Frequently Asked Questions
Is this a 501(c)(3)?
Yes. There are several different kinds of organizations that are 501(c)(3)s, and this is just one type. It is a tax exempt charity in total compliance with IRS Section 501(c)(3) Exempt Organizations.
Everyone can be great because everyone can serve.
Martin Luther King Jr.
How do I start?
First, decide on your charitable purpose or mission, and the name you prefer. Then please request an application. Fill it out and return it to us. We will call you to discuss your ideas.
How do I get the tax ID number?
You do not need to do this. If EPAJS accepts you as a client we will obtain this number for you, which is known as an EIN.
How much does my Foundation have to donate every year?
Your Non-Operating Foundation pays out 5% annually as distributions to administrative expenses and charity(ies) of its choice, OR your Operating Foundation spends 85% of its income on programs and services. We set up your Foundation so that you can be either in any year without penalty.
How does my Foundation get funds?
Your Foundation receives donations of income, investments, assets, collectibles, real estate and any such assets. The Founder and Trustees normally provide the bulk of the funding. Your Foundation is eligible for fund raising and grants and does not have to be totally self-funded.
Do I have to have a lot of money to start a Foundation?
No. The general perception is that “people don’t do this until they have a LOT of money.” But this charitable and financial tool is available to anyone. There is no minimum funding level. The most important issue is your passion to improve some segment of society or the world.
Own nothing. Control everything.
John D. Rockefeller
Do I lose control of the financial assets?
No. You no longer own any assets that you have donated to the Foundation, but you control the decisions pertaining to them. You become a steward instead of an owner. You have complete legal and decision-making control. Stewardship is a higher form of trust and accountability, and demands responsible fiduciary actions.
Do I still own the assets I donate?
No. The Foundation now owns them, so we always suggest that you consider every donation carefully. Once donated, you must not take assets out of the Foundation for "personal gain". All Foundation assets are considered to be for the “public good” and are no longer personally owned by you. This "mindset" change is the biggest mental and emotional adjustment, which is absolutely necessary for the Trustees to make. You are now a steward and not an owner. You have control but not ownership. It is vital that every Trustee remember this fact at all times.
How does my Foundation get recognized as a tax exempt organization?
IRS Form 1023 must be prepared and filed within 27 months of the start-up date of your Foundation. We prepare this form for all clients, based on the information you provide regarding your specific purposes. You will receive a complete set of all compliance documents necessary to obtain tax exempt status, ready for submission to the IRS/EO (upon full payment for your Foundation). When your Foundation is approved, that approval is retroactive to your creation date or the date of obtaining the bank account, so all of your activities from the beginning are automatically honored and accepted.
Does my Foundation pay taxes?
Your Foundation is exempt from federal income tax, capital gains tax, estate and gift taxes, and probate concerns. It can hold investment accounts, and this means the profits grow and assets accumulate essentially tax-free. Some Foundations are exempt from sales taxes on purchases, and property taxes in most counties. Non-operating Foundations with invested assets are required to pay an excise tax on the invested assets plus profits; that excise tax is 2%, or 1% in some cases. However, this amount is included in the 5% required distribution total so it is not "another" fee.
Does my Foundation do a tax report of some kind?
Yes, beginning with the second year of operation, and it would be reporting on the first full year of operation. For example, foundations founded in 2011 do not report till May 15, 2013 and the report is for 2012. This report is called a 990PF, and must be filed (or an extension requested) by May 15. It is literally a report, monies in, we did this, we spent this, monies left, and no fees are sent.
If you can dream it, you can do it.
Is the state involved or does my Foundation have to be recognized by a state?
Since this is an IRS / Exempt Organization product, it is federal. However, one rule is that it must be registered by a state entity. This is done by filing in a state of your choice. We have a very solid set-up, in Nevada, that meets this requirement but also affords you as Trustee some level of privacy.
Is there a minimum asset value level?
No, there is no minimum funding level. About half of all private foundations have less that $100,000 in asset level, and about one/fourth are worth under $25,000.
Is this only for related family members or can my friend do this with me?
These sometimes are referred to as Family Foundations, however, the word “family” is never defined in the IRS Code where the rules for these Foundations appear. So anyone can do this with anyone else as long as they share the same vision and purposes for their Foundation. You can participate with your entire family, create and begin to live your family mission statement, or join together with one or more close friends who share a common mission for change. Or you can do this by yourself.
