Philanthropy begins at home. An important 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 community. Philanthropy becomes rewarding to the giver and is a commendable and valuable lesson for future generations.
Researchers predict that by 2055 more than $41 trillion of American families’ accumulated wealth will be passed 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. Seniors are more inclined to give a greater portion of their abundance back to the community, so opportunities for family philanthropy have never been greater.
A family’s philanthropy starts by educating 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 provides powerful incentives for children to continue the principles of earlier generations.
Early involvement of children and grandchildren in family philanthropy enhances an appreciation of the responsibilities of wealth and the opportunity to make a difference in the world. It helps preserve and perpetuate family integrity, values and principles as older generations pass from the scene.
Families today have many ways to implement family philanthropy strategies that will enhance their overall plan of trans-generational wealth transfers. Such a plan should be driven by a family’s needs and objectives — not by tax considerations alone — so it’s in their best interest to consider multiple philanthropic vehicles.
Private foundations may be an ideal philanthropic strategy for high net-worth families, but family foundations are not the only alternative. Community foundations, donor-advised funds and various types of charitable trusts also can involve younger generations. Valuable skills such as governance and administrative practices, stewardship, asset management and the selection of charitable beneficiaries can be taught to the next generations to prepare them for their family’s future philanthropic legacy.
In working with philanthropically motivated families, SeekingNorth first works to identity their non-charitable, non-tax needs and objectives. We encourage a written family mission statement to memorialize core family principles, values, objectives, passions and vision. We help them select the charitable alternatives that best meet their goals. We examine available resources that will meet their objectives while providing the best leverages and tax benefits for their program.
We strongly encourage dialogue among generations in the planning process to ensure younger family members that they are an integral part of the program and that their voices will be heard. Changing dynamics create the need for regular family meetings, which drive awareness among younger members of their social responsibilities, broadens their world view, and encourages trust and bonding among parents, children, grandchildren, siblings and cousins.
Simply giving away money or property typically doesn’t meet the long-term objectives of family philanthropy. 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 charities to which they contribute, and they should be personally involved in the activities of those organizations.
SeekingNorth can help
We have worked with families and their attorneys, accountants and financial planners to design and implement strategic, effective and highly rewarding family philanthropic programs. We are prepared to help your family resolve its trans-generational wealth transfer needs to protect your legacy.