. And look at the cost basis, $1,173. It is basically an infinite return. And so what we're highlighting here is that by contributing that stock, the $2 billion with a stock with the federal long-term capital gains rate of 20 percent, and California's long-term capital gains of 13 percent, he's saving $660 million in capital gains tax. Now if you had an average accountant, what they would say is, well, that's okay, you still have 1.3 billion left over. But these guys think about the lost opportunity cost of what is, what is that $660 million worth times 8 percent times 10 years, 20 years, 30 years? Yeah, it's insane. It's unbelievable. But not only did he avoid that, he also got a $2 billion income tax deduction. So really interesting. Yeah, so he's avoiding $660 million, he's getting a $2 billion tax deduction, and he still controls the stock. So he didn't have to pay capital gains, did he get a $2 billion tax? Oh wow, that's amazing. I would say so. And this is happening all the time. We'll look at Elon Musk, we'll look at, I mean, that's why the Bill and Melannie Gates Foundation is so as big as it is, you look at Warren Buffett, contributing Berkshire Halfway stock, the mega foundations are almost all funded with the other benefits. He didn't have to sell Facebook stocks, so being, you know, a shareholder person that would, I mean, you can't just sell $2 billion worth of stuff like that could potentially hurt you. And so the foundation gets a hold on to those stocks. So the thing that's interesting though is they do just not in the same dollar amounts. They'll still trade in like a couple hundred million dollar lots and then rediverse fine other areas, which I, that alone I find interesting is like, why are they doing that? But yeah, again, full control to do that, to either maintain it, to liquidate some, reinvest in other ways, you know, you name it. Yeah, it's amazing. So you have the personal income tax deduction, you have the avoidance of capital gains tax, but then you also have the estate tax aspect of when you contribute assets, they get moved out of your estate. So you look at Warren Buffett. Over the last 20, some odd years, you know, this is 17 years, he's been giving a ton of money, and really it's been giving a ton of stock Berkshire Halfway to the Bill and Melannie Gates Foundation, which he just so happened to be, he was a trustee on for a number of years. He is no longer as he's getting up an age, but I just find it fascinating that he's sitting on the board of the foundation that's receiving billions of dollars of his own stock. And, you know, the quote at the bottom is, he plans to give 99% of his wealth away to philanthropic purposes. And the reason he does this is because he's a smart guy. He understands that when it comes to your estate, to your stuff, only three, it can only go three ways. The government's going to take it as taxation, which estate tax and certain states and income levels, you're going to be at 40, 50% easily. It's going to go to your heirs, which again, you know, in today's day and age, people are less and less, are they're realizing more and more, I should say, that giving your kids a ton of money is not necessarily the best way to go. Well, the third option is charity. And so what we're talking about here is if your kids are already set or you don't want to give too much money to them, then you have a choice between two options, the government or charity. And this would be considered your social capital, then, is either voluntarily or involuntarily going somewhere. And I don't know about you, but the, I'm sure the people that are watching this would rather their dollars go to their own charity than to go to the government. Yeah. And that's what we're talking about again is creating options, creating choices, having better awareness allows you to make better choices to ensure that what you've been working towards your entire life actually goes to the things that you care about. That's good. Then you have the income tax-free growth within the foundation, which we've been talking about, is growing that tax-free. So whether it's interest, dividends, capital gains, any other income that's derived, there is no income income tax on that investment. There is a 1.39% excise tax. But again, in the grand scheme of things, so let's just say you had a hundred thousand dollars of investment income within the foundation, you're going to pay $1,400 in excise tax for the privilege of growing $100,000. And that basically just pays the administrative expenses at the IRS to run the charitable division. And then the last one is there is a world and we'll talk about this at some point too of being able to get a property tax exemption for real estate that is owned by the foundation, which is another unique benefit. Speaking of unique benefits, these are things that are only possible through having a foundation. So being able to make grants to individuals, scholarship programs, disaster relief, the scholarships are becoming really popular of being able to provide opportunities to people and it doesn't necessarily have to be just for college or things like that. You can do other opportunities. Being able to pay staff salaries, including family, already touched on that. And that too is just like the for-profit side, providing a reasonable salary for duties when the foundation are absolutely reasonable. There's a lot of people that, quote unquote, retire into their foundation and pay themselves to salary for running all the charitable initiatives and things like that. Paying expenses to run a grant-making program. So just because we're talking about giving grants doesn't mean you can't actually run your own charitable initiatives. And for example, having the grants to non-US charities or non-chairble organizations, I'm working with somebody right now that they're looking to set up a bunch of initiatives down in Columbia. And because they don't trust the non-profits that are down there. So they're going to use their foundation and go do that down in another country. And they can do that on behalf of their foundation. So there's a lot