From arts and culture to disaster relief, local foundations set up by individuals and families do enormous good. We discuss the ins and outs of building a foundation with Helen Stephens, president and CEO of Aspen Wealth Management, based in Fort Worth.
Larry Light: One of the most important pillars of our society is the benefits provided by public charities and philanthropic foundations. Do you find that many philanthropically minded folks who have a deep commitment to giving back to society are uncertain about how to get started?
Helen Stephens: Yes, they have the resources, the desire and the commitment to build a legacy that will make a difference in their community, but they aren’t sure about the first steps. Certainly, there is much to consider when launching such an organization.
Light: What are the initial decisions that need to be made to get a philanthropic organization started on the right foot?
Stephens: The first step is to organize and register as the correct 501(c)3 organization type. Notice that I said, “the correct type,” because there is more than one.
Light: What are the different organization options?
Stephens: You need to consider the following question: Should your organization be a true private foundation or a public charity? Organizations primarily funded through the gifts of a particular individual, enterprise or family, will often serve the founders’ vision better if organized as a private foundation. A good example is the Bill and Melinda Gates Foundation, which is funded mostly by the Microsoft
Light: Sounds like, in terms of registration and legal structures, the source of funding and the means of fundraising for your foundation is key.
Stephens: Exactly. A public charity must typically be registered in every state where donations are solicited. Additionally, public charities usually spend a lot more time and effort on fundraising, partly because they depend on a large quantity of smaller gifts, as opposed to private foundations, which usually receive large sums on fewer occasions.
Light: Are there other factors for initial consideration that go beyond the financial and legal requirements?
Stephens: You need to think carefully about the purpose of your organization, building a business plan and governance. Many founders of philanthropic organizations spend months performing a detailed needs analysis for their intended area of impact, including a survey of other organizations that might have similar missions and objectives. If someone else is already doing a good job at what you’re interested in, supporting their efforts might make more sense, rather than reinventing the wheel.
Think about a concise, carefully worded mission statement that will help you crystallize your goals and methods, including your granting guidelines and what beneficiaries you are targeting. Even though they are non-profit enterprises, charitable organizations need detailed operating plans and procedures to function efficiently. Aim to recruit the most qualified people you can find—preferably those who share a passion for your desired objectives—to serve on your board of directors.
Light: What else is required to start a foundation?
Stephens: You’ll need the services of a lawyer who has experience with charities, nonprofits and private foundations. They can advise and assist with filing the proper applications for tax-exempt status, drafting a corporate charter and helping with other legal matters that must be in place as you launch your organization.
Light: Any final thoughts?
Stephens: One of the most important factors for philanthropic organizations that aim t be around for years is educating the next generation of family leaders to ensure their commitment to the dreams and goals of the founders. This shouldn’t be put off until the kids are older; it should be baked into the very beginnings of the organization. According to experts, the philanthropy mindset is learned in early childhood, and that learning then extends throughout the life of your successors as leaders of your foundation.