The Donald
Sterling case continues to provide fodder for discussion of legal topics. The latest news is that part of the sales
proceeds for the Clippers will be used to create a charitable foundation.
According to this article, it will be 10% - or $200 million – of the total $2
billion sales price. http://www.cnn.com/2014/06/07/us/clippers-sterling-sale/
A charitable
foundation is basically a private charity – in fact, the technical legal term
is a “private foundation.” Just like a
public charity, a charitable foundation must serve a charitable purpose. That usually means doing something beneficial
that relates to health, education or the general public good. In this case it is reported that the foundation
will aim to help “abused and battered mothers, underprivileged children and
particularly those in urban, minority communities.” http://www.huffingtonpost.com/2014/06/10/shelly-sterling-charity_n_5475592.html
One reason
wealthy people create charitable foundations is to avoid gift and estate
tax. When a person dies, his or her
estate is subject to estate tax if the estate is larger than a certain amount –
for 2014 that amount is $5,340,000.
However, property left to a charitable foundation is not subject to
estate tax (or to gift tax during lifetime).
Thus, charitable giving is usually an important part of estate planning
for wealthy people.
Wealthy
people certainly do make large gifts to public charities. For example, Michael Bloomberg, the former
Mayor of New York, has given a staggering $ 1.1 billion to his alma mater, The
John Hopkins University. http://www.nytimes.com/2013/01/27/nyregion/at-1-1-billion-bloomberg-is-top-university-donor-in-us.html?pagewanted=all&_r=0 But sometimes wealthy people prefer to create a
private foundation, because then they can be sure the money will be used for
the charitable purposes they really care about.
For example, a major focus of The Bill and Melinda Gates Foundation is
improving health and reducing poverty in the developing world. http://www.gatesfoundation.org/Who-We-Are/General-Information/Foundation-Factsheet
Some other well-known
foundations are the Pew Charitable Trusts, created by the founder of the Sun
Oil Company and his family, the Robert Wood Johnson Foundation, created by the
founder of Johnson & Johnson and focused on health care, and the John D.
and Catherine T. MacArthur Foundation of “genius grant” fame, just to name a
few.
So how does
the proposed Sterling Foundation stack up size wise against other charitable
foundations? Well at $200 million it
would not even make the list of the top 100 private foundation, falling short
by a cool $500 million of No. 100, The Ford Family Foundation, at $721,115,314. http://foundationcenter.org/findfunders/topfunders/top100assets.html
Disclaimer – Postings Not Legal
Advice
This blog is not legal advice and no
attorney-client relationship is formed.
The information and materials on this blog are provided for general
informational purposes only and are not intended to be legal advice. The law changes frequently and varies from
jurisdiction to jurisdiction. Being
general in nature the information and materials provided may not apply to any
specific circumstances. Nothing on this
blog is intended to substitute for the advice of an attorney. If you require legal advice, please consult
with an attorney licensed to practice in your jurisdiction.
