This is the season of giving, in fact, November is National Philanthropy Month. Supporting your favorite organizations and passions is a wonderful way to leave a legacy while making a positive impact in the world.
But have you ever wondered how to inspire the same passion for giving to younger generations? Creating the legacy of giving through family philanthropy is priceless. And it’s never too early to start!
Inspire Younger Generations to Take Part in Family Philanthropy
An interesting study performed by Fidelity Charitable showed the magnitude of charitable giving in terms of influencing younger generations to give as well as creating positive family bonds.
The study found, “45% of those who grew up with strong giving traditions donate $5,000 or more annually today vs. 36% of those who did not grow up with strong giving traditions.”
And in terms of strong family bonds, the study discovered, “81% of those who grew up with strong giving traditions describe their core family as very close vs. 71% of those who did not grow up with strong giving traditions”
Creating strong desires to give back and nurturing a tight-knit bond within a family are aspirations many parents and grandparents strive to achieve. So how can you inspire your family?
- Talk about your philanthropic passions. Instilling the virtue of charitable giving starts through conversations about the passions and values you support. Help your children or grandchildren understand the significance of helping others by sharing why you chose the charities you support, talking about causes close to your heart, and inviting your family to experience fundraising and charitable events.
- Educate your family on the many giving options available. With so many ways to give, it’s important that you educate your family on the different options available. You may want them to consider giving their time and talent through service projects or donating items like gently-used clothes which can help those in need or volunteering talents in a third-world country.
- Engage in traditions/activities. Use charitable giving to connect with your family. Below we have ideas on how you can inspire the whole family.
Create Family Traditions Within Your Charitable Tax Deductions
Many of us love celebrating family traditions around the holidays. Why not help your children fall in love with family philanthropy? Introducing children to philanthropic giving at a young age helps them see this as a priority for your family and values. Here are some great ideas we’ve seen from clients to help ignite a passion for giving in their families.
- Attend charitable events/organizations together. Invite a grandchild as your plus one to an annual charity auction, exposing them to a philanthropic event as well as giving them a special night with you to look forward to.
- Engage in an event in honor of a family member. Supporting charities and missions that touch you personally is an easy way to help your family see the value in philanthropic giving.
- Volunteer your time and talents together. No one said donating time and talent has to be boring. Ask family members to join you – together you can share in the joy of helping others.
- For younger families, provide an allowance for each child to gift to a cause/organization in need. And make it fun – a contest to see who can donate the most by earning money through chores or other activities is one way to get the whole family involved.
One of our favorite ideas came from a client’s family. Each year, every member of the family would research and create a presentation on an organization or cause they were passionate about. Then the family would vote on the best organization to donate to that year.
This created an opportunity for individual family members to:
- Learn more about non-profits and ways to give
- Understand how their generosity impacts others
- Fine-tune presentation and sales abilities, helping them develop crucial life skills
- Inject some fun and competition into their annual giving plan and create an event the whole family looked forward to
While participating in these noble causes is great, make sure you have important conversations with your children and grandchildren about gratitude and how sharing time, talent, and gifts can change someone else’s world.
Consider a Donor-Advised Fund or Family Foundation to Help Guide Your Charitable Legacy
You’re no stranger to charitable tax deductions, but maybe you’re ready to take your gift giving to the next level. Creating a legacy of giving is the next step to making a lasting impression that will continue for many generations. The two most popular giving options are private family foundations and donor-advised funds.
Private Family Foundations
A private family foundation is a type of philanthropic organization that is created and funded by a single family, however, it can accept contributions from outside donors. Its purpose is to support charitable causes that are important to the family, typically through grants to nonprofit organizations.
Private family foundations can be an excellent way for families to pool their resources and make a greater impact on the causes they care about. A foundation can be established with just about any asset type, from cash and stock to real estate and art.
They also offer families an opportunity to involve their children in philanthropy from a young age, instilling in them the importance of giving back.
Some benefits include:
- Creating camaraderie within the family through philanthropic giving
- Consistency in family giving through the foundation
- Estate tax and capital gains tax benefits
- Community recognition of family members
While private family foundations can be a great tool for your charitable funds, there are a few things to understand prior to jumping in head first.
- Foundations must follow strict regulations. It is best to have a professional involved to make sure the foundation is legally distributing and maintaining funds.
- Most foundations require a substantial minimum investment to get started. Previously, private family foundations only needed a $5 million investment to start. But in recent years, many are shifting toward $10 million minimums.
- The success of the foundation relies on the alignment with the organization’s mission. Keeping all parties aligned with the mission or goals of the foundation can get tricky as it is passed down to future generations. By the third generation, many private family foundations begin to fall apart due to different objectives, different organizations to support and members unable to come to a consensus on how to distribute the gifts.
A donor-advised fund is a type of giving vehicle that allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time. Donor-advised funds are an excellent way to simplify your giving while maximizing your impact.
There are many reasons to consider setting up a donor-advised fund. Perhaps you want to create a lasting legacy of giving in your family. Or maybe you want to have the flexibility to support multiple charities over time. Whatever your motivation, donor-advised funds can be a powerful tool for achieving your philanthropic goals.
Donor-advised funds are administered by public charities, which means they come with certain benefits and protections. For example, your contributions to a donor-advised fund are tax-deductible, and you can take advantage of the fund’s investment expertise to grow your account balance over time. Plus, you can name additional advisors (such as family members) who can help manage the fund after you’re gone.
Some of the benefits of donor-advised funds include:
- Ability to evenly split, in perpetuity, when passed down to future generations
- Not every donor-advised fund is the same, allowing you to find one that works best for your family’s goals
- No mandatory annual disbursements
- Ability to donate anonymously
- Significant tax deductions
A donor-advised fund requires less administrative effort than a private family foundation and gives family members more flexibility when sharing their generosity. It’s an opportunity to ignite your family’s passions and allow them to experience the impact of their philanthropic efforts.
Create the Legacy of Giving with Private Wealth
The philanthropic services team at Private Wealth helps clients identify the best way to share their gifts with the organizations and causes they hold dear to their hearts. We start by having important conversations with you.
Our team helps create a giving legacy by understanding your goals and objectives, offering detailed solutions, and executing the plan that fits your family best.
Private Wealth offers family philanthropy strategies that include:
- Investment Strategy & Portfolio Management
- Supporting Proper Governance Structure
- Institutional Asset Management
A personal story . . .
Jane Monroe and her husband strived to find the right philanthropic tool that would serve her family for generations. She also wanted to find a way to engage her sons in philanthropic giving, which was difficult given their very different passions.
Jane spent countless hours researching philanthropic giving, but as an accountant, she struggled to see beyond tax benefits and ramifications. Her research efforts were going nowhere, which meant they weren’t making critical decisions on their legacy. That’s when they reached out to an advisor at Private Wealth.
We helped Jane and her husband find a solution for establishing a legacy of giving to pass along to their sons and families, read more about their story here.
Learn more about how Private Wealth can help start a donor-advised fund.