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A Family Foundation: Good for Philanthropy? Good for You? Karen H. Putnam, Director of Philanthropic Advisory Services In the face of economic uncertainty, political unrest and tax reform, the uniquely American business of family philanthropy is booming, heralded by a dramatic increase in the number of family foundations. What accounts for their surge in growth? One answer is the emerging intergenerational transfer of wealth. We are in the beginning stages of that economic and social tsunami, with up to $40 trillion changing hands by the middle of this century. Researchers estimate that over half of this amount will go to philanthropy in the next 30 to 40 years. For many affluent individuals, family foundations are the philanthropic vehicle of choice. They offer continuity of personal values, family involvement and structured giving. In the spring of 2002, Bessemer Trust presented “A Dialogue on Family Foundations” where five panelists discussed the circumstances that led them to establish family foundations and shared how philanthropy has affected their lives. The panelists included Elihu Rose, Jason Burnett, Elizabeth Hart Armstrong, Emily Tow Jackson, and Abigail Disney. Bette Midler, the entertainer, spoke at lunch about her giving and how she leverages “celebrity capital” on behalf of causes she values. Several themes emerged over the course of the event: family dynamics, engaging the next generation and effective giving. A Delicate Balance: Dealing with Family Dynamics Elizabeth Hart Armstrong introduced the issue of family dynamics, using the analogy of taking a family vacation. “Starting a family foundation can be like taking a family vacation by car,” she said. “It can be difficult, but as time passes you remember less of the drive and more of the fun you had once you arrived.” On the other hand, family members can, with good will, go their own ways. Elihu Rose noted that as adults he and his brothers decided to divide their parents’ foundation and pursue separate objectives for the simple reason that siblings are different. “We had different interests and different philanthropic goals and didn’t see the need to convince one another on how to make grants,” he said. Several speakers stressed the value of a clearly defined foundation mission statement as a way to unite family members in common cause. They said increased commitment can result when “values and opinions collide” in the search for shared philanthropic ground. Sometimes an outside facilitator can be helpful in shaping the debate. The mission statement also can evolve over time. The Hart Family Foundation’s first mission statement was highly detailed; within two years the full typed page was condensed into one paragraph. Emily Tow Jackson views the Tow Family Foundation’s mission statement as more a philosophy than a concise statement of purpose. Both speakers described their families’ early giving as broad rather than deep, reflecting their desire to have their money go as far as possible. Over time both families decided to narrow their giving focus to make more efficient use of their decision-making time and to evaluate their impact. Passing the Torch: Engaging Next Generations For many families what matters most is involving their children in philanthropy. Elihu Rose said, “Before you talk about children and philanthropy you need to talk about children and money.” For Elihu and his wife, Susan, a family foundation was the natural way to educate their daughters about the responsibilities and challenges of wealth. They set up a conduit foundation for each daughter, and fund them annually. Each daughter makes a case to her parents for the causes she wants to support and the amount of money she wants to give away. Abigail Disney said growing up with a famous name presents special challenges. When the achievement that has resulted in wealth is not your achievement, and yet it affects your life and the way others perceive you, both your name and your inheritance can be an unwelcome burden. Tempted to give all her money away, Abigail decided instead to take control of her giving. She established The Daphne Foundation to support causes of special interest to her and her husband. Jason Burnett described watching his grandfather David Packard’s eponymous foundation grow exponentially, to the point where trained A Family Foundation: Good for Philanthropy? Good for You? professional staff is necessary to manage the grantmaking. As a result he now is thinking of starting an off-shoot of the Packard Foundation for family members of his generation. He wants to experiment with new ideas and to recapture the excitement that his grandfather must have felt when he established the original foundation. Jason also feels a sense of obligation, saying, “People with money frequently have responsibilities they didn’t seek, but can’t give away.” Effective Giving Practical suggestions emerged from the participants’ discussions of their own experience. Everyone agreed that close, personal involvement is key. Bette Midler said donors should “go and see what you have built, what you have made happen… just like in golf, follow through.” Among the speakers’ top recommendations: Make