Creating a family philanthropy plan

One of life's joys is applying your resources to the benefit of the greater good. While donating to a favorite cause is an easy way to give back, many families — and especially those fortunate enough to have amassed more assets than they need — yearn to make a more meaningful difference. Family philanthropy is a strategic way to harness the impact of your family's gifts while growing stronger relationships with each other. In this article, we'll explain what it is and tell you about:

• Why family philanthropy matters

• Vehicles for charitable giving

• How to create a plan

What is family philanthropy?

Family philanthropy is the act of giving as a family unit. That family may well be your biological family, but it can also include your "family of choice" — people in your support system who you treat as family. And that shared commitment to giving can provide a structured framework that focuses on a family's mission while ensuring its funds benefit a cause close to their hearts. Some common components of family philanthropy include:

• A cohesive giving strategy

• Involvement of multiple generations (e.g., children, parents, even great-grandparents)

• Building, and then implementing a long-term vision

• An overarching aim to create a meaningful impact

Why it can make a difference

Family philanthropy is a powerful way for multiple generations of a family to unite in charitable giving while maximizing their impact. And it benefits not only the communities or organizations that receive the family's gifts but also the family itself. Multigenerational giving has the power to leave a lasting legacy¹ based on a familial connection to shared values and causes. It also strengthens the ties between generations and joins family members together under a greater sense of purpose and stewardship.

How to get started

When you create a family philanthropy plan, you define your family's charitable mission and form the foundation of a long-lasting legacy. The process begins with exploring your goals as a family and then determining the best method (or methods) of executing your plans.

1. Set Priorities

Your first objective is to set your priorities and determine where your family would focus its efforts to make the most impact. What causes espouse the values you support? What organizations or charities are most meaningful to you as a family?

This is an opportunity to come together across generations and discuss what it means to be a member of your family, what philanthropic ambitions you share, and how family grants might be used to advance your collective vision of a brighter future.

2. Choose Philanthropic Vehicles

When you've selected your priorities, your next objective is to choose the vehicle you'll use to convey your contributions. While there are many different ways to give as a family, three of the most common charitable giving vehicles include:

• Donating life insurance: There are multiple ways to donate a life insurance policy to charity. You may name the charitable organization as a beneficiary, transfer the policy to the organization directly, or add a charitable benefit rider (if available) that directs payouts to the organization. Donating a life insurance policy can create an outsized benefit for the charity compared to the premiums paid.

• Contributing to donor-advised funds: Another method is to contribute to a donor-advised fund. Donor-advised funds (DAFs) are investment accounts that benefit charitable organizations and non-profits. When you contribute to a donor-advised fund, the organization gains control over the funds, but you retain advisory privileges regarding how those funds are invested.¹

• Creating a private family foundation: A private foundation can be useful for long-range, traditional grantmaking. Usually established with the help of a lawyer or CPA, private family foundations require the drafting of formal articles of incorporation and must meet IRS requirements for private foundations. This includes filing an annual Form 990-PF, among other administrative tasks.²

3. Form a Transition and Succession Plan

Another important task when creating your family philanthropy plan is to determine the lifespan of the plan. How long do you intend to continue making grants as a family? One lifetime? In perpetuity? Until the funds run dry?

Along with these discussions is the need to plan transitions multi-generationally. Many family foundations, for example, involve several generations in running the operations. It's a wonderful way to get the younger generations involved and teach them not only your family's philanthropic values, but also the skills needed to ensure a successful organization.

While a family elder is often the logical choice to lead much of the decision-making, what happens when they're no longer around? It's imperative to form a transition and succession plan for that eventuality. Both the leader and the rest of the family must prepare for their departure, identify who will succeed them in leadership, and ensure everyone is aligned on their vision for the future.

4. Establish the Administration of the Plan

With the formal structure in place and the family in alignment, you can bring in professional assistance to administer your plan. Private family foundations in particular can benefit from professional support, which depending on the size of the foundation might include:

• Legal counsel

• Tax advisors

• Investment advisors

• Grant managers

• Admin staff (such as office managers)

• Public outreach specialists

• Executive director

• Chief financial officer

• Board of directors (or trustees)

Sometimes family members may be able to fill some of these positions, but in other cases, especially where expertise is missing, you can hire directly or outsource the roles.