There is a key caveat in that donors must realize their contributions become irrevocable gifts. Yet donors maintain some control over the money because they can recommend changes in the way it's invested and can specify different charities to receive distributions. The American Foundation honors most such requests, Schaub said. The Leins chose to finance their foundation using the cash generated by three Valley apartment complexes. Malcolm and Miriam Lein are retired architects from Minnesota who started to buy investment real estate early in their careers.
Tax breaks are a major factor.
First, donors can avoid paying capital gains levies on appreciated property by giving it away. Second, they can reap income tax deductions for donations. Foundations set up through the American Foundation become accounts of the Phoenix group and receive its status as a public charity. As such, they offer higher tax advantages than private foundations that have not met certain Internal Revenue Service requirements, Benson said. For example, donations to a family foundation can be used to offset 50 percent of adjusted gross income, compared with 30 percent for private foundations.