When sharing wealth generated in one’s own lifetime, some people simply follow their hearts. That could mean responding to requests: hosting a table at a gala or raising the paddle at an auction.
But when considering what they will leave behind for future generations — in terms of both legacy and financial inheritance — many families realize it is time to strategize. Families in a position to leave a generous inheritance sometimes worry they might cause the next generation more harm than good. They want to make sure their children and grandchildren share what they have been given to make the world a better place.
That is when it is time to sit down and create a long-term plan for family philanthropy.
In my 30 years as a financial advisor, I have been able to help many clients sharpen their philanthropic focus and chart a future course that engagesevery generation. Many of the families I work with have found the best way to do that is to involve all generations in family philanthropy — starting right now.
Active Participation Across Generations
I have one group of clients who have really taken family philanthropy to the next level. They recently made a substantial endowment at PAWS Chicago’s new Rescue Ranch, a beautiful, sprawling campus where animals can escape the stress of shelter life and find their forever families. This commitment sets the whole family — including the parents’ generation, their kids and their nephews — on a course of long-term support for animal welfare in the Chicagoland area.
This trajectory did not start the day the family presented the multimillion-dollar check.
It started years ago, when I sat down with them and encouraged them to define their philanthropic mission. They ended up narrowing their focus to three areas: animal welfare, substance abuse and poverty. In 2004, we set up their family foundation, with members of more than one generation sitting on the board.
Board participation is important, but it is not enough. Members of the younger generation have also joined boots-on-the ground operations. When the family wanted to support a turtle rescue, the younger family members traveled to Florida to visit the facility. They have been to the Boys & Girls Club and to the animal shelter. Often, the younger family members are the ones to present the check.
Passing the Baton
As the younger generations mature, some families will welcome them to become more active in family giving, even choosing recipients of gifts.
It is up to the family, of course, how much guidance they choose to provide upcoming generations. But it is worthwhile to consider whether your grandchildren will share your passions. If you establish a family philanthropy to support the ballet in perpetuity, what happens if future generations just don’t care about the ballet? They are not likely to be enthusiastic participants in continuing that legacy.
Some families do put guidelines in place. One family I work with welcomes the younger generation to bring their giving suggestions to quarterly meetings. The kids can present their research and advocate for gifts, with the caveat that 90 percent of the funds stay in their local area.
Roadmap to a Focused Family Giving Plan
These are the steps I guide clients through as they work to involve all generations in shaping their philanthropic future:
Step 1: Develop a mission statement. This document can outline core values that the family wishes to project into the future.
Step 2: Consider family members’ values and interests. Talk with the younger family members to find out what issues spark their enthusiasm. Ask: Where have you lived or traveled that’s had an impact on you?
Step 3: Choose the right charitable giving vehicle. There are many options, depending on the family’s particular circumstances. Ask your advisor whether you should use a donor advised fund, a private foundation, a charitable gift annuity, a charitable lead trust or another vehicle.
Step 4: Create guidelines for future decisions. These guidelines can be specific, limiting giving to a geographical area or a type of charity, or flexible, giving younger family members more decision-making power.
Step 5: Create your family legacy. This should actually be kept in mind through every step in the family philanthropy process. By sharing your values with the younger generation and empowering them to take an active role, you’re setting in motion a legacy that could flourish for many generations.
Kathy Roeser is a Financial Advisor with the Wealth Management Division of Morgan Stanley in (Chicago, IL) . The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. Information contained herein has been obtained from sources considered to be reliable, but we do not guarantee their accuracy or completeness.
The strategies and/or investments referenced may not be appropriate for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Morgan Stanley and its Financial Advisors do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax or legal advisor.
The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, Member SIPC.
