Our guide to family foundations

Transcription

1 Our guide to family foundations Phaup Wealth Management Group of Wells Fargo Advisors J.P. Phaup Managing Director Investments Eric Showalter, CFP Financial Advisor

2 Many persons have a wrong idea of what constitutes true happiness. It is not attained through self-gratification but through fidelity to a worthy purpose. Helen Keller When you invest in a family foundation, you are investing in your legacy. J.P. Phaup

3 The value of legacy. For more than a century, the family foundation has been the giving vehicle of choice for wealthy families. Over the years, private foundations have grown in popularity because, in our opinion, no other planned-giving opportunity provides a comparable level of unique, powerful and lasting benefits. Today, what was only available to a privileged few is now an attractive option for many families who want to create a living legacy, to enjoy tax benefits and to add a measure of control over how their money will be spent now and in the future. The value of your legacy isn t just measured in dollars and cents but in the countless lives you ll touch. About us Phaup Wealth Management Group of Wells Fargo Advisors specializes in assisting affluent individuals and their families in addressing the often-complex financial issues they face. Our unique focus and size enable us to provide the highest level of client service and attention backed by the resources and research of one of the nation s largest financial institutions. Behind our name and identity is the promise of dedication to our clients. Our open architecture platform means we are not in the business of selling products. Instead, we provide unbiased, conflict-free strategies to help you create and manage a family foundation suited to your unique needs. Our sole compensation comes from fees based on the value of our clients assets, meaning our success is mutual with yours. Everything we do consulting with our clients and working with their accountants, attorneys and foundation boards exemplifies our values of trust, performance and strong fiduciary responsibility.

4 What is a family foundation? A family foundation is a not-for-profit entity that is established and controlled by an individual or family for ongoing charitable purposes and potential tax benefits. As more and more families are discovering that the powerful benefits of a foundation are available to them, the number of family foundations in the U.S. has increased considerably to approximately 38,000 in existence today. These benefits include significant control over assets and giving, substantial tax benefits and the opportunity to create a family legacy through philanthropy. 40,000 Total family foundations 35,000 From 1998 to 2008 the total number of family foundations increased by 110% 30,000 Number of Family Foundations 25,000 20,000 15,000 10,000 5,000 DATA NOT AVAILABLE DATA NOT AVAILABLE Family foundations with $1 million or less in assets 60% of all family foundations have $1 million or less in assets Increased by 125% from 1998 to 2008 Family foundations with assets between $1 million and $5 million % of all family foundations have assets between $1 and $5 million Increased by 86% from 1998 to 2008 Source: Foundation Center

5 Benefits of a family foundation. Potential tax benefits Because a family foundation is a charitable organization, the gifts you make to your family foundation provide you with certain tax advantages. Income Taxes. If you make a gift of cash to a family foundation, you can take an income tax deduction in the year of the gift for as much as 30% of your adjusted gross income, and donations in excess of this limit can be carried forward for five years. Capital Gains Taxes. Contributing appreciated assets to your family foundation can eliminate capital gains taxes on unrealized profits. Transferring these assets to a private foundation lets you diversify your portfolio without paying any capital gains taxes. Estate Taxes. If your estate is subject to federal estate tax, contributing a portion to your assets to your family foundation during your life, or leaving it to your foundation at your death, removes the gifted assets and future appreciation on those assets from your taxable estate. This reduces your tax liability while retaining your assets within your family foundation. (Consult with your tax advisor). Control Family foundations provide the greatest control of any planned giving entity. You decide which charities to support, who sits on the board and how assets are invested. Principals retain full control over the granting decisions made by the foundation. You also have great latitude regarding the types of grant-making in which they may engage. Benefits at a glance f Deduct contributions against up to 30% of AGI per year f Eliminate Capital Gains taxes on donations of appreciated assets f Exempt from estate and gift tax f Long-term build up of foundation assets free of income tax f Complete legal control of foundation during life of founder f A unique opportunity to share value and vision with children and grandchildren f Create a permanent legacy for causes you believe in Family legacy A family foundation establishes a legacy of giving that supports causes that are important to you, promotes charitable activities now and into the future, and creates a family bond and stewardship that extends to future generations.

