You've read through the information on family foundations and considered your other giving options. If you have decided you are ready to start, here are some steps to take:
Read more about starting your family foundation
The Council on Foundations recommends the following publications:
Family Foundations and the Law: Answers to the Essential Questions - Fourth Edition
By John A. Edie and Kelly Shipp Simone
In a straightforward question-and-answer format, this newly updated edition steers you through the complex legal issues that affect family foundations and outlines such issues as payout, charitable deductions, excise taxes on investment income, rules against self-dealing and taxable expenditure, international grants, and tax return disclosure rules.
Find a qualified foundation attorney
You will need an attorney to get started and to help with your application to the Internal Revenue Service as well as craft your foundation’s governance documents – Articles of Incorporation and By-Laws. The Council on Foundations suggests that you find a lawyer who has expertise in non-profit tax law. Some possible sources for finding attorneys in your area include the local community foundation or United Way or your state's bar association. These suggestions do not constitute an endorsement for any suggestions. The Council recommends that you get references on any professional advisor you use.
Find the documents you need to get started
The basic IRS form that is needed to start a private foundation is Form 1023, the Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. You should consult with your lawyer about these and other documents that may be needed for the formation of the foundation. The Council’s publication First Steps in Starting a Foundation contains samples of all of these documents.
Create a mission statement
A mission statement is an excellent first step for the operation of any organization. The mission statement helps focus the foundation and informs grantseekers, other foundations and the general public about what you plan to fund. By having a clear statement of mission, you assist potential grantseekers to determine if it is appropriate to apply to your foundation for a grant. You can also use the mission statement as a first step toward both short- and long-range planning. The statement should help clarify your goals by setting forth the following:
- Grantmaking priorities
- Geographic focus for giving
- Types of organizations funded
- Projects that may be considered
- Other stipulations
Mission statements can change over time. If the goals of the foundation evolve, the statement can be redrafted to reflect changes from the mission originally described. Most foundations choose to include their mission statement in their grant guideline.
For sample mission statements, order a free copy of The Family Advisor: Values, Visions, and Missions from the Family Foundation Services department at the Council on Foundations, 703/879-0600.
Develop a Statement of Donor Intent
As the original donor to your new family foundation, you have the opportunity to expand on the ideas you set forth in your mission and values statements. A statement of donor intent is a message from you, the original donor, to your family foundation board and your descendants who will manage the foundation, describing your grantmaking values, your areas of philanthropic interest and your hopes and desires for your family’s philanthropic involvement. While not a legally binding document, such a statement should provide guidance for the future board when you step down from your foundation responsibilities.
For sample statements of donor intent, contact the Family Foundation Services department at the Council on Foundations at 703/879-0600 or firstname.lastname@example.org.
Develop grantmaking guidelines
No matter what its size, your foundation should establish publicly available guidelines to assist grantseekers. Guidelines will reduce paperwork for the foundation as well as for grantseekers. Having clear and concise guidelines is a proven way for foundations to decrease the number of inappropriate inquiries and proposals they receive. Guidelines can be simple and should clearly provide:
- A brief history of the foundation.
- A mission statement
- A brief statement of grantmaking policies, including:
- What legal and other documents are required for proposals to be considered
- How proposals are evaluated and how funding decisions are made
- Whether the foundation will fund a project one time only or will consider continuing support
- Whether the foundation will fund a project alone or prefers funding partners
- Whether more than one proposal from an organization will be considered in a calendar year
- Where proposals must be sent and by what date
- What monitoring and evaluation will be done if the grant is made
- A clear statement of the information to be included in a grant proposal—for example, number of pages, format and issues to be addressed.
For more information and samples of grant applications and guidelines, contact the Family Foundation Services Department at the Council on Foundations, 703/879-0600.
Join a philanthropic association
Join the Council on Foundations and attend various educational and networking opportunities through meetings, seminars and conferences.