First generation family foundations are founded on a gut-level need to give back. Founders are energized, motivated, and actively engage in the construction and inner workings of their vision. This direct participation generally leads to the launch of a very successful family foundation, one that makes a measurable difference in the greater world.

Many founders realize the importance of engaging the next generation but this focus is primarily and very rightly on the philanthropic impact of the family foundation. The mundane aspects of operations are downplayed or their transition is procrastinated. Without intent, successive family members are oftentimes left to navigate these and many other administrative essentials without a guide:

Board Meetings
Like all nonprofit organizations, family foundations must designate a governing board with officers. The board must hold meetings at least annually and whenever action requires a vote. States have varying rules regarding whether or not meetings must be held in person and your foundation’s bylaws should also address the format that constitutes a meeting. Minutes should be taken to document the occurrence and legitimacy of the meeting as well as any formal action that was approved by the board.

Tax-Exempt Registration
Most states require private family foundations to renew their exempt status within the state on an annual or bi-annual basis. This renewal may require the payment of a fee and/or the submission of a specific report. Failure to comply could jeopardize the favorable tax-exempt status of your foundation and its ability to continue philanthropic work.

Accounting & Tax Records
Maintaining the financial integrity of the foundation requires that gifts are acknowledged in writing using prescribed IRS wording, even if the gift is received from a member of the governing board. Documentation should also include the maintenance of accounting records and completion of annual tax filing. Payment of awarded grants should be properly issued and changes in investment activity appropriately recorded and reconciled.

Many family foundations choose to forego the employment of staff, so responsibility for these tasks fall by default to a member of the board. An alternative option to ensure best practice management and compliance is through collaboration with a subject matter expert. An experienced certified public accountant or legal professional focused on private family foundations could fill these gaps and free your family to focus on the impactful mission that motivated that first generation.

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Kaydee Ruppert, CPA, MSA
Nonprofit Accounting and Financial Outsourcing Manager • 859.425.7730