of, again, flexibility, control, aspects that you can do a lot of different things that you couldn't do personally. So all of that, you know, combined. We have the income tax deductions. We have the capital gains void in. So we have the estate tax exemption. We have growing assets tax-free and these other benefits. And this is still, I know this is a lot of information, but it's still just scratching the surface of what's possible. Yeah, it's really good, though. I really appreciate you putting this together because sometimes it's hard for us to grasp if we're just talking. And this really starts showing you the compound effect of having a private family foundation. Well, and you know, that's really the compound effect right here. You know, it's the same well-giving system. This this was kind of born from listening to one of your interviews with John Noel of planting Melia trees in Africa because they are a very sustainable tree that you can grow. And I was like, man, well, we're talking about tax-free growth. We're talking about efficiency. How can we make this in such a way that the foundation could run whether we're here or not? And this is where the concept came from is on the left hand side, if you give $10,000 a year to the United Way, to your church, to you name it. And you have a bad year or you die, that donation disappears. So then that organization, they don't have to find another way, but realistically, they will want to replace that somehow. So they have to go find somebody or a way to replace your annual gift. Whereas if you look on the right hand side of investing, and really this is this is looking at the economy of why investing is probably better than just donating because it creates a further return. But if you if you gave $150,000 to your foundation and the foundation grew that at 8% in a tax-free environment, that annual income produced would be $12,000. So $10,000 could be granted to the United Way and $2000 is left over for operating expenses and continual investment growth. Now, this is just an example, obviously, but the numbers could change any which way. You could have, you could give less to your foundation, you could give more, you could provide less in less of a grant, you could get a better rate of return. There's a lot of different levers that you can pull. But the idea is that if you were to do that, then that $10,000 would be given every single year just off the investment growth. So that could happen during your lifetime, that could happen after you're gone and everywhere in between. It's interesting, Dan. I know this is the first time we're talking about this, but it's like you don't you don't spend every dollar that you make, you will you save for the future. Part of the reason why we save for the future is so that our money can start working for us. But yet all that goes out the window when we come to giving. It's like give and it's like you're almost giving the paycheck to paycheck model of like, you know, which is not, I mean great. It's awesome when you're giving. I'm not downplaying that, but it's like that concept of sustainable giving is the same concept of why we both save and invest for the future is because we want our dollars and our assets to work for us. And the same thing can go with giving. It doesn't just have to be for our benefit. You can set that same thing up. Hence the entrepreneurial giving mindset that this will continue to kick off giving whether you are alive or not. I know you said that, but it's a really powerful concept, but it takes takes some time to put into that because the downfall of that is you might give less now, but you're setting up a model that can arguably give way more over your lifetime and beyond. That's correct. And I've done a lot of different calculations and it is almost always better to start earlier. It's just like life insurance. It's better to start that compound curve earlier than it is to do like a charitable request after you die because you already kickstarted that compound curve. And that's where this concept here is just like you're saying is you might give to whatever organization. Let's just use your church for example. You've been giving $10,000 per year to the church. Maybe you redirect that full $10,000. Maybe you redirect to portion. Maybe you start giving more than $10,000 and you start dividing percentages or whatever it may be. But you start peeling that off into your foundation. And now you grow that. And this in this example, if you had a 7% growth growth rate and you gave $10,000 per year at the end of 10 years, you would have just over $10,000 of annual interest. So in that case, you have now created your sustainable giving system. And then this is again talking about that concept of the different levers. Hence the lever there is your contribution could be more, your growth rate could be more or less. Whatever lever you change the growth period as well, that'll change the amount of annual interest that'll be produced. So we can dial in based on the amount of money that you want to give and the amount of resources you have to contribute. And a realistic growth rate, we can figure out how long it would take for you to create your sustainable giving system. That's good. And then the concept of family legacy. This is actually I think one of the benefits that is kind of glossed over because people focus on the tax benefits so much, which I fall into that trap too because it's very logical. Whereas the family legacy aspect is more of an emotional side. But I think it's by far the most important, especially when you're starting to talk about ultra-high net worth families. In my opinion, family relationships is one of the only things that wealthy people can't solve with money. And that's where being able to use something like the foundation to start having that concept of what is the family legacy, what does that look like, what do we care about? I think is really important. Hence, you know, again, here 70% of wealth transfers fail. And everybody's talking about the boomers aging out and the transfer of wealth that's currently happening. The vast majority of that is going