Philanthropic Adventures: Family Foundations Introduction: Family Giving and Philanthropic Travel

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Philanthropic Adventures: Family Foundations Introduction: Family Giving and Philanthropic Travel

Wednesday, November 15, 2006

Family Foundations and Philanthropic Travel
In a conversation about the surge in family foundation start-ups and how many of these foundation's were adopting a venture capital funding model to their giving practices, Sterling Speirn, President of the Peninsula Community Foundation, commented that many family foundations were practicing "ad-venture" philanthropy more than venture philanthropy. This person's comment speaks to how family philanthropic efforts take different approaches and paths to giving.

The current environment for family giving and philanthropy is positive. Interest level among clients seems to be growing. While this interest level is exciting for advisors involved in charitable planning, many clients who are starting family foundations have limited philanthropic experience. Inexperience is not a bad thing. The concern is that inexperience in a family foundation may cause, at the least, some confusion and, at the very worst, family rifts. Most problems can be avoided if the client is provided with some general information about family foundations.

Clients starting a family foundation should consider some basic points. At the very least, a client should have the opportunity to talk with other families about their giving efforts and have time to explore the different options available. Yet, many family foundations are established at year-end and are tax-driven events. Advisors who help clients establish family foundations should consider their role in helping clients both start their foundation and then successfully navigate their philanthropic adventure.
The December Philanthropic Adventure Telephone Call

On December 1st, you receive a telephone call from a client who explains, "I was at a holiday function last night and a friend mentioned that her family created a family foundation to give away money to charities around the country. My friend told me that her children are involved and that she read about starting a foundation in a magazine article last year. She also said that her advisors helped her start the thing. How can I start one of these family foundations?"

You take a deep breath as you look at the calendar and wonder why now-and then start to answer the client's question. She interrupts you and asks, "How much money should I put into this new giving vehicle?" You respond that based on what you remember from your review of her financial statement and tax situation last year that the client could fund a family foundation with around $1 million in publicly traded stock. And then the client says, "Sounds good, I am late for a meeting, so when can I have this thing up and running?" You try to explain that it is not that simple, but the client says goodbye and hangs up the telephone

What Vehicle Does the Client Need For A Family Philanthropic Adventure?
A client, like the one in the above example, who is starting on a family philanthropic adventure without considering what vehicles or information she needs to enjoy the trip may find the journey a little bumpy. A successful family foundation is generally realized through a combination of advice and experience. In the above example, the client is just starting a family foundation and, like many clients, does not have any previous experience from which to draw. Therefore, the client will rely on the advice she receives from her advisor.

An advisor who is involved in a family foundation creation should consider his or her responsibility in making sure the client's new family foundation is in a position to succeed. Of course, it is unrealistic to expect a client to resolve every issue before creating a family foundation, but by providing a client with what amounts to an introduction to the family foundation world they will at least be aware of the issues. Advisors who help prepare their clients for any surprises will find their clients not only survive the journey, but also enjoy it.

The remainder of this article is a suggested memorandum in response to this client's year-end inquiry. Its purpose is to provide the client with an adequate amount of knowledge to make an informed decision regarding the creation of her family foundation. It is not intended to act as a legal compendium.

Click here to read part one of this three part series on Adventure Philanthropy: Family Foundations and Philanthropic Travel.

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