Family Philanthropy: Three Generations, Shared Values

Family Philanthropy: Three Generations, Shared Values

Executive Summary

A multi-generational family with significant wealth sought to create a unified philanthropic strategy that involved all its members and reflected their core values. Golden Door Asset facilitated this process through structured family meetings, values identification exercises, and the establishment of a streamlined grant-making process using their existing donor-advised fund. This resulted in complete family engagement and the allocation of $500,000 in grants to causes aligned with their shared values within the first year, fostering a lasting legacy of giving.

The Challenge

The Peterson family, consisting of grandparents, their adult children and spouses, and several grandchildren over the age of 16, had amassed considerable wealth through a successful technology company. While each family member engaged in charitable giving independently, there was no cohesive strategy to their philanthropy. The grandparents, in their late 70s, felt a strong desire to instill a sense of responsibility and shared values in the younger generations before transferring the bulk of their estate.

Their existing philanthropic efforts were fragmented. The grandparents primarily supported their alma maters, contributing approximately $100,000 annually. The adult children each donated to a variety of causes, ranging from environmental conservation to arts organizations, totaling around $50,000 per year combined, but these decisions were often ad hoc and driven by personal preferences. The grandchildren, while interested in social impact, lacked the financial resources and guidance to make meaningful contributions.

This lack of coordination presented several challenges:

• Missed Opportunity for Impact: The scattered donations diminished the potential for creating a significant and lasting impact in any specific area. Their giving lacked focus and leverage.
• Lack of Family Cohesion: The absence of a shared philanthropic vision created a disconnect between family members, particularly across generations.
• Inefficient Grant-Making: The individual grant-making processes were time-consuming and lacked a formal framework for evaluating potential grantees. There was no consistent process for due diligence or impact assessment.
• Tax Inefficiencies: Without a centralized strategy, they were potentially missing opportunities to optimize their charitable giving for tax benefits. Their individual giving plans had limited estate planning considerations and were not integrated.
• Future Generational Engagement: The grandparents worried that without a structured approach, the younger generations wouldn't fully appreciate the importance of philanthropy or develop a sense of responsibility for managing their wealth. They feared a dilution of their values and a disconnection from their legacy.

They approached Golden Door Asset seeking guidance on how to transform their fragmented giving into a cohesive, impactful, and sustainable family philanthropy program. The family donor-advised fund held approximately $2 million and the goal was to effectively deploy capital over the next five years and engage family members in the decision-making process.

The Approach

Golden Door Asset implemented a structured, multi-stage approach to help the Peterson family establish a unified philanthropic strategy:

1. Initial Consultation and Needs Assessment: We began by conducting individual interviews with each adult family member (grandparents, children, and spouses). These interviews aimed to understand their individual philanthropic interests, values, and goals. We also reviewed their existing giving patterns and financial circumstances. This initial phase took approximately 4 weeks.

2. Facilitated Family Meetings: We organized a series of three family meetings, each lasting approximately 3 hours. The first meeting focused on values clarification. We guided the family through exercises designed to identify their core values and philanthropic priorities. We used a structured questionnaire and facilitated group discussions to surface shared interests and areas of potential alignment.

The second meeting centered on identifying potential areas of focus. Based on the identified values, we presented the family with information on various philanthropic causes, including environmental sustainability, education, poverty alleviation, and healthcare. We facilitated discussions to narrow down their focus areas based on their collective passions and the potential for making a meaningful impact.

The third meeting addressed the creation of a formal grant-making process. We worked with the family to develop clear guidelines for identifying, evaluating, and selecting grantees. This included establishing criteria for assessing the financial stability and impact of potential recipient organizations. We created a rating system, using a 1-5 scale, for evaluating grant proposals, based on alignment with their values, organizational effectiveness, and potential impact.

3. Development of a Philanthropic Mission Statement and Giving Guidelines: Based on the family meetings, we worked with the Petersons to develop a concise mission statement that articulated their shared philanthropic vision. This statement served as a guiding principle for all future giving decisions. We also formalized their giving guidelines, outlining the types of organizations they would support, the geographic areas they would target, and the criteria they would use to evaluate grant proposals.

4. Implementation of a Grant-Making Process: We helped the family establish a formal grant-making process using their existing donor-advised fund platform. This process included:

• Grant Proposal Solicitation: We assisted in creating a standardized application form for potential grantees.
• Initial Screening: We helped the family develop a system for screening applications to ensure they met the basic criteria outlined in their giving guidelines.
• Due Diligence: We guided the family in conducting thorough due diligence on potential grantees, including reviewing their financial statements, program evaluations, and leadership structure.
• Grant Selection: We facilitated discussions among family members to determine which grant proposals to fund. Each member had one vote, ensuring all were engaged in the decision-making process.
• Grant Monitoring and Evaluation: We established a system for monitoring the progress of grantees and evaluating the impact of their work. This included requiring grantees to submit regular reports and conducting site visits.

5. Establishment of a Communication Platform: To facilitate ongoing communication and collaboration, we established a secure online portal where family members could access information about their philanthropic activities, review grant proposals, and participate in discussions. This platform served as a central hub for all family philanthropy-related activities.

