Lessons learned from three case studies
A joint publication of Boldly Go Philanthropy and Winding River Advisors
Introduction
A growing number of multi-generation philanthropic families are seeking solutions to support individual family members’ personal philanthropy. As families grow through the generations, individual family members’ interests and independence often expand beyond the legacy family foundation. A family foundation focused on K12 education set up decades ago to honor the legacy of the first-generation founders may hold great interest for some younger family members but may not light the fires of philanthropic passion for others. At the same time, generations of giving back in a family can spark individual creativity and agency among next generation philanthropists for other issues, geographies, populations, and approaches somewhat or completely disconnected from the family foundation.
Larger trends are bearing this out. A 2023 NCFP report suggests that a robust family philanthropy “ecosystem” consisting of collective, personal, and collaborative philanthropy (see definitions below) within a family serves multiple interests across generations and can keep the legacy of giving back fresh and vital.
Boldly Go Philanthropy and Winding River Advisors recently conducted research to better understand how families offer personal philanthropy support to individual family members. On behalf of a family foundation client, we analyzed three families with very different contexts for personal philanthropy. We created short case studies based on this research which led to a framework for structuring personal philanthropy support and additional insights that may be helpful to other families that are contemplating similar support services.
We started with this question:How can a philanthropic family best support the ever-changing philanthropic interests of individual family members?
Families face an important decision about whether to provide family-supported services for personal philanthropy, which can ease practicing philanthropy for family members and provide them with a trusted system to facilitate their giving.
framework for Personal Philanthropy Support
The decision to embark on structuring support for personal philanthropy often triggers questions and options for families, much like the myriad choices around programmatic focus areas, structure, and governance for a family foundation. Decisions about how to support personal philanthropy require similar discussion and reflection to ensure that future personal philanthropic support is in tune with a family’s multi-generational expectations, style, and evolution.
The framework below can help families navigate the key considerations to successfully design and implement personal philanthropy support. Depending on the family structure, families can contemplate all these factors at once and create a strategy or plan to support personal philanthropy, or they can start by meeting the needs of “first mover” family members and iterate their way forward. Either way, the factors below are critical in the design of personal philanthropy support. In all cases, it is important to consult legal counsel to stay on the right side of charitable compliance.
Purpose: Families come with a range of reasons to conduct personal philanthropy, including fostering greater family cohesion and collaboration through philanthropy, promoting the values of giving to younger generations, and expanding or enhancing the efficiency of existing personal philanthropy. Often families pursue a combination of these purposes. One of the most critical steps in designing personal philanthropic support is to comprehensively assess the needs/services desired by individual family members, across generations, family lines, locations, and level of interest.
Governance: Depending on the complexity of the services offered, infrastructure, and internal family context, a family may choose to have family members provide oversight through existing family governance mechanisms (e.g., family foundation board, family council) or new ones. Governance can ensure that services constantly adapt to changing and expanding family needs.
Personal Philanthropy Services: Services are wide-ranging and tend to fall along a continuum of simple to complex, e.g., sourcing or conducting due diligence on charities, administering and managing grantmaking, facilitating collaborative philanthropic projects, tracking impact metrics, providing educational resources on philanthropy, accessing legal support, setting up and managing a donor-advised fund (DAF) or a foundation, investigating new structures such as a 501(c)4, and more.
Several factors shape personal philanthropy services:
- Existing Support: Families may already offer some level of philanthropic support to individuals through the existing family foundation, a family office, or some other entity. When considering how best to design personal philanthropy support, families should consider whether the existing support can adapt to additional generations’ needs and changes in philanthropic liquidity.
- Liquidity: The amount of philanthropic funding available to wealthy families can differ widely by generation or even family line. A key consideration when designing personal philanthropy support is whether the services are being built to serve the needs of those who have existing philanthropic liquidity and/or family members who will benefit from future liquidity but may have real interests in learning about philanthropy today.
- Values: It can be complicated to be an arbiter of shared family values for personal work, especially as families grow. Most philanthropic families have built their collective giving on shared family values, which guide focus areas and giving approaches. Families that support personal philanthropy must consider whether to apply family values as boundaries for personal giving.
- Autonomy: A key question families must ask is to what degree family members are empowered to independently make choices about and manage their individual philanthropy that might be supported by family-funded services. Some families choose to create guidelines for minimum annual distributions, the types of organizations that can be supported, or which philanthropic approaches can be used, while others place few or no restrictions.
