History of Family Foundations

Foundations have a history that dates back to an era long before income-tax laws made them so attractive. Ben Franklin created a fund in 1789 with 1,000 pounds sterling to benefit worthy young Philadelphia apprentices. When the foundation terminated 200 years later, per Franklin's instructions, more than $2 million was awarded to Philadelphia charities, illustrating the power of thoughtful philanthropy.

Many prominent foundations were formed at the turn of the 20th Century by the business and industrial giants of that famed era. Andrew Carnegie's foundation was formed in 1911, more than five years before the enactment of the Federal Income Tax Law. During his lifetime, Carnegie bestowed $350 million to the foundation, which today would be worth more than $3 billion. John D. Rockefeller formed his foundation in 1913, contributing $540 million, which in today's dollars would exceed $6 billion.

By the year 2000, there were more than 56,000 foundations qualified with the IRS, with assets totaling about $450 billion and grants to public charities totaling about $23 billion. The last decade has witnessed the most rapid growth in the number and size of foundations in history. There are many reasons for this phenomenon. Foundations are formed to:

• Support and perpetuate the founder's core values;
• Teach the principles of philanthropy, compassion and commitment to future generations of family and community;
• Maintain family control over its wealth; and
• Minimize tax exposure and erosion of the estate.

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