Inheritance need not just be about money

What would it look like if the conversation around inheritance did not focus on money?  Instead, what if the conversation focused on values, stories and vision? Wouldn’t this say a lot more to your family about what is really important to you and what your life is all about?

Working with families, it is enlightening to carry out an exercise where together they plot out important life events and business events that shaped the family experience and history.  It is surprising how many of the family members do not know about how grandpa and grandma actually started out, their initial vision and activities and then how this has evolved over time with the involvement of others in the family.  To increase understanding, family events can be overlapped with world events (like wars and significant economic shifts). 

The comprehensive timeline generates conversation and the telling of important stories.  From these stories come questions, explanations and an understanding of how things came about and the values that shaped them. 

In a family where money has been at the forefront of what has made things possible, a shift to stories and values creates a healthy environment to consider wealth as a means for positive impact in the world.  This leads to an appreciation for philanthropy in a meaningful and holistic way. 

An inheritance is so much richer when money is only one part of what is shared. 

As a philanthropy advisor, it is rewarding to work with families and individuals to explore and articulate their values and use these to develop and implement a plan to make their giving meaningful, satisfying and effective.

It does not have to be perfect before you start

Often people think that before they can embark upon an initiative, they have to have everything all figured out. 

When it comes to carrying out a philanthropy plan for making a difference in the community, however, it is not necessary to have all the planks perfectly in line.  You don't need to know exactly how much you will be contributing, or whether you have to have your own foundation, or even exactly where and to what you will make your contributions over the long term.  There is a lot of room to plan for flexibility and to test things over the short term. 

For example, if you are unsure about the amount you ultimately want to contribute to charitable projects, you can donate as much as you like at the outset - perhaps an amount that makes sense for your tax situation in a particular year (for instance a year when you sell property or a business and there are resulting taxes payable).  Many people don’t want to go through a full evaluation of exactly how much they will need over their lifetime and exactly how much they want to transfer to their children.  They know, however, that they will have some money to give to charity and they can contribute this amount at the beginning.

And you don’t have to set up your own private foundation at the outset – even if you think that eventually you might like a separate foundation.  There are a variety of donor-advised fund options offered by community foundations and by financial institutions.  Each organization offers different fee structures and flexibility and most will allow you to move the funds to a private foundation in the future if you choose.  (In a future blog I will describe more about the considerations between holding your funds in a donor-advised fund and in your own private foundation.)  In this way, you can get a sense of how it feels to work with a fund framework and the community foundation or financial institution will take care of the administrative details and may also be able to assist with guidance on making grants. 

Furthermore, you may consider how you want to have an impact in the short term without fully developing a long term plan.  In this way you can monitor the impact that initial grants are having and can flesh out your plan based on your experience. 

It is still important to go through a process to articulate your values and general desired impact and where appropriate to engage your family in this activity.  A thoughtful vision and mission statement will guide the processes for an effective giving plan. 

This important planning will set you on your way without having to have all the answers around the structure and ultimate value and direction of your philanthropy.  And as you enjoy your philanthropy in the short term, your understanding will grow and longer term decision-making will be much easier.  

Yes - even without all the planks lined up at the beginning, you can still envision and eventually reach a rewarding outcome. 

For more information on how I work with clients to assist them to give with heart and for impact please visit the approach and services pages of my website. 

National Center for Family Philanthropy 2015 Trends Study

There have been many changes to family philanthropy observed over the years.  Now the National Center for Philanthropy has released a new study (conducted with the Urban Institute) that provides data to support these observations.  

This benchmark study surveyed nationally represented family foundations in the United States and documents the current number, size, age, assets, and giving levels of family foundations and looks at a variety of unique aspects of family foundation governance and management practices, including the engagement of the next generation and the participation of the founding donor. 

The study reveals a number of important trends that not only reflect a changing field, but also inform where family philanthropy is going.  