- Privacy: While many family members grow up with each other and know cousins and aunts intimately, individuals may not want their philanthropic choices shared within the family. Some families choose to make all information confidential and add an “opt in” component. Family members who prefer to share (e.g., to promote the charities they care about) can then voluntarily choose to share out any aspect of their giving.
- Cost: Delivering personal philanthropy services takes some dedicated resources, even if the giving amounts by individuals are relatively small. Some families charge for personal philanthropy services while others subsidize some or all the services depending on the complexity of the task or the degree to which the service is individually focused (e.g., setting up and managing a separate foundation for an individual family member or family line).
Infrastructure: To support the objectives and services desired by the family overall and individuals, infrastructure can take many forms from existing or new staff at the existing family foundation, a family office, a new foundation or LLC, or outsourced philanthropy support firm, among many other approaches. In addition to providing personal philanthropy services, this infrastructure is often tasked with communicating within the family about the state of the services (abiding by privacy boundaries).
three family case studies
The case studies below demonstrate how different families have designed personal philanthropy support. Two of the examples are named with their permission while the other two are anonymized to protect confidentiality. The three families are very different in terms of generations and size, available philanthropic liquidity, and the choices they have made regarding the factors above. What is revealing is that there is no cookie cutter approach to personal philanthropy support. Each family wrestled with and, in many cases, is still working through the inter-relationships of these factors to achieve the family’s objectives and individual family member needs.
1. Gates family: Fifth generation family with family foundation headquartered in Colorado.
Background
The legacy of the Gates family goes back at least 100 years to Charles Gates, Sr., who started and led the Gates Rubber Company and instilled a strong sense of giving back in the family. The Gates family recently celebrated the 78th anniversary of the Gates Family Foundation, the family’s collective giving entity that focuses its work on education, the environment, economic development, and civic engagement in Colorado. Fourth generation family members sit on the board of the foundation and provide leadership on other non-philanthropy family governance entities, such as the family office.
Family Funds Managed by the Family Foundation
The Gates Family Foundation allows family members to establish family funds at the foundation to facilitate their personal philanthropy. The practice started when two second-generation family members combined their personal assets into a fund at the foundation and used it as an unrestricted source of joint grantmaking. Foundation staff provided support for this early personal philanthropy grantmaking.
Upon recognition that the fund required minimal staff time but had increased the family members’ overall giving, the foundation allowed all family branches to establish funds with a minimum of $1 million in assets. Today, the foundation hosts eight family funds overseen by the foundation but guided by a designated representative from each family fund.
Generally, there are no giving restrictions placed on these family funds. They do need to mirror the foundation’s general eligibility criteria and no expenditure responsibility grants are allowed. A minimal cost (flat fee based on percentage of assets) is charged to each fund. Grants made within the family funds show up on the foundation’s 990-PF, so privacy is not a concern. The foundation board approves all grants within the family funds while the individual fund holders direct their use. Each family fund has its own governance structure.
Today, the family funds serve as opportunities for selective collaborative philanthropy. For example, the foundation co-invested with the Gates Frontiers Fund, the largest family fund, to support the Denver School of Science and Technology, the National Western Center, and several land conservation efforts in the state.
In looking back at the short history of personal philanthropy services through the family foundation, CEO Tom Gougeon reflects that it was important for the family to structure services with as little hassle as possible. Using the existing family foundation enabled family members to access support more easily for their personal philanthropy and decreased costs and time associated with creating additional infrastructure to support their personal giving.
2. Bechtel family: Third generation family with a wound-down family foundation based in California.
Background
The Bechtel family’s legacy began with Warren A. Bechtel, who started the Bechtel company at the turn of the 19th century. Warren’s grandson, Stephen D. Bechtel, Jr., became CEO in 1960 and formed the S.D. Bechtel Jr. Foundation in 1957, focusing on education and the environment with a particular focus on California. The foundation’s leadership transitioned to daughter Laurie Dachs, who engineered the foundation’s spend down that concluded in 2020.
A Constellation of Autonomous Foundations with Support from Philanthropy Specialists in the Family Office
The family used a portion of remaining assets to create 16 mini private foundations for second and third generation family members who were interested in developing their personal philanthropy. A small family office team supports family members with hands-on grantmaking capacity and educational materials to support their personal philanthropic learning journeys. There is no formal governance structure between the family office and mini foundations beyond the hired partner ensuring legal compliance for each of the foundations.
