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Besides fulfilling their desire to do good works in their communities and giving being an essential part of being wealthy for many, are there more tangible benefits for NFL players (and professional athletes in general) to establish charitable foundations?

Are there significant tax benefits involved? Obviously there are some material advantages as almost every player has one. I'm almost certain they are all receiving similar professional advice on how and why to set up these charities. And I'm sure they probably have a team of "approved vendors" who set up these charities for them and operate them (for a small fee).

Also, during the election it came to light that both presidential candidates also had 501(c)(3) charitable foundations as well.

Can someone please explain, explicate and elucidate this phenomenon for the rest of us?

Edit

Suggested similar questions here and here.

This question is different. Those questions are about being the giver of charitable donations (i.e., supporting the foundation). This question is about being the receiver of charitable donations. (i.e., creating the foundation).

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  • Giving, for most, is an important part of building and being wealthy. – Pete B. Nov 15 '16 at 15:14
  • @PeteB: I originally wrote the question to exclude answers of this type. But I guess I wasn't specific enough. I have now edited the question to more specifically exclude these types of answers. – Mowzer Nov 15 '16 at 15:57
  • @DumbCoder: This question is different. Those questions are about being the giver (i.e., supporting the foundation). This question is about being the receiver. (i.e., creating the foundation). – Mowzer Nov 15 '16 at 15:59
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    @AakashM: If the only goal is to give money to charity, there is no need to set up a new one. I observe many people of a certain group (NFL players in particular and professional athletes in general) set up charities / foundations at a much higher rate than the average population. This group also shares similar characteristics of their finances which are atypical (i.e., short period of high earning potential early in life). My suspicion is that it's not just a coincidence or philanthropic bent that is the real reason they establish these charities. This question's purpose is to find out why. – Mowzer Nov 18 '16 at 16:10
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In addition to tax-related benefits, one answer may be that it helps them avoid being inundated with requests to support other foundations. Most charities have access to public records that indicate potential donors based on income and demographic. They can use that info to solicit for donations. "Hey NFL Player, you have lots of money, and we have cute starving emus that really need your help!"

Here's a blurb from Foundation Source about some of the benefits to starting your own foundation.

  1. Get an Immediate Tax Deduction, but Give Later: You get the tax deduction when the foundation is funded, then make your charitable gifts over time.

  2. Leave a Lasting Legacy: Foundations set up in perpetuity can burnish your name far beyond your lifetime. Because gifts are made from an endowment that generates investment revenue, the total gifts made by the foundation can far surpass the actual funding.

  3. Be Taken More Seriously as a Philanthropist: A foundation imparts a gravitas that causes people to take your philanthropy more seriously, due to the structured, organized approach you employ for your giving.

  4. Sidestep Unsolicited Requests: When you focus your foundation on specific giving areas, your mission statement can be used to politely turn down off-target funding requests.

  5. Deepen and Focus Your Philanthropy: Whereas individual donors often spread their giving among as many causes as possible, the formalized structure of a foundation often encourages donors to narrow their focus to specific causes.

  6. Build a Better Family: As family members take on philanthropic research, present their findings to the board, participate in the decision-making process, and track results, they hone skills that will serve them for years to come.

  7. Tax-Deductible Grants to Individuals in Need: A private foundation allows you to provide emergency assistance directly to individuals using dollars for which you’ve already received a tax deduction.

  8. Run Charitable Programs Without Setting Up a Separate Nonprofit: Direct charitable activities are IRS-approved programs that permit foundations to directly fund and carry out their own projects.

  9. Pay Charitable Expenses: All legitimate and reasonable expenses incurred in carrying out the foundation’s charitable mission can be paid by the foundation and will count toward the annual minimum distribution requirement.

  10. Provide Loans Instead of Grants: When used to support a charitable purpose, private foundations can employ loans, loan guarantees, and even equity investments, which are paid back (potentially with interest), so you can recycle your philanthropic capital for other charitable causes.

https://www.foundationsource.com/resources/library/top-10-advantages-of-a-private-foundation/

There's a similar list here on the website for an attorney that specializes in philanthropy and non-profits. I won't copy/paste that list as it's similar, but I wanted to provide an additional source confirming the above benefits. This link contains some disadvantages as well.

http://www.hurwitassociates.com/l_start_pros.php

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BobbyScon's answer really covers this, but perhaps isn't sufficiently explicit. Reason 1 of the quotation is the largest, by far:

Get an Immediate Tax Deduction, but Give Later: You get the tax deduction when the foundation is funded, then make your charitable gifts over time.

Having a "personal" foundation means that you make donations whenever it is appropriate from a personal finance point of view, but then actually perform the charitable giving in a time that is convenient.

So you fund the foundation on Dec. 31, say; that gets the money out of your hands, and out of your taxable income, for the prior tax year. Then you're not required to do anything else with that money until a time and place where it's convenient to you.

In many cases, they set it up not as a foundation but as a Donor Advised Fund. These are of late becoming extremely popular among the wealthy, largely the ease of setting them up and the above.

The other major advantage of a Donor Advised Fund is simplicity in tax season: you have exactly one charitable donation recipient, with one receipt (or one set of them if you donate over time).

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