site visits yourself. Site visits give first-hand knowledge of the grant recipient, provide the opportunity to ask tough questions, assess the competency of the organization’s leadership, and talk to people who work behind the scenes, such as administrative staff and volunteers. Stay in touch with the executive directors of your charities. Ask what challenges the organization is facing — financially, technologically, in terms of personnel, and so on. Solicit candid responses as to what they could do better — and what you also could do better as a funder. Emily Tow Jackson, whose foundation has evolved to be a source of information on the juvenile justice system, frequently consults with grant recipients because they are part of her resource network. Abigail Disney invites the executive directors to her house once a year for a group dinner, encouraging a mutual exchange of experience. Provide grantees with a clear explanation of your foundation’s expectations. Clarity from the outset minimizes misun- derstandings and establishes indices for evaluating success. The ideal is not to be overly rigid, rather to strike a balance between the organization’s needs and the foundation’s goals. Don’t reinvent the wheel. Guidelines for drafting a mission statement, checklists for site visits, grant reporting forms, and procedures for conducting board meetings already exist and can be used to create documents and practices that best meet your needs. Professional advice is also available; you can engage someone to advise you on 2 building your foundation just as you would engage an architect to help you build a house. Thinking Small, Being Strategic One theme that came up time and again was that even modest grants can have an impact out of proportion to their size. Bette Midler has chosen to do some of her philanthropic work “under the radar” by giving to small causes. Among other things, she established scholarships to allow underprivileged children to attend private school in New York and funded music programs in New York City public schools — everything from choir robes to a music library. Bette pointed out that small grants can be leveraged by partnering with your city or state. Sometimes, for example, money has been set aside by a municipal agency to match a private grant. In a notably successful example of leveraging, the Tow Foundation partnered with the state of Connecticut in funding a program to bring paroled youth back into the community. They discovered that the state supported these young people for only the first four months out of prison. The Tow Foundation provided additional funding to prolong support and discovered it made a big difference in the program’s success rate. When the value of the supplemental funding was demonstrated, the state took over the entire funding commitment. When You Reach for the Moon, Get a Boost from a Star While Bette Midler can often be found along side of other volunteers refurbishing neglected parks around New York City — she claims to “specialize in garbage” and has been known to chase a windblown plastic bag over several city blocks — she acknowledges that her celebrity helped her to get people to pay attention and to cut through bureaucracy. When one audience member asked how other advocates of good causes could get a celebrity of their own, she had a ready response: call some agents. Agents want opportunities for their clients to be in the public eye, and many celebrities would be genuinely interested in supporting a good cause; it may simply be that no one has asked. A Family Foundation: Good for Philanthropy? Good for You? The Wages of Good: Compensation and Benefits Family philanthropy is hard work, but the compensation is high. It is a major investment of time and effort, but the dividends can exceed the initial investment. For Emily Tow Jackson the personal rewards come not only in thinking about the lives that have been improved thanks to her work, but also in the interaction she has with others who share her family’s values. Philanthropy in Elizabeth Hart Armstrong’s family is “an instrument of balance between their life and their community.” Abigail Disney said that for some people philanthropy is a lodestar, providing a way to make a difference in society, a tool to teach children the value of money, and “a reason to look forward to getting up in the morning.” If you are considering establishing a family foundation or would like to learn more about our Philanthropic Advisory Services, please contact your Client Account Manager. This material is provided for your general information. It does not take into account the particular investment objectives, financial situation, or needs of individual clients. This material has been prepared based on information that Bessemer Trust believes to be reliable, but Bessemer Trust makes no representation or warranty with respect to the accuracy or completeness of such information. 3 A Family Foundation: Good for Philanthropy? Good for You? Atlanta • Cayman Islands • Chicago • Dallas • London • Los Angeles • Miami • Naples New York • Palm Beach • San Francisco • Washington, D.C. • Wilmington • Woodbridge Visit us at www.bessemer.com Copyright © Bessemer Trust Company, N.A. All rights reserved.