The largest private foundations in the United States control hundreds of billions in assets, and were established by wealthy individuals or families dating back generations. These foundations are dedicated to philanthropy in a broad range of areas and geographies, and were funded by fortunes made in the oil, pharmaceutical, automotive and other industries. (There are several things to consider when it comes to this type of charitable giving; make sure you're well informed. To learn more, check out Gifting Your Retirement Assets To Charity.)

IN PICTURES: 8 Tips For Starting Your Own Business

Private foundations are an important part of the tax-exempt sector in the United States. In the 2006 tax year, 81,850 private foundation filed Form 990-PF, required by the Internal Revenue Service. These foundations reported assets of $645 billion and distributed $75 billion in grants and other disbursements during 2006. But where do these foundations spend their money, and just how big are they? Here are the five biggest and what they have been up to.

1. Bill and Melinda Gates Foundation
The largest private foundation in the United States, this technology-backed group is endowed by Bill Gates, one of the founders of Microsoft (Nasdaq:MSFT). The assets of this foundation are held in the separate Bill and Melinda Gates Foundation Asset Trust, and totaled $34 billion as of the end of 2009. This private foundation will grow even more as it is set to receive yearly donations from Warren Buffett of Berkshire Hathaway (NYSE:BRK.A, BRK.B), and receive the bulk of his personal stock holdings upon his death.

The Bill and Melinda Gates Foundation is focused on making grants that improve health and reduce poverty in the developing world, and improve access to resources in the U.S. The Bill and Melinda Gates Foundation also has an interesting twist and is set up to distribute all of its resources within fifty years of the death of Bill and Melinda Gates. (Learn more about Warren Buffett's charity work in Is The Billionaire Charity Pledge A Good Idea?)

2. Ford Foundation
The foundation of the automotive pioneer started up in 1936, and was initially funded by Edsel Ford, the son of Henry Ford, who founded the Ford Motor Company (NYSE:F). Although the foundation is closely associated with the Ford family, the foundation divested all its stock in the company many years back.

The Ford Foundation has four stated goals as part of its mission. These goals are to strengthen democratic values, reduce poverty and injustice, promote international cooperation and advance human achievement. The Ford Foundation held $10.2 billion in assets as of September 30, 2009.

3. The Lilly Endowment
This large private foundation was founded in 1937 by descendants of Colonel Eli Lilly, who founded pharmaceutical giant Eli Lilly and Company in 1876. The Lilly Endowment holds $5.3 billion in assets, including a large block of Eli Lilly (NYSE:LLY) stock worth $4.8 billion, as of the end of 2009.

The Lilly Endowment makes grants in community development, education and religion, and is focused on improving the quality of life in Indianapolis and Indiana.

4. The Robert Wood Johnson Foundation
The Robert Wood Johnson Foundation is dedicated to improving public health. This includes making Americans healthier and improving the delivery of that health care by the system.

General Robert Wood Johnson, the CEO of Johnson and Johnson (NYSE:JNJ), started up the Robert Wood Johnson Foundation in 1936, under the original name of the Johnson New Brunswick Foundation. Johnson made contributions to the foundation all through his life, and bequeathed his company stock to the foundation after his death in 1968.

The foundation has diversified its investment portfolio throughout the years, but still held $949 million of Johnson and Johnson stock. The Robert Wood Johnson Foundation reported assets of $7.5 billion as of the end of 2008.

5. The J. Paul Getty Trust
The oil-backed trust was founded in 1953 by Jean Paul Getty, and was funded by the proceeds of his estate in 1982. The trust is described by a representative from Getty Communications as a "private operating foundation dedicated to advancing the understanding and preservation of the visual arts in California and around the world."

The trust funds four Getty programs: The J. Paul Getty Museum, Research Institute, Conservation Institute and the Getty Foundation. The J. Paul Getty Trust held $9.3 billion in assets as of June 30, 2009.

