Mark Zuckerberg, the co-founder of Facebook, recently announced that he and his wife are pledging 99 percent of their wealth to charity. The method by which they are giving away their wealth, however, is quite unusual.
Many billionaires give money to charity by creating a foundation, by donating directly to the charity, or by establishing a charitable trust. Zuckerberg chose a somewhat atypical structure to fulfill his pledge. He and his wife pledged to transfer about $45 billion worth of Facebook shares to a limited liability corporation. The new LLC, named the Chan Zuckerberg Initiative, will make private investments and will fund non-profit organizations.
Although Zuckerberg has faced some criticism for the decision, the LLC may offer some benefits that the more traditional structures do not. The LLC will allow Zuckerberg to have more control over his money. A charitable trust, for example, is irrevocable. This means that once someone establishes a charitable trust, he or she cannot take back the money that was given. By establishing the LLC, Zuckerberg and his wife have the option to change their minds about how much money they want to give and where they want the money to go.
Another benefit of the LLC structure is that it allows Zuckerberg to donate to political campaigns. Non-profit organizations and foundations are prohibited from making political donations, and a charitable trust is required to report any such donations. Zuckerberg’s LLC will be able to fund political campaigns without having to disclose the donations.
If you are interested in making a substantial gift to charity, you should consider speaking with an attorney who has experience in estate planning. As mentioned in this post, there are many options to give to charity under Minnesota law, such as setting up a charitable trust. Each option has both advantages and disadvantages. An attorney can help you decide what is right for you.
Source: CNBC, “Mark Zuckerberg’s unusual method of charitable giving,” Robert Frank, Dec. 2, 2015