Estate Planning

Private Foundations.

Q: What is the difference between a private foundation and a public charity?

A private foundation is funded by a single source — an individual, family, or company — and usually makes grants to other charities rather than raising money from the public. A public charity is supported by many donors and typically runs its own programs. Foundations offer more control and family involvement but come with specific IRS rules, including a minimum annual distribution requirement.

Philanthropy on your terms, control how funds are invested and granted, involve your family in governance, and build a lasting charitable legacy.

Reviewed by Elizabeth A. Tresp, JD, LL.M., trust & probate litigator · Updated July 2026

In short A private foundation lets an individual, family, or business fund philanthropy on their own terms, controlling how money is invested and granted, and involving family in governance. Foundations are tax-exempt but must follow IRS rules, including distributing at least 5% of assets each year. We help you decide whether a foundation is the right vehicle and structure it correctly.

There are many ways individuals, families, and businesses engage in philanthropy, and many enjoy the control and flexibility that private foundations provide. A private foundation lets donors decide how funds are invested and ultimately put into service to support cherished causes. Donors can control the foundation themselves, include their families, or appoint others to govern it.

Private foundations typically make grants to public charities, though some undertake their own charitable activities. A single individual, family, or corporation provides all of a private foundation’s funding, and foundations do not usually engage in public fundraising, which lets them sidestep many of the hurdles other charities face in obtaining tax exemption.

Donors establish private foundations for charitable purposes, and these entities are tax-exempt. To maintain that status, they must comply with IRS rules ensuring grants benefit the public, for example, each year a private foundation must distribute at least 5% of its prior year’s average net asset value.

Decisions we help you evaluate

Whether a private foundation is the right vehicle to achieve your philanthropic goals
The potential tax implications
Which assets to contribute
How best to structure the foundation for proper governance

A private foundation is one of several charitable planning strategies, and it often works alongside a family’s broader estate plan. We help you weigh it against the alternatives and, if it fits, build it correctly from the start.

To discuss your situation with our attorneys, call (858) 755-6672 or request a consultation.

Common questions

Frequently asked

What is the difference between a private foundation and a public charity?

A private foundation is funded by a single source, an individual, family, or company, and usually makes grants to other charities rather than raising money from the public. A public charity is supported by many donors and typically runs its own programs. Foundations offer more control and family involvement but come with specific IRS rules, including a minimum annual distribution requirement.

How much does a private foundation have to give away each year?

To keep its tax-exempt status, a private foundation must generally distribute at least 5% of its prior year's average net asset value for charitable purposes each year. Meeting this and the other IRS rules is part of what proper structuring and administration ensure.

This overview is general information, not legal or tax advice, and does not create an attorney-client relationship?

This overview is general information, not legal or tax advice, and does not create an attorney-client relationship. Every situation is different and the law changes; consult a qualified attorney about your circumstances.

This website is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Every situation is different; please consult a qualified attorney about your specific circumstances.

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