Energy creates energy. It is by spending oneself that one becomes rich.
How do I or my trustees donate to our Foundation?
Consider each asset you wish to donate, because once donated it cannot be taken out for personal gain. Then write up a simple letter that says who you are, what the asset is and that you own it and thus have the right to donate it, what its value is as of the date of the donation, the date, and sign it. If it is worth over $5,000, you will need an appraisal from a qualified and objective third party expert. We provide templates for all such documents. File the letter in your Foundation’s permanent files.
Is attendance required at a Trustees' Workshop?
Because it is vitally important that Trustees know the eight rules that apply to private charitable foundations, creating and establishing your Foundation using the services of EPAJS requires attendance at some point at an EPAJS FOUNDATION educational workshop. Workshops are done physically-live in physical locations and as webinars. Two registered Trustees are included. The Form 1023 will be provided after attendance at a workshop (and after your Foundation is fully paid for).
What is the Board of Trustees?
The Board of Trustees has legal control, plus responsibility and accountability, over the Foundation in all matters. The Board makes all decisions and has total financial and fiduciary control and responsibility. You can start with one Trustee, the Founder, and expand the Board later, or have a backup Trustee in case you become unable to fulfill the requirements of Trustee.
Who should be on my Board of Trustees?
You as Founder become a Trustee, and the Founder "job" is competed once the Foundation is founded. Think carefully about any other Trustees, as they need to be totally compatible with your Foundation’s mission, capable of serving, have the necessary time available, and be in a position to take over all responsibilities if you should be unable to serve. Normally these Boards are small, and the most common Boards are a husband and wife. However, any other demographic is acceptable, as long as all are of majority age. You can start with one, yourself, or two or more Trustees, and these can be you and your spouse and/or family members. Or you can engage a close friend you trust and who truly shares your vision for the Foundation. You can have as many Trustees as you wish, but remember that too many might dilute your vision. Typically founders choose themselves, the spouse and/or children. You can add additional Trustees later if you desire.
Sometimes a Board will create a Junior Board of Trustees, for interested children or grandchildren or nieces/nephews, or other persons, and anyone of any age can be appointed to that Junior Board. Members are considered to be “in training” and can be fully involved with the Foundation’s mission and purposes; they simply do not vote. They can participate in your mission in any other way.
How often do Boards of Trustees meet?
As often as needed to fulfill the Foundation’s committed programs and purposes. One annual meeting is the minimum requirement, and this meeting can be a positive bringing-together of family members, friends who are involved and anyone else important to the accomplishment of your mission. It can be held anywhere in the world. All Trustees must be present unless there is an overriding reason for their absence, such as emergency surgery, and this reason must be documented in the minutes of the meeting.
There are many things in life that will catch your eye. But very few that capture your heart.
Can I receive any personal tax advantages by creating and donating to my Foundation?
You as Founder can contribute up to 30% of personal or family income or the equivalent in personally owned assets, thereby lowering your tax liability (50% for operating foundations). Because what would be tax monies is re-directed to charitable purposes, this is a “tax system for the informed” in place of “THE tax system for the uninformed”. You will learn how to self-direct and self-manage tax dollars.
Charitable Purposes and Missions include:
• Youth Programs (educational and at risk)
• Programs for the elderly
• Minority organizations and programs for minorities
• Alternative energy programs
• Recycling programs
• Wildlife conservation/zoology
• Sexual abuse
• Animal welfare
• Religious programs
• Protection for scientific work
• Literary and literacy programs
• Educational and training programs
• Community and outreach programs
• Athletic competitions support
and countless more.
What if I don't have a specific charitable focus point and just want to protect assets for now?
That is perfectly fine and legitimate. The majority of Foundations are like this. It is simply necessary to be sure "5% of invested assets" goes out the door for all of the Foundation's administrative and charitable expenses and this is very simple for most Foundations. The actual average runs about 17-18% instead of 5%, so 5% is easy. Remember that the Rockefellers and other elitist families created these from scratch in the late 1800s and they created the rules they wanted to live with.
I have several areas of interest, the elderly, animals and the environment. Do I have to have a separate Foundation for each focus?
No. All of these programs can be run under one Foundation. Each would be a separate program, have a name of your choosing, and eventually with expansion have its own manager and own bank account for ease of accountability. Your Foundation can have as many programs as you the Board of Trustees want. No limit.
Trust that still, small voice that says, "This might work and I'll try it."
