Many people seem to believe that “inheriting” e.g. The Gates Foundation is just as profitable as inheriting tens of billions in cash. My gut tells me that charitable law must be more complicated than that. What’s the truth?
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You should earn absolutely zero from a charitable foundation. They are non profit. You inherit responsibility only.
If you own it, you can appoint yourself to the Board then appoint yourself as President. From the Board, you can set your salary.
Charities don’t give away all of their money. They have operating costs, including salaries. But to be a non-profit and get the tax benefits of being a charitable organization, they do have to document everything they spend.
Take Eric Trump’s charity as an example. He would hold golf events to raise donations for his charity, but the golf course (owned by his father) would charge the charity millions of dollars to use the golf course. This is a way to funnel donation money to other people besides the charity, sometimes called double-dealing.
CharityWatch documents what percentage of donations actually go to their programs. The Disabled Veterans National Foundation, for example, only passes on 4% of their donations and keeps the rest for other purposes.
No, money in a charitable foundation is not like cash. You could not liquidate/spend that money, you could only continue its causes. You could earn salary as a CEO or trustee of the foundation, however, not billions or anything.
Actually it depends on the charity but it is not the same as cash. If you inherit a legitimate foundation, you probably will make little money by comparison with coming from a family and working in business.
Charities are not normal companies and they have tax regulations and a board of directors that might not approve you as a CEO.
A Charity is not cash. The many people you quote are ill informed at best.
Charities have to show zero net profit at the end of their year. That does NOT mean they can’t raise and spend money wildly and pay executives and officers millions.
This is going to depend strongly on the legal jurisdiction and the exact type of organisation.
> Many people seem to believe that “inheriting” e.g. The Gates Foundation is just as profitable as inheriting tens of billions in cash.
As far as I know, with that kind of organisation, you wouldn’t actually “inherit” it, but they tend to be set up in such a way that members of the family keep being appointed as trustees/directors. They can be paid salaries out of the charity’s funds, but they have to be reasonable for the amount of work they do for the charity.
On the other hand, it’s not unheard of for people to use charities as vehicles for fraud or tax evasion, and presumably being associated with a charity can bring indirect benefits (e.g. networking opportunities).
Anyway, is there an expectation that Bill Gates’ kids aren’t going to get an inheritance or something? I would think it would be a bit surprising if they don’t get left something.
Your guts are right.
First of all, you don’t OWN a charitable foundation. You may have the right to control how the foundation spends its money (subject to some limits), but there’s no ownership involved there — it’s a separate entity.
If it’s a charitable foundation, then the foundation documents (and tax law) will specify how the money can be spent. At minimum, it has to be spent for a charitable purpose. You might have the ability to say “You know, I’d like this to go to the university my kids attend” (and, in fact, the Gates Foundation has given a lot of money to Duke University, where Melinda went to school). But, you can’t say “You know, I’d like this to buy me a new house.”
However, it may be possible to draw a salary from the foundation — the salary would have to be reasonable for the services performed (and the IRS is going to be looking over your shoulder.) Whether you could do that with any specific foundation would, again, depend on the foundation documents.
The whole point of a charitable foundation is for a rich person to separate a chunk of their wealth and say “this is for charity.” As such, *they* no longer really own it, and it certainly does not pass automatically to their children. Aside from the tax benefits, this lack of inheritance is sometimes desirable for the person making the charitable endowment. They want a broader legacy than providing money for their children, and they don’t want those children (or their grandchildren or great-grandchildren, etc.) diverting that legacy to more spending.
So in the case of the Gates Foundation, Bill Gates has a leadership position (though he’s not an active executive like the CEO), but it’s unlikely that any of his children will “inherit” that leadership position by default. Even if they did, the legal documents establishing the charity would maybe let them redirect the money to different charitable causes, but they would have no power to ransack it for personal gain. The Gates Foundation in particular is set to “self-destruct” by spending all its money within 20 years of the deaths of its founders, so keeping it going as a cash cow would be even harder.
Depends on what section of the law the charitable foundation is set up under. The section mark Zuckerberg used has no requirements on how the money is used, law was set up for use in publicizing charitable organization, others do use the money for some charity but mostly just for tax write offs and notoriety of the people they are named after.
And yes the entire us law code needs a major overhaul.
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