Family Philanthropy
Philanthropy begins at home. A way for parents to model their values, interests, passions and stewardship goals, to their children and extended family members, is by giving a portion of the family's wealth to the greater community. Philanthropy, then becomes not only rewarding to the giver, but it is a commendable and valuable lesson for future generations.
By the year 2055, researchers predict that over $41 trillion dollars of the American family's accumulated wealth will be passed on from one generation to the next. Personal beliefs, as well as transfer-tax considerations, indicate that older generations are more reluctant than ever to pass the bulk of their financial legacy to the younger generations. Rather, seniors are more inclined to give a greater portion of their abundance back to the community. Hence, the opportunities for family philanthropy have never been greater.
A family's philanthropy starts with the education of their children through stories of family history and by continuing old, and developing new, family rituals and traditions. Teaching by personal example through gifts of money, property, time and talent furnishes powerful incentives for children to continue the principles of earlier generations. Early involvement of children and grandchildren in a program of family philanthropy enhances a transgenerational appreciation of the responsibilities of wealth and the opportunity to make a difference in the world in which they live. It facilitates their ability to preserve and perpetuate family integrity, values and principles as senior generations pass from the scene.
The choice of vehicles to implement family philanthropy strategies is vast. A number of these alternatives are discussed elsewhere on this website (see Charitable Gift Planning). This broad array of alternatives permits a family to choose the best channels that will enhance the family's overall plan of transgenerational wealth transfers. A family's transgenerational wealth transfer plan should be driven by the family's needs and objectives and not by charitable or tax considerations. Therefore, it is in a family's best interest to have multiple philanthropic vehicles, to meet a family's unique set of goals. While private foundations may be an ideal philanthropic strategy for high net-worth families, family foundations are not the only alternative. Community foundations, donor advised funds and various types of charitable trusts also provide the opportunity to involve the younger generations. Valuable skills such as, best governance and administrative practices, stewardship, asset management and the selection of charitable beneficiaries, can be taught to the succeeding generation, as a way to prepare them for their family's future philanthropic legacy.
In working with philanthropically motivated families, we first work with members of the family to identity their non-charitable, non-tax needs and objectives. We encourage a written family mission statement, as a way to memorialize core family principles, values, objectives, passions and vision. Members of multiple generations should participate in drafting this statement. We then assist family members in selecting the charitable alternatives that best meets their goals. We also examine all available resources to fund those alternatives; resources that will meet and succeed their charitable objectives, while simultaneously provide the best leverages and tax benefits for their program. We strongly encourage dialogue among the generations, in the planning process, to assure younger family members that they are an integral element in the program and that their voices will be heard.
Changing transgenerational dynamics stimulates the need for regular, periodic family meetings or councils that provide a forum for insightful sharing among members of different generations. In addition, it is a time for those to express changing needs or objectives and new strategic giving initiatives. These meetings will help facilitate increasing growth and awareness among younger members of their social responsibilities, broadens their world view, and encourages transgenerational family trust and bonding among parents, children, grandchildren, siblings, and cousins.
Giving away money is in itself insufficient to meet the long-term objectives of family philanthropy. Family members of each generation should be actively involved in knowing and participating in the organizations to which they donate. Family members should review grant requests and be thoroughly familiar with the beneficiary organizations' programs, successes, failures, accountability, stewardship, effectiveness and compliance with federal and state reporting and disclosure laws. Family representatives commonly serve on the governing boards of their charitable beneficiaries and should be personally involved the activities of those organizations.
We have worked with families and their attorneys, accountants and financial planners to design and implement strategic, effective and highly rewarding shared family philanthropic programs. We are prepared to work with your family, to best resolve all your transgenerational wealth transfer needs that will protect your legacy.
©2008 Ronnie C. McClure, PhD, CPA