What Is a Family Foundation?
What Is a Family Foundation?
A family foundation is a type of private foundation. There is no legal distinction between a family foundation and other private family foundations, but within the philanthropic world, a family foundation is defined by the source of the funds (a single family) and the involvement of family members in management and decision-making. Family foundations vary widely in size, assets, and grantmaking focus.
- A type of private foundation.
- A nongovernmental, nonprofit 501c3 organization that gives money.
- Funded by contributions from a single family.
- At least one family member is actively involved, such as serving on the board and participating in grant decisions.
- Can be small or large, with a range of philanthropic capacities and missions.
How do family foundations work?
Family foundations work much like independent private foundations:
- Family foundations are required to pay out at least 5% of the value of their assets each year. (However, many would like to see foundations pay out more than is required.)
- Grantmaking decisions are usually made by a board.
- Grantmaking is transparent, with grantees and grant amounts disclosed in annual 990 filings with the IRS.
What makes family foundations different from other private foundations is that they are started by a single family and operate with family leadership. Even if the original donor is no longer living or involved in philanthropy, their children or other family members are actively involved with the foundation, such as with the Surdna Foundation, which is steered by the descendants of founder John Emery Andrus, or the Conrad N. Hilton Foundation, one of the largest family foundations in the United States.
Family members can be involved in operating the foundation in multiple ways, including serving on the board of trustees, participating in grant decisions, and running the foundation. Family members usually serve the foundation in a volunteer capacity.
What is the role of family foundations in philanthropy?
Family foundations are a major part of American philanthropy. They make up more than half of US private foundations and one-third of the membership of the national Council on Foundations.
In 2024, there were more than 18,000 family foundations in the Candid database with assets of at least $2 million and annual grantmaking of at least $100,000, according to the National Center for Philanthropy for Family Philanthropy.
Many family foundations choose to be members of the National Center for Family Philanthropy, a network that offers peer learning and other resources for family foundations to learn best practices for effective philanthropy.
How can families engage in philanthropy?
A family foundation is only one form of family philanthropy. Families can also give together through donor-advised funds, giving circles, philanthropic LLCs, or simply by making decisions together about where to give and writing a check or making an online donation. Some families have multiple giving vehicles.
No legal definition of a foundation, but there are tax classifications
There is no legal definition of a “foundation,” but there are some relevant U.S. tax classifications. All 501c3s are considered “private foundations” by the IRS unless they qualify as public charities by proving that at least one-third of contributions to the foundation are given by donors who give less than 2% of the organization’s overall funding. So a private foundation is one with a single or a few funders, and where control of the foundation is also held among a few, while a public charity is funded by many funders.
Private foundations are exempt from federal income tax, though they are subject to small (1–2%) excise taxes on investment income. Private foundations are required to disclose all grantees and grant amounts in a yearly 990-PF form. Since most foundations don’t have websites, those forms are often the only way to learn what these institutions are doing.