to go places that we have no control over. And that's when we're coming back to the concept of choices, being able to have the choice to have a foundation that can, if you so choose, you know, live on in perpetuity, that's an interesting decision to make, knowing that, you know, by the first, second, third generation, pretty much everything you worked for in most cases has been squandered. One of the most famous examples is the Vanderbilt's first The Rockefeller. The Rockefeller family continues to thrive while the Vanderbilt's don't really have much to show for it. And we'll look at their foundations at some point. The Vanderbilt foundation has like four million bucks and the Rockefellers have like 15 billion. So it's a vastly different concept. And the Rockefellers focus on family, you know, the concept of family values. How do we spend, how do we save, how do we invest, what do we think about philanthropy? The foundation can be a proving ground of being able to instill these things, teach these things and do it in a way that is charitable. So it's like bringing it all together. It's a very fun environment to do it instead of bringing the kids into the family business or whatever it may be. You can bring them into the charitable business and be able to start having these conversations. Warren Buffett is famous for saying that he, with his three children, they'll receive enough money so that they feel they could do anything but not so much that they could do nothing. But then you go look at the foundations that he set up for them and they have multiple billions of dollars in them. I like to pose this question of even if they were destitute as individuals, do you think that they would survive by having a multi-billion dollar foundation that they could be employed at, that they, what are the relationships that they're going to have by having this asset set? There's so many things I can come from that. I have a funny feeling people invite you to their dinners. You could just eat for free for the rest of your life because you have a foundation in everybody and their mother and law once, once you to grant them money. That's right. And the cool part is Warren gets to fund their charity and they get to decide the issues that they care about. Yeah. Yeah. There's, I mean, future videos. I just get excited to having our family be really thoughtful about how we give and and that this entity is going to live beyond me. And hopefully if it stewarded well, it could be live multiple generations. And the one thing that's common is the continual growth of assets that will for them for the purpose of being able to be generous. So I think this resonates for sure. Well, and you said it and I should have said it way earlier steward ship. I mean, that's exactly what we're talking about here is steward ship steward ship with the family assets, steward ship with the family values, steward ship with the family legacy. And so within this, again, I keep saying you harpin on the family aspect, but you have the board of directors and then you have the ability as your family grows to have a junior board of directors and be able to start incorporating them. I have David Green here. He calls it the adventure of philanthropy. They're now in the third generation of the green family. And for those of you that don't know, David Green is the founder and CEO of Hobby Lobby. They he he said, you know, out of all the things he's been able to do, being able to be charitable is been the most fulfilling thing that he's ever done because he gets to include his family and they get to go impact people all around the world. And that he just said, you know, there's no better feeling than being able to do that. And the concept of having a family retreat. Well, what if we could do a basically an offsite on behalf of the foundation and have all of these conversations and do it in a way that is relaxing and leisurely and inclusive. And it's just like a it's a really really neat way to have some structure to that. You know, I think that's a piece that people they lean in towards is right now they're giving is all over the place. And being able to have structure through something like a foundation, being able to have a family retreat is really really beneficial. And then the last aspect is site visits. This is basically saying, hey, we want to go travel to a place to see either a where we want to give our dollars to or b have some accountability for the dollars that we're providing. So one of my favorite examples is people who give to doctors without borders. And then they're able to go like in a perfect world, they would be in the medical field themselves and they can travel on behalf of their foundation and go do a medical mission trip on behalf of the foundation to go see the impact of their dollars through that. So again, that is infinitely wide. Whatever you deem is your purpose, your charity, whatever it may be, there's a lot there's almost infinite ways that you can go about that. So overall, we have all these things. We have tax minimization. We get to maintain control. We get to create a sustainable giving system. We get to have our family legacy or lock that in. And the last piece is, do you qualify? And you already touched on this of, it seems like all these billionaires and people have this, but am I able to do this? And this is the neat part. Is if you look at the 100,000 or so foundations in this country, the vast majority of them have assets of less than a million dollars. We're looking at 55%. So more than half of all of them have assets of less than a million. And so the size of the fund does not necessarily correlate to the size of the impact that's possible. And that depends on how much time you put into it, what kind of relationships you put into it, what kind of capital you put into it. And the accountability piece, that's where a site visit comes into play is being able to see is if what you're trying to accomplish is actually getting done. So the thing I want to just hit home here is you clearly don't have to be a billionaire because we're talking 55,000, 60,000 of those foundations are