A family foundation can help wealthy donors maintain the integrity of their charitable intent for many years into the future and inspire future generations to serve others in the same way.
Philanthropic LegaciesFoundations can establish an ongoing atmosphere for family philanthropy by creating ground rules for future charitable work and incentives to uphold the original donor's legacy. Almost 80% of family foundation board members are not first-generation members, but according to a study by the Council on Foundations, 92% of family foundations remain committed to the original donor's charitable interests.
Nevertheless, with each new generation, the foundation will move further away from its original mission, and the grant-making agenda of new board members may begin to differ from that of the original donor. The philanthropic enthusiasm displayed by the original donor may also be lost in future years. To alleviate these potential problems, a donor can attach an incentive-based estate plan to the family foundation that rewards heirs for overall participation and employment by the foundation, as well as the execution of the foundation's original mission.
Many children of affluent families face the challenge of learning to manage their inherited wealth. A family foundation gives heirs many opportunities to learn complex business and financial management skills, whether they are involved as volunteers, employees, and/or board members.
Many donors have their entire families participate in the foundation's activities. If the donor already has several grown children who are involved in the family foundation, he or she may consider making all of them board members or establishing a rotating seat on the board for them. Younger school-aged children can volunteer their time or observe the operations of the foundation to learn more about the family's charitable efforts.
Some donors have developed creative ways to teach life skills through foundation activities, such as a contest where each heir is responsible for managing $10,000 of the foundation's assets or a contest asking young heirs to write an essay on a charity they would wish to benefit. These programs can have considerable benefits for the participants, the donor, and ultimately, the foundation.
A Lifetime Return
Philanthropy is exceedingly important to many affluent individuals, and establishing a family foundation enables the donor to share his or her passion for charitable pursuits while teaching future generations how to handle their wealth.