Below, I have copied the 10 trends which NCFP recently reported on in their excellent e-newsletter, that they believe  - will be shaping the field for years to come:

1. Donor-advised funds and social enterprises might get all of the headlines, but family foundations are a popular choice for a new generation of philanthropists. Family foundations might be more traditional in their approach, but many new-age philanthropists are choosing to create family foundations to manage their charitable activities. Between 2002 and 2013, the number of family foundations grew by 44 percent and during that time, total giving to family foundations almost doubled - to $23.9 billion. 
2. Twenty-first century founders of family foundations are more engaged in their philanthropy than their predecessors. A few decades ago, family foundations were primarily the products of an estate - and the second generation was charged with interpreting the donor's wishes. But that is changing. Today's founders are much more actively involved - as two thirds of family foundations now have a founder who is still active in the foundation.
3. Family foundations are increasingly focusing on issues - not on places. Charitable giving has long been motivated by the desire to give back to the community or region that nurtured the philanthropist. But many newer foundations report that they are putting less of an emphasis on the communities in which they were created in favor of giving to specific issues.
4. Family foundations are more focused on effective grant making than ever before. Many older foundations focused on supporting causes in which their founders had a personal connection - whether it was their alma mater, religious institution, or home community. But many newer foundations are taking a different approach. They are instead building their grant making strategies around impact - and not necessarily personal connections.
5. Newer family foundations are spending their assets more aggressively.One in five family foundations established in the 1990s and 2000s give more than 10 percent other corpus - as do foundations with an active donor. The minimum legal requirement is 5 percent - which means that a large number of foundations are giving more than twice as much away as required.
6. While the idea of perpetuity will likely never die, more foundations are choosing to spend down their endowments. Twenty percent of the youngest family foundations have already decided to operate with a limited life span. This is less true among older family foundations. In fact, only about 3 percent of the oldest family foundations are operating with a limited life span.
7. Family foundations remain relatively small - but they're growing. Of family foundations created since 1990, 78 percent have less than $10 million in assets. But three in five family foundations created after 1990s also report that they expect their assets to increase.
8. Family foundations are taking active steps to engage the next generation.In many organizations, the emerging millennial generation is already beginning to influence giving decisions and operations. More than half of family foundations report that they are already engaging younger family members in their operations - and many of those that are not yet doing so plan to in the coming years.
9. While family feuds work well on game shows, they aren't common among most family foundations. Nearly 90 percent of organizations report that most family members work well together. And three out of four agree that family dynamics do not have a negative effect on the foundation's work.
10. Family foundations understand the value of capacity building and long-term relationships with their grantees. About 83 percent report making general operating grants and 63 percent give capacity building grants.

If you are interested in getting more information on this, you may contact NCFP to request a copy of the executive summary of the report or the full report.  

Giving with Heart

So many of us make our charitable contributions in a knee-jerk way.  For example: 

• a friend asks us to support a cause that is important to him or he
• a solicitation is presented that strikes a chord for some reason and we react; or
• we feel an obligation to support a cause due to a past relationship or sense that it is something we just “should” donate to. 

But what if giving was an expression of who we were, what we believed and what we wanted to see in the world?  What if giving engaged those closest to us in conversations around our values and vision for the future?  What if we really explored those issues and made thoughtful and conscious decisions about where and how we wanted to make a difference?

Giving with Heart is possible! But how does it happen?    

First of all, it’s important to explore and articulate the values that motivate how you make decisions, your areas of interest, and in what ways you would like to make a positive difference - that is the impact you would like to have. 

If you choose to engage your family in your giving, it is possible to first individually articulate your values, interests and desired impact and then come together in a safe environment where you can openly share and discuss these and get to understand more about the commonalities amongst you.  Together you could build mission and vision statements that will guide you in how you make gifts going forward.   

Giving with heart provides a personal expression of what you think is important.     No wonder it is very rewarding.

In future blogs I will describe some exercises that I use to help my clients to articulate their values and desired impact – individually and as a family.

Family and Philanthropy: The Rewards

Charitable giving can and should be a positive, engaging and impactful experience—one that aligns with your values, priorities and culture.

It may also be a tool for family coherence and the propagation of family values. It can be an adventure where you explore and reach new heights together. 

We live in a world of consumerism and affluence where wealth has the power to be good or destructive.  By openly talking about money as a family, you can use wealth as a means for positive impact in the world, based on values, and as a way to have meaningful conversations with your children.

So how does it work?

