For families of means, there are plenty of reasons to consider establishing a private foundation: tax savings, control over assets and the ability to give back using a broad range of philanthropic capabilities, such as program-related investments and grants to individuals. But for many of our clients, the most important benefits of a foundation are those that help them ensure that the next generation will be responsible stewards of their values and wealth.
The Ideal Training Ground
A private foundation is like “an estate plan in action,” because the skills needed to run an effective foundation are identical to those required for the next generation to manage their inheritance. By learning how the foundation maintains its investments, conducts due diligence before making a grant and measures its impact, heirs learn essential business skills. And by participating in group decision making, advocating for their positions and resolving disagreements with other members, young people acquire the social skills that are key to leadership.
Beyond the acquisition of financial and business skills, many families of wealth are concerned that their success will kill their children’s ambition — especially if their wealth passes to their children before they have had a chance to develop sufficient maturity. For these families, a foundation is a perfect fit, because it enables the next generation to participate in wealth and understand both its power and responsibility — all without taking control of it. By having a say in the foundation's governance and work, children witness the impact of their decisions and learn the value of money in ways no lecture can ever hope to match.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Foundation for a Legacy of Giving
When a family decides to establish a private foundation, the process naturally sparks discussions about what the family wants to accomplish with their charitable funds. These conversations can be a springboard for exploring the family’s priorities, offering a rare opportunity to uncover what matters most to individuals and what core values the family shares. Ultimately, the family can distill this conversation's fruits into an external mission statement for the foundation. However, this process might also give rise to an internal mission for the family itself.
Whereas the external mission details what the family wants to accomplish for others, an internal mission focuses on the family’s goals for itself. Many Foundation Source clients use an internal mission statement to articulate their intentions to strengthen family bonds, forge a distinctive identity and optimize time spent together.
Connection to Each Other and Future Generations
In this day and age, it’s common for families to spread out all over the globe. Education, job opportunities and marriages exert their gravitational forces, pulling family members away from one another. For many families, the foundation becomes the glue that holds the family together, even when they live in different ZIP codes and time zones. Having a common cause and a formal vehicle for advancing it provides a “non-Thanksgiving” reason to meet regularly.
Finally, because private foundations can be established to exist in perpetuity, they can link the founders to generations of the family they will likely never meet. The foundation conveys the founders’ cherished values, hopes and dreams from one generation to the next. And, as the foundation’s assets grow in a tax-advantaged environment, it can become a philanthropic heirloom of substantial worth, empowering each generation to embrace the family’s legacy and add to it themselves.
-
Even Retirees Get a Case of the MondaysAnxiety about the start of a new week isn't just experienced by those in the workforce. Retirees deal with it, too. Here's why it happens and strategies for dealing with it.
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for WomenWhile most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for Women
While most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational WealthPrivate placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.
-
How to Maximize Your Social Security Now That the One Big Beautiful Bill Is LawWhen applying for your Social Security benefits, consider the new enhanced deduction for people age 65 and older, as well as your health, family situation and other financial issues.
-
I'm a Retirement Specialist: This Is How to Keep Your 401(k) on Track Amid Dire News AlertsHistory shows that consistent, disciplined investing far outweighs any attempt at market timing, so focus on long-term growth and tune out the sky-is-falling news headlines.
-
Five Money Moves to Make Before Your First Child Arrives: A Financial GuideI wish I'd known some of these when I was an expectant parent. These important steps include establishing an emergency fund, budgeting for new expenses, securing life insurance and more.
-
Retirement Tax Bombs: How Roth Conversions May Cut the Blue WireIf you have a significant amount in tax-deferred retirement accounts, you could be sitting on a tax time bomb. Luckily, there's a way to defuse the situation.
-
A Financial Planner's Guide to Planning for Retirement Health Care ExpensesWhether you're eligible for Medicare or getting coverage through the Affordable Care Act, make sure you plan for premiums, deductibles and other out-of-pocket costs.
-
I'm a Financial Adviser Who's Been Through Divorce: This Is How I Break It Down for ClientsDividing a divorce into three stages — decision, negotiation and finalization — makes it more manageable. These are the key steps to take in stage one.
