Can you take money out of a private foundation?

No, you can’t take money out of a private foundation for your own private use or benefit. A private foundation is not owned by the people who found it nor is it owned by foundation leadership. Once a donor makes a contribution to a foundation, the money is owned by the foundation itself. Private foundations exist as a result of legislative grace and their assets must be used for a charitable purpose benefiting the public at large. Therefore no individual person has any legal right to a foundation’s assets.

Loud alarm bells will ring with the IRS if the money is instead used to directly or indirectly benefit an individual person that has a close relationship with the foundation—this is a violation of the self-dealing rules. The IRS is very concerned with self-dealing and the consequences can be severe. The IRS may impose financial sanctions on both the foundation and the individual offenders. The IRS also has the capability to fully revoke the foundation’s 501(c)(3) status causing the foundation to dissolve.

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