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Oct 1, 2011 12:00 PM
Family Office Management of Private Foundation Funds
Properly structuring compensation arrangements to mitigate self-dealing risks and other concerns
Private foundations (PFs) remain popular because wealthy donors often want to maintain control over donated assets. In a similar vein, many wealthy families form family offices to provide greater control and oversight over their financial affairs. More substantial family offices typically provide investment management oversight to various family members, trusts and other entities established by the family. As such, it's natural for these family offices to consider extending investment management services to the family's PF.
Family advisors are often reluctant to structure an investment management relationship between the family office and the family's PF, particularly if the family office is providing these services (and potentially other administrative services) to the PF for compensation. The concern typically expressed is that the Internal Revenue Service could challenge the relationship as inappropriate and subject the PF to punitive excise taxes or loss of tax-exempt status. Even worse, if such a challenge were made public, the local community could misinterpret it, creating negative publicity for the family.
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
E-Newsletter Signup
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