Some parents give their kids the keys to the family car when they reach a certain age, but others offer something far more profound: big money to spend on good causes through their family’s private foundation.
Whether philanthropists want to foster a love of charitable giving in future generations or use teachable moments to help them learn technical aspects of running their foundation, using family wealth can bring families together while solving pressing societal concerns.
That is, as long as the next generations are on board. Without a carefully considered plan in place initially, things can go seriously awry years later.
Bri Trypuc, a philanthropic advisor in Toronto, works with numerous multi-generation families and sees what happens when the founder’s goals and passions don’t quite land with the heirs. Maybe grandma wanted to start funding the symphony decades ago or sponsor a room in a museum. But the kids? Not so much. They’re more interested in ending child hunger or addressing LGTBQ+ rights and climate change.
Younger family members might say, “’We don’t care about this. It was our grandparents’ [vision] and there are needs that are much greater right now. Why don’t we just spend it down?’” explains Trypuc. “It’s really hard to pass that motivation on without their engagement.”
So, how to ensure that newer generations share what the family founder is captivated by and pass on that passion for a specific cause for years to come?
To that, Kate Bahen, managing director of Charity Intelligence Canada in Toronto, has a question of her own: “Should they?” she asks. “As a philanthropist, to what extent should you go to handcuff future generations for your philanthropic interest?”
She points to a couple of classic examples of what can go wrong if founders require their wishes to be followed to the letter in perpetuity. There’s the 1880s donor who created an endowment to provide and maintain water and drinking fountains in Chicago for dehydrated workhorses. So that the work continued, strict limitations were written, creating a legal headache a century later when the foundation struggled to spend millions of dollars annually as stipulated.
As a philanthropist, to what extent should you go to handcuff future generations for your philanthropic interest?Kate Bahen, Charity Intelligence Canada
Meanwhile, in 1909, Milton S. Hershey and his wife, Catherine, used their colossal fortune to open and run an orphanage for white, fatherless boys. “So how does that stand in 2021?” Behan asks. (The answer? Turn it into a free private school, and include girls and racial minority students. Eventually.) It was an overwhelming donation for one institution and with investment returns that continued to grow. Today, the Milton Hershey School boasts a 7,000-seat football stadium, eight lighted tennis courts, a skating rink, pool and three gymnasiums for its 2,300 students. Not to mention controversy over how some board members may have used the massive slush fund for personal reasons. “I mean, this has got money coming out of the wazoo,” Behan explains.
It’s a good idea for families to discuss philanthropic sunset clauses and limited lifespans at the outset to avoid these situations. Or, if the foundation is donating to causes that no longer appeal to later generations, it’s fine to look at ways to make it more flexible.
“If there’s a grey area in there, why don’t we modernize the foundation?” Trypuc says, mentioning that some families look at the charitable objectives and mission and then find new and worthy causes that still speak to them, at least in spirit. In other words, a boy’s orphanage may no longer fly, but giving funds to feed disadvantaged students would.
Either way, don’t get too hung up on the details decades later, but stay within the legal confines laid out.
“Because I bet your grandparents would probably care more about your involvement and working together as a family than they did about arts and culture,” she says. “If they just cared passionately about arts and culture, they could have made a one-time gift.”
Trypuc recommends that founders ask themselves why they want to bring family into their philanthropic goals to begin with. She mentions three words: inform, inspire and involve.
- Informing means sharing details about why the founder plans to build a long-term donation plan, such as in a family foundation or donor advised fund.
If the goal is to inspire, some donors provide seed funding for their family’s own interests. Even kids and teens could be involved in this way.
- If founders want to deeply involve family in their plans, even giving them roles and jobs in the family foundation, more conversations are needed.
- Some founders open the conversation with children and grandchildren by telling the family fortune origin story. How was the money made? What happened in their lives that makes a charitable cause so important? These conversations can happen at home, at the family business or even on a family retreat.
If the goal is to inspire, some families encourage adult children or even kids and grandkids to come to the roundtable discussion with pitches prepared for causes they believe in. A little competition and debate aren’t always bad things. And if the cause reflects the family foundation mandate and mission, it can be included.
Ultimately, it’s important to do whatever is right for the family. For some, strict rules seem to be fine, as long as they’re not forever rules. Adult children want to carry out their parents’ wishes, even if the cause is not something they would choose. For others, more choice and flexibility work best.
“Of all the giving portfolios I’ve looked at, they’re each unique,” says Trypuc. “None of them are ever the same.”