Donor-Advised Funds: Strategic Vehicles for Family Philanthropy
Betsy Brill, President, Strategic Philanthropy, Ltd.
Philanthropy can strengthen family ties; offering family members a unique opportunity to articulate and act on their shared values. Donor-Advised Funds offer an effective means of passing on your family's philanthropic legacy through the generations as well as the opportunity to involve family members now.
Families wishing to give together with a Donor-Advised Fund, can begin their work by identifying charitable goals and crafting a plan to achieve them.
Many families seek out a philanthropic advisor—a professional with extensive nonprofit sector expertise—to act as an objective third-party facilitator, helping families to create philanthropic plans that both reflect their personal interests and contribute to positive social change. A philanthropic advisor can coach families through the process of assembling the key components for effective and meaningful family philanthropy that is outlined below.
- Mission Statement
A mission statement can help families to situate their giving in the context of their specific family history and values while clarifying a purpose for their giving activities. A well written mission statement outlines the specific issue areas in which donors plan to invest (e.g. the arts, cancer research, ending homelessness, etc.), the outcomes they hope to achieve, and the strategies they will employ to realize their goals. Mission statements should be reviewed and revised every few years to ensure relevancy, as interests and goals change over time.
- Governance Framework
Understandably, some families are initially hesitant to put formal structure around family interactions. However, philanthropic families benefit greatly from establishing an agreed upon structure that addresses the following questions:
How will decisions be made about which organizations to fund? Who makes the decisions? By selecting a leadership group or "giving committee", donors ensure that there is a formal decision-making body charged with overseeing all aspects of the family's philanthropy: from identifying aligned non-profit organizations to making grant decisions and engaging the next generation.
- Will we convene formal giving meetings? If so, will they coincide with family business meetings or holidays? How often will they occur and who will be included?
- What kind of due diligence will we engage in when it comes to choosing grantees?
- What expectations do we have of grantees when it comes to application and reporting? Donors often find it beneficial to solicit written requests for funding from potential grantees. Doing so allows them to get a full sense of the organization's work and provides more information about a grant's potential impact.
- What kind of support do we want to give to organizations? (Project specific? General operating? Emergency support?)
- Legacy Plan
Donors giving as a family may be interested in ensuring harmony among successive generations. Legacy plans record a founding generation's motivations for creating a philanthropic entity and outline the objectives they hope to achieve through their charitable endeavors. These expressions of personal values and charitable intent give future generations a reference point to consult should doubts surface about how to focus their giving.
Legacy plans typically address who will become the successor advisor to the DAF when the current advisor passes and who will take responsibility for overseeing the "giving committee". This succession planning aspect of the legacy plan helps to ensure effective stewardship of charitable assets across generations.
Strategic Philanthropy, Ltd. is a global philanthropic advisory practice based in Chicago serving clients worldwide. We work with individuals, families, closely-held and family-owned businesses helping them plan, assess and manage their charitable giving.