Family Foundations

The Council on Foundations defines a family foundation as one whose funds are derived from members of a single family, though this is not a legal term and has no precise definition. The Council on Foundations suggests that family foundations have at least one family member serving as an officer or board member of the foundation and, as the donor, that individual (or a relative) must play a significant role in governing and/or managing the foundation. Most family foundations are run by family members who serve as trustees or directors on a voluntary basis. In many cases, second- and third-generation descendants of the original donors manage the foundation.

Family foundations make up over half of all private (family, corporate, independent, and operating) foundations, or 40,456 out of approximately 73,764 foundations (Foundation Center, 2011). Family foundations make up approximately one-third of the Council’s membership.

Family foundations range in asset size from a few hundred thousand dollars to more than $1 billion. The holdings of family foundations total approximately $294 billion, or about 44 percent of all foundation holdings of $662 billion. Despite this, three out of five family foundations hold assets of less than $1 million. Family foundations gave away approximately $21.3 billion in grants in 2011 (The Foundation Center, 2011).

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What is the five percent payout requirement?

Each year, every private foundation must make eligible charitable expenditures that equal or exceed approximately five percent of the value of its endowment. The purpose behind the minimum payout requirement contained in Internal Revenue Code Section 4942 is to prevent foundations from simply receiving gifts, investing the assets, and never spending any funds on charitable purposes. The basic rule can be stated simply, but its calculation is complex.

Both the board and CEO advance each foundation’s mission. They hold different responsibilities, but they need to support and balance each other.

Sample form that might be used by the Board to evaluate the Chief Executive. This sample should be customized to the particular culture and purpose of the agency by modifying the performance criteria as appropriate for the organization, inserting those criteria, and conducting the evaluation using the updated criteria.

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