The family deliberately prioritized family members’ autonomy by seeding private foundations for family members. The family proactively thought through how services could be paid for and ultimately decided to leverage its existing family office. Using a family office allows family members access to a variety of services, including those unrelated to charitable interests. For example, the family office can pay for an expert to advise family members on impact-investing or philanthropic education.
Currently, the fees paid to the family office cover the cost of philanthropic education. For any services beyond this, family members are billed directly. The family is hopeful that the trust built by working with a consistent partner over a period will encourage the uptake of additional personal philanthropy services.
3. Second generation anonymous family.
Background
An anonymous family decided that the time was right for second generation family members to take a more proactive and intentional approach to their philanthropy. They needed a nimble way to support the emerging interests of family members that would accommodate diverse interests, risk tolerances, and approaches, including advocacy and political activities.
The Prioritization of Privacy and Autonomy
A trusted advisor worked closely with a first-generation family member to determine the right approach to support family members who were at different points in their philanthropy. The advisor worked with each family member to create bespoke philanthropic learning journeys and grantmaking portfolios that aligned with their areas of interest.
Autonomy was paramount to the family. Each member had full autonomy on how much funding to dedicate to his/her work, what to support, what approaches to use, and whether to collaborate with other family members. Given varied risk tolerances within the family, they also prioritized privacy and therefore chose to operate anonymously to give each member wide latitude to pursue their areas of interest.
Because most family members were just starting their personal philanthropy, a structure that would allow for a high degree of flexibility was key. The family office stood up an LLC to employ the advisor and a small team staffed with skilled generalists. This structure facilitated activity across both 501(c)3 and 501(c)4 giving. The trusted advisor intentionally used fiscal sponsors as funding vehicles to keep things lean, limit the administrative burden on the core team, and give family members a high degree of flexibility on the type of activity they could do.
Costs are allocated to each family member, proportional to their annual philanthropic activity. While there is not a formal governance structure, each family member is free to opt into support of the shared personal philanthropic team.
concluding insights
As we learned through these case studies and reflected upon our own tacit knowledge about personal philanthropy services, several insights stood out for us.
First, ease of use is a re-occurring theme. To get started, individual family members often lean toward more traditional grantmaking and are looking for easy onramps of support. Philanthropy is rarely the sole focus of family members. If families aspire to spark more individual philanthropy, they should initiate services and infrastructure that address tangible demands and are not the enemy of a good start.
Second, and following from the point above, personal philanthropy support is not static or “one and done.” Having support in place often propels family members’ philanthropic learning and innovation, which means that areas of interest and approach change. Families can expect that needs will adapt over time and can build flexibility into their approach.
Third, personal philanthropy is a distinct component of a family’s philanthropic ecosystem. While it is not inherently in service of the collective or legacy family foundation, personal philanthropy is a critical outlet that enables collective philanthropy to stay focused on a family’s shared mission and values, which is key to its health and ability to foster family cohesion. Personal philanthropy can also enable fresh opportunities for collaboration with collective philanthropy, creating new and energizing entry points into legacy work.
Fourth, squaring family values with individual philanthropic interests may be one of the trickiest and evergreen issues for families that pursue personal philanthropy support. Philanthropic interests and approaches inevitably diversify as families grow and new generations move away from the hometowns where the founding generation lived and that defined the family values. It can be difficult to apply boundaries on what individuals can do with their personal philanthropy. At the same time, regardless of the individual nature of grantmaking, families are tied together, and external stakeholders often perceive individual grantmaking as part of or linked to the family in its entirety.
Families that prioritize alignment with family values may have some individual members opt out of personal philanthropy services if their interests diverge from the family’s traditional approach. Likewise, personal philanthropy enabled by the collective family foundation generally needs to be aligned with its mission and values which means its ability to support any and all personal interests can be more limited.
Lastly, unlike other trending issues such as foundation wind downs/spend downs, use of LLCs or 501 (c)4s, and impact investing, the design of personal philanthropy services seems to be happening silently or below the radar. In our work with multi-generation philanthropic families, we are hearing great interest in how to realize the ambitions of individual family members that are distinct to the family’s context, personality, and needs. However, we are not seeing commensurate public learnings to benefit the family philanthropy field.
We believe the area of personal philanthropy support will experience significant growth in the coming decade and we hope that our framework of considerations and real-life examples inspire families to bring more intentionality and structure to their personal philanthropy. As more families choose to service the personal philanthropy needs of family members, we look forward to learning alongside them.
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