Kids Not Ready for Their Inheritance? Consider a Private Foundation
The benefits of starting your own foundation extend far beyond tax savings: It can help preserve your family’s wealth and unity.


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.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Hannah Shaw Grove is the chief marketing officer of Foundation Source, founder of "Private Wealth" magazine and author of 11 data-based books and hundreds of reports and articles on topics relating to the creation, management, disposition and transfer of wealth. Hannah has previously been the chief marketing officer at Apex Clearing, iCapital Network and Merrill Lynch Investment Managers and is a cum laude graduate of Harvard University. She holds the FINRA Series 6, 7, 24, 26 and 63 licenses.
-
The Best FSA or HSA-Eligible Amazon Prime Day Deals You Can Shop Now
Double down on savings by taking advantage of these early Prime Day deals that are FSA or HSA eligible. Save on fitness trackers, air purifiers, baby gear and more.
-
Stock Market Today: It's 'All Sectors Go' Ahead of Independence Day
The resilience trade continues to work, even for sectors and stocks with specific uncertainties.
-
Investing Professionals Agree: Discipline Beats Drama Right Now
Big portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This Instead
Yes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.
-
Social Security's First Beneficiary Lived to Be 100: Will You?
Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?
You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational Shifts
As the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.
-
Why Homeowners Should Beware of Tangled Titles
If you're planning to pass down property to your heirs, a 'tangled title' can complicate things. The good news is it can be avoided. Here's how.
-
A Cautionary Tale: Why Older Adults Should Think Twice About Being Landlords
Becoming a landlord late in life can be a risky venture because of potential health issues, cognitive challenges and susceptibility to financial exploitation.
-
Home Equity Evolution: A Fresh Approach to Funding Life's Biggest Needs
Homeowners leverage their home equity through various strategies, such as HELOCs or reverse mortgages. A newer option: Shared equity models. How do those work, and what are the pros and cons?