Are you looking to make a meaningful change in the world? Building a philanthropic legacy is one way to achieve this, allowing you to create lasting impact while instilling values across generations. This pathway doesn’t require a career change—just an expansion of your vision.
Private family foundations are incredibly successful engines of positive change. These foundations have uniquely helped bring about major innovations – from Sesame Street to the white lines on highways and the 911 emergency system. Today, their transformative work continues, powering solutions to environmental challenges, poverty, and other persistent problems.
Giving Through a Private Foundation
A private family foundation is an essential tool for building a philanthropic legacy, offering a structured framework for impactful giving. These foundations not only magnify your philanthropic impact, establish your personal legacy, and bring your family closer together, but they also offer financial benefits. A private family foundation is designed to allow families to achieve their philanthropic goals in a tax-efficient manner.
For instance, my family donated to the University of Kansas Hospital to help with the purchase of MediGuide Technology. This technology provides state-of-the-art views of the heart without exposing people to significant amounts of radiation. The gift was put to use immediately by the University of Kansas, and we’re proud of this contribution housed at the Raizada Family Electrophysiology Lab at the Center for Advanced Heart Care at the University of Kansas.
The Structure of Family Foundations
A private family foundation is a type of private foundation set up by a family, funded with the family’s assets, and often run by family members who can also participate in its charitable grantmaking. Family foundations like mine serve philanthropic ambitions and can adapt as the family’s composition and charitable focus change.
About 50 percent of private foundations in the U.S. are family foundations, according to the Council on Foundations. Family members often serve on the foundation’s board and decide how the assets are used to meet the foundation’s mission—by making grants to charities or individuals. Like all private foundations, family foundations must disperse at least five percent of their assets annually. A private family foundation’s grants are publicly viewable, which can make it easier for nonprofits and donors to understand its focus and causes.
The initial board of directors typically includes the family patriarch and/or matriarch. Subsequent or additional board members usually consist of family members or close personal advisors familiar with the founders’ goals and aspirations for the foundation. When established, a private family foundation is funded with cash, appreciated securities, or other assets. The foundation reinvests these assets to meet its investment goals, using the income and appreciated value to make future donations or grants to charities.
Benefits for Families and Future Generations
Private foundations provide the perfect opportunity for building a philanthropic legacy, teaching children about giving back while strengthening family bonds. In addition to achieving tax advantages and compliance, these foundations ensure that philanthropic values are passed down to future generations. They create opportunities for families to work together on shared goals, instilling values like leadership, teamwork, and social awareness.
Involving the younger generation in the foundation can build practical skills such as investment management and negotiation while fostering a deep understanding of the importance of philanthropy. Research shows that giving back increases personal fulfillment and happiness, making this an excellent way to unite families while making a lasting difference in the world.
Challenges and Considerations
It is advisable to consult with an experienced CPA and estate lawyer when setting up private family foundations, as the process can be complex. Some challenges include the initial time commitment, administrative costs, regulatory requirements, and annual reporting obligations. Despite these hurdles, the long-term benefits far outweigh the disadvantages for families looking to create a meaningful impact.
Conclusion
In my view, building a philanthropic legacy requires engaging the next generation in philanthropic pursuits, ensuring values are passed down and charitable efforts endure. Setting up a family foundation is one of the best ways to achieve this, making philanthropy a family affair while creating a structured and impactful approach to giving back. By working together, families can create a legacy that lasts for generations.
