In a previous blog I wrote about a process to help donors work their way through their three big gift planning questions:  how much will they need for the remainder of their lives; how much should they give to their children; and, how much should they give to charities? The process, which consists of three boxes, is important for two reasons:

1) These are the questions that donors have to answer before they pull the trigger on a testamentary gift.

2) It is the most consistently effective tool I have ever used. Check out the process at Helping Donors Answer Their Most Perplexing Question and give it a try.­

The difference between the successful and disappointing outcomes is in a particular type of asset transferred — a non-monetary legacy that has been systematically imprinted on succeeding generations.

Increasingly, I have found that donors have a desire for a FOURTH BOX, one in which they intend to insert a very large number. This number represents assets used to establish (or contribute to an existing) family foundation.

In Part One of this blog, Estate Planning Follies, I talked about donors wanting to inspire and enable the next generation to continue a legacy of giving established by their parents and grandparents. In that article I outlined five common reasons why those who set up family foundations to carry on their giving traditions are almost always disappointed — or would be if they lived to see the results. It almost never turns out as anticipated.

However, I have also been personally involved with a number of families over the years that represent the most extraordinary examples of multigenerational philanthropy one could imagine. Generally speaking, the difference between the successful and disappointing outcomes is in a particular type of asset transferred — specifically, a non-monetary legacy that has been systematically imprinted on succeeding generations.

Fundraisers, who are also Mentoring Donors in the Art of Philanthropy, will often be brought into these conversations. Here’s your first and most important talking point:

What you impart to the next generation about the meaning, value, and purpose of wealth is far more significant than the amount you leave to them — be it great or small.

One of my good friends (a.k.a., Sam) and his three successive generations of children and grandchildren participate together in their family foundation. I’ve known their children and grandchildren for many years and have been invited to several of their family meetings. Early on Sam was determined to teach each generation of his family about spending and frugality, wise investing, and strategic generosity that follows compassion and responsibility.

(Grandchildren) are left with a sense of personal empowerment through giving, as well as the startling realization that altruism is “way cooler” than self-centeredness. 

One example: Philanthropy comes from two Latin words, meaning “the love of mankind.” Sam knows the difference between shoveling money and becoming a genuine philanthropist, and wanted his grandchildren to know it too, He and his wife established a tradition of giving lump sums for their grandchildren to invest in charitable causes. Those grandchildren, however, couldn’t just send cash or a check. The stipulation was that they had to do a site visit among the people they intended to help. Grandchildren would return from encountering needs and opportunities, and then gathered to lobby cousins, parents, and grandparents on their plan to make a difference. The site visit served to engage them personally and emotionally. Making the case to their cousins forced them to begin thinking strategically.

Getting kids involved with your philanthropy can have a powerful impact. It injects into kids some reality about the world in which we live, gives them a sense of appreciation for their blessings, and helps them deal with the constant pull of materialism. Kids returning from a Third World vision trip witness the impact and overflowing gratitude that comes from even the smallest acts of generosity. They are left with a sense of personal empowerment through giving, as well as the startling realization that altruism is “way cooler” than self-centeredness. How many adults have figured that one out? This example, and in a hundred other ways, Sam and his children have made it a first-priority family tradition to mentor succeeding generations of family members.

Of all the tributes one might receive, what could be better than a teenager saying, “My grandparents taught me about generosity and the importance of genuinely caring for others.”

How (a family foundation) turns out all depends on what parents and grandparents have intentionally and systematically transferred to the next generations with regard to the meaning, purpose, and strategic use of wealth.

PRESERVING DONOR INTENT
Most of the disappointments with regard to perpetual family foundations have had to do with bourgeoning administrative costs and/or funding priorities that have wandered from the original donor intent. The previous article describes how this happens over time. However, I do know of a handful of family foundations that have maintained family involvement and donor intent through four and five generations. Those extended families have made monumental differences in their respective communities. In each of those familes there has been a progressive mentorship in the wise application of family foundation assets to effectively fund community needs.

If donors want to load up the FOURTH BOX with assets for a family foundation, that is indeed a noble aspiration. However, fundraisers serving in the role as philanthropic advisors should make the point very clearly — how it turns out all depends on what parents and grandparents have intentionally and systematically transferred to the next generations with regard to the meaning, purpose, and strategic use of wealth. That is, by far, the most valuable asset they have to transfer.

Eddie Thompson, Ed.D.

Copyright 2013, R. Edward Thompson