Are you thinking about setting up a private foundation? It can be a wise decision - if it is done correctly, and for the right reasons. Read on for 5 key points you should be aware of before taking the big step.

1. What is important to you?

First, you should identify what is really important in your life. After all, the foundation you create should be a good fit for your goals, your dreams, and your vision.

Essentially, your foundation will allow you to take an industry, a hobby, or any activity that is of interest to you and turn it into a tax deductible activity.

2. What exactly is a foundation?

A foundation is a non-profit entity, typically a corporation or a trust. If it is a trust, the foundation will have trustees; if it is a corporation, it will have directors and officers. In either case, there will be quite a bit of bureaucracy, so you should be aware of that before taking this step. And this entity will provide financial support for charitable activities and/or organizations.

3. What are the benefits of setting up a foundation?

A private foundation has many benefits. Among them are tax benefits: contributions to the foundation are generally tax deductible, and the foundation can pay for legitimate expenses related to the purpose of the foundation so that activities you enjoy anyway would be tax free. You will also have a great deal of control over how the funds are spent, so you can be more actively involved in how your money is spent to make the world a better place.

4. How will it work?

By transferring assets to a Private Foundation, you can create an endowment that will generate an income stream to support your interests, now and far into the future. You can create a foundation that engages in charitably oriented activities itself, or one that supports other charities. But either way, your foundation can contribute a great deal of good to the world, and even bring your family closer together to do it.

5. Why it might be right for you

Successful people usually have many different interests. By creating a private foundation, you provide financial support for your personal interests and contribute to the good of society at the same time. It's a win-win all around.