relatively reasonable in the grand scheme of things. There are still tons that have a lot, but it doesn't have to be that big. I like to think of it as these three questions is, first of all, do you even want the added benefits of having a private foundation over an alternative giving vehicle? And what I mean by that is do you want the added complexity? Do you want the added potential burden of having all these other levers versus just continuing to give directly or doing something like a donor advice fund, which again is easy to set up. You write the check or contribute the asset and then you get to advise on where those dollars go. If yes, then it's the next few questions of how much do you want to contribute on an annual basis? And or do you have existing assets that could be donated? And the reason for that is if we're just looking at from the tax perspective of the standard deduction being 25,000 creeping up on close to $30,000 now for married filing jointly, theoretically, you would have to be giving at least $25,000 on an annual basis to actually get the benefit of starting one of these. That doesn't mean you couldn't still do it because 90% of people take the standard deduction, which means that the vast majority of people just from a pure dollars perspective wouldn't benefit from this, but that doesn't mean you couldn't start small and grow that into the future. Maybe there's going to be some liquidity event in the future. Maybe you're going to team up with some other family members. There's a lot of different ways that you can go about that. And so lastly, if somebody wanted to get started, it's actually pretty simple. It's three things. You need to decide on a name, which for some people's easy, some people's hard. You need to decide who the directors could be. This could be an individual, it could be an entire family. It could be some combination of that. The benefit of the private family foundation is you can have a board of just family members, whereas if you had a public charity, you would have to have what's called a diverse board where you couldn't have just all family members. So you have full purview and decision making as to who gets to be on the board. And then the third is how much do you want to contribute and where is that coming from? And past that, that's about it. So this has been fun for me to, you know, blabber on about this, but really the the reason I'm doing this is as you can see, my mission is to help 100 families effectively steward and deploy their surplus resources into philanthropic initiatives they care about. Like that is like I said, when I started is I want to help people help people. And I believe that this is the best way to be able to do that, to be able to steward the resources, to be able to grow them in a tax-efficient manner and create an impact that I don't think any of us can imagine. Hey Dan, I really appreciate you taking time breaking this stuff down. I think there's a lot of questions that I have that I don't want to derail you. Even even like the question like technically does the how do you how does if you have five people, five family members on a private family foundation as a director or on the board do how who decides who gives you need three at least three of them to decide or is there is there a main person that gets to decide like how does that all work. But then the point that I'm trying to make is if you have questions, please write them down in the chat like we're Dan's going to be a contributor that comes on the show lots and we're we'll answer questions, but then we'll also look at like what questions you have about certain people because one of the things that you you have a gifting of is you can go down the rabbit hole and do a lot of research that is available, but it's not super easy to find. And so if you have questions about private family foundations or people, please put that in the chat. And then also if you're want to talk to Dan, if you want to see like if you want to be one of the hundred families that Dan wants to serve, like there will be a link down below where you can check out more more information. And I just encourage you if you're on the fence or you're like I'm not sure have a conversation with Dan. He'll be able to really help answer your individual questions because it's hard sometimes presenting without knowing who we're talking to, but at least the groundwork is built to where it's like you get the sense of like the pros and cons. And so again, I want to thank you. Sometimes it's hard to put something together like this and you did it, man. Thank you. Yeah. The last thing I would say is anytime I talk to somebody, the first thing I start with is what is your philanthropic dream? Because that is really the starting point of what is the purpose? What is the mission? What is the dream that you want to accomplish? And then figuring out what is the best charitable vehicle for doing that? Like I said, this is all about choices and figuring out based on what you're trying to accomplish, what is the best avenue to do that? But that starts with the most fun aspect of figuring out, you know, what is that dream? And what do you want to what kind of difference do you want to make in the world? That's good. Dan, is there any final thoughts that you have before we before we sign off? I think that's it. All right. Hey, it's Caleb Williams here. I'm just interrupting this video quickly to invite you to check out our NS at vault. You may have been there. We've actually revamping it. And if you are somebody that wants to learn more about is life insurance right fit for me? Does this end as it makes sense? Like does this actually help me be more efficient? We've put together a 10 minute documentary style video that I can test a really, really good job giving the history why the end asset, different setups and designs that we use. And then we have an end asset fault that gives like case studies, calculators, handbooks, and so much more. We are here to serve you whether it's a conversation, whether it's education or the video. So make sure to go check out and asset.com slash bolt. Learn more.