Transfer the foundation assets to a donor advised fund.
Voluntary termination of private foundation status by transferring remaining foundation assets to a donor advised fund such as the Jewish Communal Fund enables family members to continue pursuing their philanthropic goals more efficiently, without the costs and burdens of annual tax filings.
JCF’s donor advised funds are:
- less expensive
- more tax advantageous and
- offer Fundholders confidentiality
While you should consult with foundation counsel, generally you will find the following steps are required to transfer assets from a private foundation to a donor advised fund and dissolve the foundation.*
- Corporate action
The governing body of the private foundation must authorize the foundation’s dissolution and distribution of assets to the donor advised fund.
2. Distribution of assets
Prior to the end of the foundation’s final year, all estimated expenses and accounting fees should be paid and the remaining assets of the foundation should be distributed to JCF.
3. Final returns
The private foundation should file its final federal tax return on Form 990-PF and pay all Federal taxes the year in which it is terminating. The foundation should also file any required final State report and pay all filing fees for that year.
4. Notification of IRS
After the end of the foundation’s final year, when the foundation has no remaining assets, the foundation should notify the IRS that it is voluntarily terminating its private foundation status. The IRS will require documentation of the disposition by the foundation of all of its assets.
5. State requirements
In most states, termination of a foundation requires filing the proper documents with the Secretary of State and paying a filing fee. However, New York State has additional requirements including obtaining approval from the New York State Supreme Court and the Attorney General. For specific information, visit your state’s website.
*This information is not intended to serve as legal or tax advice. Individuals should consult their legal or tax advisors to review their personal situation.