Preserving Family Wealth and Unity with a Private Foundation
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For families of means, there are plenty of reasons to establish a private foundation: tax savings, control over assets, and the ability to give back using a broad range of philanthropic capabilities, such as program-related investments and grants to individuals. But for many clients, the most important benefits of a foundation are to ensure that the next generation will be responsible stewards of their values and wealth.
The ideal training ground
One financial advisor I know calls a private foundation “an estate plan in action,” because the skills needed to run an effective foundation are identical to those required for the next generation to manage their inheritance. By learning how the foundation maintains its investments, conducts due diligence before making a grant, and measures its impact, heirs learn essential business skills. And by participating in group decision making, advocating for their positions, and resolving disagreements with other members, young people acquire the social skills that are key to leadership.
Beyond the acquisition of financial and business skills, many families of wealth are concerned that their success will kill their children’s ambition – especially if their wealth passes to their children before they have had a chance to develop sufficient maturity. For these families, a foundation is a perfect fit because it enables the next generation to participate in wealth and understand both its power and responsibility – all without taking control of it. By having a say in the foundation's governance and work, children witness the impact of their decisions and learn the value of money in ways no lecture can ever hope to match.