6 Responsibilities of a trustee. There are standards by which trustees are evaluated in their role of managing and protecting foundation assets. As investment professionals with years of experience advising fiduciaries, we help our clients meet the high standards for which they are held accountable. We do this by guiding them through a prudent investment process aimed at achieving and exceeding the seven accepted standards of fiduciary responsibility. An investment fiduciary is someone who manages the assets of another person and stands in a special relationship of trust, confidence and/or legal responsibility Use Know the standards, laws and trust provisions. Diversify assets to specific risk/return profile of client. Prepare investment policy statement. prudent advisors (i.e. an investment manager) and document due diligence. Control and account for investment expenses. Monitor the activities of prudent advisors. Avoid conflicts of interest and prohibited transactions.

7 Our consulting approach. Our consulting approach helps trustees fulfill their responsibilities and helps ensure their foundation continues to work as designed. Step 1: Discover. This critical first step is getting to know your foundation s needs, goals and priorities and helping you align all of your investments into a single, cohesive strategy designed to meet your long-term financial objectives. Step 2: Create. We establish your risk return profile and spending goals. By incorporating your investment objectives, we will create a sound strategy built around your time 5Monitor horizon, risk tolerance and income needs. Step 3: Memorialize. Your investment policy statement is a blueprint for your investments giving you a transparent guide to objectives, expected returns, time horizon, liquidity needs and regulatory requirements. 4 Step 4: Construct. We then develop and implement a diverse portfolio based on your investment policy. Construct Step 5: Monitor. We continually monitor, evaluate and adjust your portfolio to help make sure each component as well the entire portfolio is on track to meet your goals. 1Discover 3 Memorialize 2Create Working together with other advisors In many cases, our clients have a team of advisors including lawyers, accountants and insurance professionals. In developing a family foundation we can work in the way that best complements your current situation: f Working with your own family accountant or financial consultant f Coordinating with a specialized family foundation administrator f Delivering services through Wells Fargo Philanthropic Services to share fiduciary responsibility

8 Our leadership team. J.P. Phaup Managing Director Investments John Paul (J. P.) Phaup, Managing Director Investments, specializes in family foundations and retirement income strategies. Mr. Phaup served on the board of Capital Hospice and was an adjunct professor in the Department of Finance at George Mason University s School of Management. He serves on the Board of Trustees for the GMU Foundation and is Vice Chairman of Arts at GMU. Mr. Phaup earned his Bachelor s degree from the University of Southern California and an MBA from GMU. Eric Showalter, CFP Financial Advisor Eric Showalter, CFP, Financial Advisor, focuses on managing diversified investment portfolios and formulating retirement income strategies. Within the community, Mr. Showalter volunteers as President Emeritus and Treasurer of the Washington Association of Money Managers and as Instructor at the Osher Lifelong Learning Institute of George Mason University. Mr. Showalter earned his Bachelor s degree in Electrical Engineering from Vanderbilt University and his MBA in Finance from The University of Texas at Austin. Additionally, he is a Certified Financial Planner TM (CFP ) professional.

9 Is a family foundation the right opportunity for you and your family? What are the short- and long-term benefits? Will it complement your current investment strategy? We can help you find the answers. And it all begins with a conversation. Please call J.P. Phaup at (703) Phaup Wealth Management Group of Wells Fargo Advisors 1650 Tysons Boulevard, Suite 500 McLean, VA (703) direct (703) fax Investment and Insurance Products: u NOT FDIC Insured u NO Bank Guarantee u MAY Lose Value Wells Fargo Advisors is the trade name used by two separate registered broker-dealers: Wells Fargo Advisors, LLC, and Wells Fargo Advisors Financial Network, LLC, Members SIPC, non-bank affiliates of Wells Fargo & Company Wells Fargo Advisors, LLC. All rights reserved. CAR