Private Family Foundations Expose Client Privacy Risks

In today’s increasingly data-driven world, clients establishing private family foundations may be unknowingly exposing their personal privacy and security. While PFs remain a valuable tool for multi-generational philanthropy, estate planning and family governance, they also come with a comprehensive set of disclosure requirements that might reveal sensitive information to the public.

For professionals advising affluent families, including attorneys, trust officers, CPAs and wealth managers, understanding these risks is critical. It’s not just about helping clients create charitable legacies, but also ensuring that the structure they choose aligns with their risk tolerance, privacy expectations and administrative capability.

What Gets Disclosed on Form 990-PF

PFs are required to file Internal Revenue Service Form 990-PF annually, and these returns are publicly available through resources like GuideStar (now part of Candid). The scope of disclosure is significant and, for many clients, very surprising.

The 990-PF includes required disclosure of:

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When I previously served as a principal of a donor-advised fund, my frequent practice before meeting with a prospective client was to look up their last name on GuideStar. If they had a PF, I would print the most recent 990-PF, drop it on the conference table during our first meeting, and ask: “Is this your philanthropic vehicle? Is that your home address? Is that your signature?”

The reactions were often a mix of surprise and dismay. Clients were typically unaware that this level of personal detail was so easily and publicly accessible.

Risks Beyond the Obvious

These disclosures pose any number of risks. A listed home address can expose a family to unsolicited requests from charities, stalkers or even bad actors engaged in social engineering or fraud. Public grantmaking patterns can reveal sensitive political or religious affiliations. The visibility of PF assets and investment portfolios might invite scrutiny, criticism or litigation.

Moreover, while IRS guidelines require that personal signatures be redacted from the public record, this doesn’t always happen.

Practical Steps for Enhancing Client Privacy

Advisors can add enormous value to the client relationship by proactively helping their clients mitigate these risks. Some key privacy protection strategies to implement with PF clients include:

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Use a professional address. Ensure that the PF’s mailing address listed on the 990-PF is that of the client’s CPA, attorney or wealth advisory firm, not their personal residence. This small administrative step can significantly reduce privacy exposure and unsolicited contact.

Redact signatures before submission. Although redaction is standard, advisors should verify that the preparer has appropriately removed personal signatures before the return is filed and posted.

Avoid using the family name. Encourage clients to select a PF name that doesn’t include the family surname. This helps prevent immediate association between the PF’s public activities and the family’s private identity. A more generic PF name adds a layer of anonymity.

Conduct a privacy audit. Review with the clients their most recent 990-PF and explain to them what information is publicly visible. Many are unaware of the extent of the required disclosures and will appreciate being better informed. This practice may give rise to deeper conversations about philanthropic strategy and structure.

Reevaluating the PF Structure

In some cases, clients who initially gravitated toward PFs may be better served by more privacy-oriented charitable vehicles, such as DAFs or community foundations.

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These structures offer several advantages beyond enhanced anonymity:

While DAFs don’t provide the same degree of control as a PF, especially regarding investment management or multi-generational governance, they can serve as an excellent primary or complementary vehicle, particularly for clients who prioritize discretion.

Consider a Hybrid Approach

For ultra-high-net-worth families with substantial assets and diverse charitable goals, a hybrid approach may be optimal. A PF can serve long-term strategic or legacy goals, while a DAF can accommodate more sensitive or controversial giving.

For example, a family might use a PF to fund local civic initiatives or educational institutions, while using a DAF to support causes related to reproductive rights, political advocacy or international aid — areas where discretion is often desirable.

The Advisor’s Role

Advisors have a fiduciary responsibility to not only optimize the tax and legal structure of a client’s charitable plan but also to help clients understand the broader implications of their choices, including exposure to privacy risks.

In many cases, the decision to create a PF is made with moral intent but without full awareness of the compliance burden and disclosure requirements. By engaging in a transparent, privacy-focused conversation early in the planning process, advisors can help clients make more informed, secure and sustainable decisions.

Inherent Risks

PFs remain a powerful philanthropic tool, particularly for families seeking long-term engagement, governance, control and strategic impact. But the public reporting requirements for PFs carry inherent risks that can be mitigated through thoughtful planning and candid conversations.

For privacy-conscious clients, DAFs and community foundations provide appealing alternatives or supplements to PFs. Advisors who stay ahead of these issues and raise them proactively with their clients provide an enhanced level of advisory value.