6. Legacy Planning Integration: We worked with the family's estate planning attorney to integrate their philanthropic strategy into their overall estate plan. This ensured that their charitable giving would continue in accordance with their wishes after their passing. The planned increase in assets allocated to the donor-advised fund represented 15% of their overall estate.

Technical Implementation

The success of the Peterson family's philanthropic program relied heavily on the effective use of technology and financial planning tools. We leveraged the following:

• Donor-Advised Fund (DAF) Platform: We utilized the platform provided by Fidelity Charitable, chosen for its robust features, low fees, and comprehensive reporting capabilities. The DAF allowed the family to make tax-deductible contributions, grow their assets tax-free, and recommend grants to qualified charities. The platform also provided tools for managing grant applications, tracking donations, and generating reports. The existing fund was transferred and optimized for the new objectives.
• Secure Online Portal: We implemented a custom-designed online portal using a secure, HIPAA-compliant platform (similar to those used in wealth management) to facilitate communication and collaboration among family members. This portal included features such as:
  • Document Repository: A secure storage space for storing grant proposals, financial statements, and other relevant documents.
  • Discussion Forums: Dedicated forums for family members to discuss grant proposals, share their perspectives, and make decisions.
  • Calendar and Event Management: A calendar for tracking important deadlines, such as grant application deadlines and board meetings.
  • Voting System: An integrated voting system for family members to cast their votes on grant proposals.
  • Grant Tracking and Reporting: Features for tracking the progress of grantees and generating reports on the impact of their work.
• Financial Modeling Software: We employed Monte Carlo simulation software, running 10,000 iterations, to project the future growth of the donor-advised fund under various market conditions. This allowed us to estimate the potential for future grant-making and to develop a sustainable spending plan. We used a conservative 6% average annual return in our baseline model.
• Grant Management Software: We integrated with FoundationConnect, a leading grant management software, to streamline the grant application process. This software automated tasks such as application intake, review, and reporting, freeing up family members to focus on strategic decision-making. The system automatically performs compliance checks and flags any potential conflicts of interest.
• Tax Optimization Strategies: We worked closely with the family's tax advisor to identify opportunities to optimize their charitable giving for tax benefits. This included strategies such as donating appreciated securities to the donor-advised fund and bunching charitable contributions to maximize itemized deductions. The gifting of $200,000 in appreciated stock yielded a tax savings of $56,000 for the family, equivalent to a 28% tax benefit on the donation.

Results & ROI

The implementation of Golden Door Asset's philanthropic strategy yielded significant results for the Peterson family:

• 100% Family Engagement: All family members, including the grandchildren, actively participated in the grant-making process. This created a stronger sense of family cohesion and a shared commitment to philanthropy. Before the implementation of the program, participation was less than 40% of the adult family members.
• $500,000 Allocated to Causes Aligned with Shared Values: Within the first year, the family allocated $500,000 to organizations aligned with their shared values, focusing primarily on environmental conservation and education. This was a 100% increase in charitable giving compared to their previous fragmented efforts.
• Increased Grant Application Quality: The standardized application process and clear giving guidelines resulted in a significant improvement in the quality of grant proposals received. This made it easier for the family to evaluate potential grantees and select those with the greatest potential for impact.
• Enhanced Impact Measurement: The grant monitoring and evaluation system allowed the family to track the progress of grantees and measure the impact of their work. This provided valuable insights for future grant-making decisions and ensured that their philanthropic efforts were making a real difference. They tracked the average percentage of donation allocated to programs vs overhead.
• Improved Tax Efficiency: The strategic use of the donor-advised fund and other tax optimization strategies resulted in significant tax savings for the family. This allowed them to give more to charity while minimizing their tax burden. Their effective charitable tax deduction increased by 15% within the first year.
• Strengthened Generational Legacy: The program fostered a deeper sense of responsibility and shared values among the younger generations, ensuring that the family's philanthropic legacy would continue for years to come.
• Increased Investment Returns (Indirectly): By proactively managing their philanthropy, the family was able to streamline their overall financial planning, leading to a 0.5% improvement in the overall management fee charged by their wealth manager, translating into approximately $10,000 savings on their overall AUM per year.

Key Takeaways

For other advisors looking to help families establish effective philanthropic programs:

1. Start with Values Clarification: Facilitating a process for families to identify their core values is crucial for developing a unified philanthropic vision. Don't assume family members are aligned; surface these differences upfront.
2. Establish a Formal Grant-Making Process: Implementing a clear and transparent grant-making process ensures that donations are allocated effectively and that grantees are held accountable.
3. Leverage Technology to Enhance Communication and Collaboration: Utilize online portals and other digital tools to facilitate communication and collaboration among family members, particularly those who are geographically dispersed.
4. Integrate Philanthropy into the Overall Financial Plan: Charitable giving should be viewed as an integral part of the family's overall financial plan, not as a separate activity.
5. Engage Future Generations: Involve younger family members in the philanthropic process to foster a sense of responsibility and ensure that the family's legacy of giving continues for years to come.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors deepen client relationships and streamline complex financial decisions. Visit our tools to see how we can help your practice.