What is the difference between Operating Foundations and Non-Operating Foundations?
Operating foundations run programs and activities that provide services to people. Do you have a dream? Do you have a passion to change some specific situation that you could impact positively? We are about change, empowering you to make a difference where you have a deep desire to see something better emerge.
Without an entity and a way of operating, it can be difficult to move forward with your passionate desire to impact those who may need your help. An Operating Foundation could be exactly what would serve your desired activities.
Operating Foundations run programs, workshops, individual or group activities or events, and/or provide services, that give charitable benefits to those whose lives will improve in some way because of those activities. These can serve children, seniors or the elderly, broken families or single parents, animals, the environment, and hundreds of other worthy causes. They can involve health issues, educational issues, poverty issues, homelessness and tent cities, sports, community needs, and any other focus where some charitable effort or contribution will make a difference. YOU get to identify what issue(s) or focus you feel passionate about.
We specialize in Operating Foundations, and empowering those who are serious about creating change. Most of us are not familiar with the use of this magnificent entity, which has no minimum asset level and the ability to start very small and grow.
Non-Operating foundations give grants and funding to charitable organizations and purposes. Suppose you have some financial, investment or property assets you wish to protect and possibly contribute to causes you believe in. Yours would be a Non-Operating Foundation.
Think BILL & MELINDA GATES FOUNDATION, only on your asset level.
Maybe you desire an estate plan that focuses on giving back while securing the assets that will make it possible for you to make a contribution to some area(s) of society. Or you own a property that, upon sale, generates capital gains, and you would prefer to channel those funds to charitable purposes. Or you are faced with gift taxes or estate taxes on wealth beyond the current exclusion level. Or any other desire, and you wish to be able to channel monies that formerly paid personal income taxes, to charity(ies), and make a difference.
Your life having even greater significance, value and meaning
Positively impacting the world around you
Seeing your former tax dollars go where you choose
Being in control and able to preserve and self-direct wealth;
Looking for new options and fresh ideas in regards to wealth and its use
Anticipating a future tax burden. Remember Rockefeller’s advice: “Own nothing. Control everything.”
Do you agree with these three most common responses by 1000 octogenarians as to what they might have done differently? They mostly agreed on three things: (1) reflect more, (2) risk more, and (3) leave a legacy.
Keep in mind:
To freely give is a virtue…to be compelled to give is a vice.
Consider the following possibilities in your life:
• A plan for creating a permanent legacy
• A tool for teaching values, principles and greater vision with children and grandchildren
• A vehicle for controlling and furthering charitable endeavors
• A way to express your own beliefs, concerns and experiences
• A blueprint for maintaining legal control over tax exempt assets
• A method for freely and anonymously giving, thereby “doing well” by “doing good”.
A Private Charitable Foundation is much more than an opportunity to save taxes, which would be the lowest priority reason. It is a tool for redirecting tax dollars to benefit others and establishing a legacy for serving.
Whatever you give your emotion to becomes reality for you.
In other words, establishing a Private Charitable Foundation is one way of making a significant impact in areas of your interest.
How long does it take to start my Foundation?
The creation is done within hours of a final decision on the name you wish to use and receipt of application and funds. So you can be operational almost immediately. The paperwork you will need in order to open your Foundation's bank account takes 2-3 weeks from creation.
How might I name my Foundation?
You can name the Foundation anything you want. Often the Founder names the Foundation after themselves (The John Smith Foundation), or themselves and their spouse (The Mary and John Smith Foundation), or the family name (The Smith Family Foundation). Founders who wish for privacy can create an acronym (The EPAJS Foundation). The title can include the words “Private” and/or “Charitable” if you choose (The John Smith Private Charitable Foundation). Another choice is to go back into your family history and choose a family name from a female ancestor who dropped her maiden name when she married, or consider a male ancestor whose name expired when there were no children for it to pass to. Another possibility is a name that identifies the charitable focus of the Foundation (The Tiger Sanctuary Foundation). Remember that the Foundation is a legal entity.
The Founder of your Foundation can be a living soul or an entity. The Founder is the creator and initial grantor of the Foundation. Your Foundation can be a shareholder in a corporation or an LLC and thereby receive distributions from those for-profit entities.
The best thing to give your enemy is forgiveness; to an opponent, tolerance; to a friend, your heart;
to your child, a good example; to a father, deference; to your mother, conduct that will make her proud
of you; to yourself, respect; to all men, charity.