IN PICTURES: 5 Ways To Control Emotional Spending

Even Charities Have Rules
The Tax Reform Act of 1969 codified the legal concept and regulations that govern the operations of a private foundation. This act, and others that followed, required private foundations to pay out a minimum amount of funds to further the exempt purpose of the organization, and established an excise tax on the net investment income of private foundations. These private foundations, like all tax exempt organizations, are also barred from lobbying and political campaign activities.

The Bottom Line
Private foundations are an integral part of the philanthropic landscape in the U.S., and contain the vestiges of large family fortunes earned many generations ago. They are devoted to many worthy causes ranging from healthcare to education and the arts.

For the latest financial news, see Water Cooler Finance: Mergers, Hostile Bids And SEC Probes.

Related Articles
  1. Term

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
  2. Investing Basics

    Warren Buffett Biography

    Warren Buffett is probably one of the top investors in the world.
  3. Entrepreneurship

    Bill Gates Success Story: Net Worth, Education & Top Quotes

    Learn about billionaire Bill Gates, and how the computer genius forged his own path from an early life and eventually changed the world with his innovation.
  4. Investing

    How To Invest For The Greater Good

    We discuss why is important to prioritize economic, social and governance factors when making investment decisions, regardless of gender or generation.
  5. Stock Analysis

    Warren Buffett's Latest Bet: The Riskiest Yet?

    Warren Buffett just made the biggest — and possibly riskiest — acquisition of his career.
  6. Economics

    Explaining Endowment Funds

    An endowment fund is money set aside to earn revenue to fund some type of charitable activity.
  7. Professionals

    Are Stock Buybacks Always Good for Shareholders?

    Stock buyback programs aren't always done with the interests of shareholders in mind. It's important to try to understand the motivation behind such moves.
  8. Taxes

    5 Warning Signs a Charity Is a Scam

    Giving to charities and helping those in need is admirable. Here's how to ensure your good intentions and donations aren't siphoned off by scammers.
  9. Investing

    Acorns: The Perfect Investing Tool For Millennials

    We look at how the Acorns app works, how it makes money, and why is it innovative.
  10. Trading Strategies

    Microsoft's Game of Catch-Up With The Dow

    Microsoft (MSFT) underperformed the Dow Jones Industrial Average during the 2002 to 2007 bull market, but it has played catch-up in recent years.
  1. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
  2. Endowment

    A financial asset donation made to a non-profit group or institution ...
  3. Organizational Behavior - OB

    Organizational Behavior (OB) is the study of the way people interact ...
  4. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  5. Hunting Elephants

    The practice of targeting large companies or customers.
  6. Enterprise Investment Scheme (EIS)

    A UK program that helps smaller, riskier companies to raise capital ...
  1. Why did Warren Buffett invest heavily in Coca-Cola (KO) in the late 1980s?

    Warren Buffett found Coca-Cola an attractive investment because it had a moat and was attractively valued. Buffett began ... Read Full Answer >>
  2. Why does Warren Buffett largely avoid investing in the technology sector?

    Warren Buffett has often said that he avoids investing in the technology sector because he does not like to own stocks in ... Read Full Answer >>
  3. Why doesn't Warren Buffett own Apple (AAPL) stock?

    Warren Buffet claims he simply does not know how to properly evaluate Apple (AAPL) and does not feel confident in his reading ... Read Full Answer >>
  4. How does revenue recognition differ between profit and non-profit companies?

    Under the generally accepted accounting principles, or GAAP, for-profit companies recognize revenue as it is earned through ... Read Full Answer >>
  5. What are the key differences between pro forma statements and GAAP statements?

    The U.S. generally accepted accounting principles (GAAP) require companies to adhere to uniform reporting standards that ... Read Full Answer >>
  6. How do the C-suite members work together to make a successful company?

    Corporate managers, typically chosen by a board of directors in large organizations, are ultimately responsible to stakeholders ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!