The process begins with a review of your financial situation including the identification of what you “need” for financial independence to continue your desired lifestyle and what you “want” to pass onto your family, balancing what would be reasonable and still provide incentive for personal ambition. 

The difference  between your assets and these “needs” and “wants” will provide a pool from which to contribute strategically and effectively to causes you think are important.

The next step is for each member of the family, individually and collectively to articulate the values that shape your decisions.  Your common values form the basis of a vision and mission for your philanthropy; they guide you as you create a practical and customized, flexible giving plan that meets your particular needs, aligns with your goals and helps you create the kind of change you want to see in the world.

Next, as a family, you will itemize and prioritize your areas of interest and determine your criteria for making gifts.  You may also want to consider how family members may involve themselves, beyond the financial contribution, in the causes that are important to them. Additionally, it will be critical to work with recipient organizations to ensure that they are aware of your expectations and are committed to regularly updating you on their progress.  From this you may monitor and evaluate the impact of your philanthropy.

Your personalized framework for charitable giving will allow you to easily make thoughtful decisions that have an important impact on the world, your family and the causes that align best with your objectives.

Giving well and with purpose does not just happen - it requires the commitment to develop and implement articulated values, a clear vision and mission, a practical plan and defined outcomes.  Working on this together as a family will not only have a positive effect on the world, it will also provide a profound and fulfilling family experience.  You will be on a rewarding path and adventure together. 

As a philanthropy advisor, I love working with individuals, couples and families to develop and implement a plan to make their giving meaningful, satisfying and effective. 

Are You Ready to Start Thinking About Being a Strategic Funder?

Being strategic about your philanthropy is a balance between focusing on each tree in the forest and seeing the forest for the trees. There are a number of important steps which will help you ensure that your philanthropy is focused and  managed in an organized and professional way. This may apply if you are first establishing a philanthropic fund or if you want to use an existing fund more strategically. The following steps will set you on your way to maximizing your philanthropy in a way that will be engaging and satisfying.  

 

Articulate your values, motivations and desired impacts

• Identify and engage those in your family whom you wish to involve in your philanthropy

• Explore your personal and group values and articulate how and where you want to make a difference in the world

• Develop shared  vision and mission statements to guide you in your philanthropy 

 

Select the philanthropic fund vehicle that meets your needs

• Review  the pros and cons of each philanthropic fund vehicle and consider which may be most appropriate for your particular circumstances

• Establish the appropriate philanthropic fund vehicle

Develop your philanthropic strategy

• Consider the best practices in philanthropy

• Develop policies and procedures for grant making (including how and when decisions are made)

• Develop grant proposal forms, report forms and template contracts to support your funding  strategy

Guide operations and governance

• Develop guidelines and procedures for productive communication and family harmony

• Develop plans for operations and board policies to support effective giving

Integrate the next generation

• Discuss the goals of meaningful integration of the next generation

• Develop functional plan to integrate next generation

Plan for succession 

• Consider long term view for the philanthropic vehicle 

• Prepare letters of donor intent to preserve founder’s vision 

• Develop leadership succession ideas that consider founder’s long term goals and cultivate family cohesion and legacy.

As a philanthropy advisor, I  coach my clients through each step of their philanthropy journey. Going through these processes is engaging and rewarding in and of itself.  And - the outcome - strategic and impactful granting - is extremely gratifying.  Not only do donors make important improvements to communities and the world  and  enhancing the lives of others, they also enrich their lives and those of their family.  The forest and the trees are in alignment.

How to Become a Strategic Philanthropist

Strategic or impact philanthropy identifies a challenge or need in the world and invests resources to address that problem in a targeted and measured way. It is the shift from making simple donations that you hope will help a cause, to actually articulating a focus and helping to shape a program that will have significant impact. Focus is key!

A strategic grants program will allow you to make important change. You may choose to make individual grants that are strategic or your actual grant choices may be linked in a way to accomplish an overarching goal.  

I find that clients are more engaged and satisfied when we have worked together to develop a strategic granting process, which includes the following:
 

As a philanthropy advisor, I work with my clients through all these steps, so they understand what they really want to accomplish and have strong administrative tools and practices to carry out their objectives. With focus and balance, they achieve their goals.