Family philanthropy paper explores opportunity and challenges of engaging tomorrow’s philanthropists

IfP’sdirector for next generation philanthropy Sarah Teacher says the paper, Funding as a family: engaging the next generation in family philanthropy,  shows that "younger family members will bring fresh ideas, perspective and energy to an established philanthropy and their joining a foundation can often catalyse reflections on direction and process in a foundation. 

“However, next generation participants themselves also benefit enormously from engagement in a family giving vehicle. In a practical sense, particularly pertinent for family business philanthropies, a strategic philanthropy can play a role in supporting the next generation’s understanding of sound financial management, good governance and group decision making in a professionalised environment.  

“Also, and perhaps more importantly, the best family philanthropies act as a physical manifestation of a family’s values in the world. Next generation engagement with a foundation therefore becomes a way for them to engage and participate in shared family values. There is a tremendous wisdom that resides around the family foundation board room table – in both senior and junior members – and philanthropy presents a unique and structured opportunity to share and act on that wisdom together.”  

Bill Woodson, head of family wealth management at Credit Suisse Private Banking USA says many challenges arise when there is a generational change in a foundation or trust that lead to “general governance issues associated with the lack of an appropriate succession plan within the charitable entity; lack of focus or dilution of the mission established under the prior generation's leadership; conflict among family members that is no longer resolved by a senior family member leading to disengagement by one or more family members."

He adds, “Philanthropy creates a forum for families to pass down values and build legacy together, and to address issues around wealth and inheritance. The paper provides inspiring insights into how families around the world are working together to build thoughtful and effective family philanthropies.”

Teacher comments, “As in all environments, change presents potential conflict as well as opportunity, and preparation is the key.  An unengaged next generation with responsibility for a family foundation thrust upon them, may feel the burden but not the opportunity that philanthropy presents.  The key is to plan long term, engage next generation family members early and in imaginative ways, and create a supportive environment in which younger generations can have their opinions heard and participate actively in philanthropic work.  Obfuscation is often at the heart of upset.  A clear, measured and long term plan communicated openly and participated in actively by all generations is the best approach to smooth generational change.”

Dr Salvatore LaSpada, chief executive of the IfP, said: “We are very pleased that Credit Suisse is paying such close attention to what is currently one of the most crucial issues in philanthropy: how to see that each of the generations engage effectively in their family’s giving. To take part in philanthropy as a family is a uniquely rewarding experience, though not without its challenges."

Looking at future trends in family philanthropy Woodson says, “As a result of the recent economic downturn, many families are focusing their philanthropic energies on fewer projects or organisations.  We think this will continue in spite of the recovery. There is a greater interest in and ability to support international charities and philanthropic efforts.  Increased use of planned giving vehicles and techniques such as charitable remainder trusts and charitable lead trusts as income and estate tax rates increase.”

The report identifies three categories of family philanthropy;
•    Family foundation: A board made up principally of family members oversees the activities of a philanthropic foundation.
•    Family business model: A family makes grants through the corporate foundation or corporate philanthropy program of a family business.
•    Informal activities: Family giving initiatives organised around the kitchen table allow younger generations to learn about their families’ philanthropy in preparation for their future engagement.

The Funding as a family: engaging the next generation in family philanthropy paper is available for download at the end of this article.