General Question

zina's avatar

What is a family foundation and/or family bank?

Asked by zina (1636 points ) July 18th, 2007

Where can I find an easy-to-understand but complete and detailed explanation of what these are, how they work, pros/cons, hidden elements, etc?

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6 Answers

zina's avatar

I would also like to know about any relevant info on related topics such as living trusts, wills, California or US inheritance laws, taxes on $ gifts of various sorts and sizes, etc.

bpeoples's avatar

It sounds like you need a financial lawyer =)

More specifically, check out Nolo book's catalog, they have lots of specific books on what you may be looking for. And if you're in the SF area, they have an outlet in Berkeley that'll get you their books even cheaper.

gailcalled's avatar

For this complicated issue, involving both fed. and CA laws, I would invest in an hr's consult w. an estate or tax lawyer. Even lawyers and CPAs these days have trouble keeping up. w. the Alice-in -Wonderland aspect and complicated tax codes and inheritance laws. For example, in 2010, unless somthing changes, the law about how much $$ in an estate can be passed on tax-free will drop from a large amt to 0 for the year, then revert to the 2001 amount (I think).

I am not a lawyer; Google estate taxes, inheritance taxes, etc and remember that they can change. Pretty murky stuff; http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States

zina's avatar

Thanks for the link - it's an interesting article and I had read all other related Wikipedia pages, but I'm still looking for a description (let's say between a few paragraphs and a few pages) of the family foundation and family bank.

This is not for a wealth of money I have and I can't afford to see a lawyer -- I just want to find information about it.

KCD's avatar

I’m not an expert, but my understanding is that a family bank is often a combination of a family limited partnership and a trust that is designed to get money out of an estate. The bank usually makes loans to members of the family at reduced interest rates. The trust administers it and can decide whether or not to make the loans. On a smaller scale, one could simply designate an investment account as the “family bank” and use it in the same way, however the asset would still belong to the person whose social security number is on the account and thus they would be responsible for the taxes and it would be in their estate at death.

A family foundation suggests to me that it is intended to make charitable gifts – again a way of getting money out of an estate. The trust/foundation document would set the ground rules surrounding how, when, and to whom the gifts could be made.

Both vehicles give the wealthy grantor the ability to control the money after death by laying out the parameters in the trust and foundation documents of how and why the money can be used.

hossman's avatar

Excellent answer by KCD. zina, I’m a lawyer, and I wouldn’t try something like this without consulting an estate planning lawyer. The potential to have the IRS irritated with me scares me like a root canal.

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