One of the biggest myths of private foundations is that you need $10 million to justify one. It isn’t tax code or a requirement, and for many of your clients, it isn’t true. This belief is based on decades-old cost structures that assumed the need for outside counsel, an accountant and staff. But with Foundation Source’s outsourced foundation management services, operating a private foundation is now very cost effective—regardless of asset size. The real justification is discovering what your clients truly want to achieve philanthropically.
First Some Facts
According to the IRS, nearly 63% of all private foundations are initially funded at or below $1 million in assets.1 The notion that private foundations shouldn’t be considered as an option unless a client has $10 million+ to fund it with simply isn’t true.
Private foundation can make grants to charities like DAFs, but they can also make grants to individuals, provide direct international giving, make program-related investments, create formal programs like scholarships, and in many cases, even make grants to non-501(c)(3) entities.
So what does this mean for advisors? Based on flexibility and complete control of investment strategies and grantmaking abilities, we can no longer assume that the donor-advised fund (DAF) is the only charitable vehicle that is right for a client contributing a smaller asset base. In fact, DAFs and private foundations should be discussed together as they can be used in combination to provide clients with a full spectrum of options to reach their philanthropic and wealth management goals.
The Important Role You Play
Every high-net-worth (HNW) or ultra-high-net-worth (UHNW) client wants to be heard and provided with options that suit their charitable giving goals. And while 91% of affluent American households rank charitable giving as a priority, not every client is very satisfied with their philanthropic discussions. According to the 2026 TPI Study of The Philanthropic Conversation, 38% of clients report being somewhat satisfied with their philanthropic discussions despite advisors’ growing philanthropic expertise and more balanced conversations.
What’s more, there are also some knowledge gaps. Advisors continue to rate HNW clients’ top motivations for giving differently than clients do. Advisors most often cite being an inspiration to others (51%) and passion for a cause (47%). Meanwhile, HNW clients say they are primarily motivated by making an impact (53%) and because it feels good (50%).
EVERY HNW OR UHNW CLIENT WANTS TO BE HEARD AND PROVIDED WITH OPTIONS THAT SUIT THEIR CHARITABLE GIVING GOALS
Timing Is Key
With the Great Wealth Transfer right in front of us, it is more important now than ever to have meaningful conversations centered around philanthropy with HNW/UHNW clients. So when should you have these discussions? Early and often. It should no longer be a year-end discussion as philanthropy is ever evolving. In fact, 58% of clients agree that the best time to introduce philanthropy is after the first few meetings.2
Navigating the Conversation Is Simpler Than You Think
With 91% of HNW/UHNW families making charitable giving a priority, the conversation they are expecting to have may have nothing to do with money and everything to do with involving their family, helping their community, and investing in the future. It’s important to discuss family values, legacy, and impact to determine what the right charitable vehicle may be for them.
It’s also important to discuss not only what they want to do today philanthropically, but what do their giving plans look like five or 10 years from now to help determine what the best charitable vehicle(s) is for the client. Build relationships with philanthropic specialists like Foundation Source and invite them into these conversations to help navigate, decipher, compare and contrast giving vehicles, and probe with questions to help lead your clients down a smooth path in determining which charitable structure is right for them.
IT’S IMPORTANT TO DISCUSS FAMILY VALUES, LEGACY, AND IMPACT TO DETERMINE WHAT THE RIGHT CHARITABLE VEHICLE MAY BE FOR THEM
Your Action Plan
Coming up with a charitable giving solution should be no different than a “Know Your Client” worksheet to ensure they are satisfied with the outcome they receive from the vehicle they start. Here are a few common questions you can ask to get the conversation started:
- What motivates you to start a charitable vehicle?
- How are you envisioning your ‘impact?’
- How important is control over your investments or granting abilities?
- Do you want to include family or bring in the next gen when the time is right?
- Is anonymity a must-have? For all grants? For some?
- Do you want to go beyond traditional grantmaking (501(c)(3) organizations)?
- Would you want to compensate family members or hire staff?
- Do you anticipate site visits with organizations, and would you want to be reimbursed for expenses?
Should any of these questions reveal a need for a deeper dive, your partners at Foundation Source will provide the expertise for you to confidently advise your clients and prospects with philanthropic giving. Our services are the perfect complement to your core practice, enabling you to offer your clients the support they need to accomplish their philanthropic goals, while ensuring they select the correct giving vehicle.
1. https://grantedai.com/research/foundation-wealth-concentration
2. https://foundationsource.com/blog/key-takeaways-new-tpi-study-of-the-philanthropic-conversation/
ABOUT FOUNDATION SOURCE
Foundation Source empowers people and companies to create a better world through philanthropy. We support more than 5,600 charitable organizations with innovative technology backed by philanthropic expertise.
