Why Families Start Foundations
The following is adapted from Mission Possible by Bruce Raabe.
Beyond the generosity and sense of gratitude that underlies most family foundations, there are usually a couple of other key motivations to start these philanthropic pursuits. First, foundations are viewed as a family project. It facilitates bringing families together to work toward a common cause everyone can feel good about. Second, the founding generation often sees the foundation as a way of instilling philanthropic ideals into subsequent generations. Both of these are incredibly worthy goals and, certainly, two of the primary personal benefits family foundations offer.
Over the course of my career, I’ve come to realize that there are a few common underlying themes that motivate the establishment of most family foundations.
One of the things I love most about my job is that it reaffirms my belief in the inherent goodness of humans. As we’ve already discussed, the possession of wealth alone is not enough motivation to undertake philanthropic work; for philanthropy to exist, wealth must be accompanied by a kind and compassionate disposition, as well as the aforementioned sense of gratitude and humility.
Particularly in this day and age, many might question the state of the human condition and how invested we really are in the well-being of others. Those people might be heartened to hear that a 2007 experiment by The Hebrew University of Journalism indicated that generosity actually exists on a gene — AVPR1a, to be exact. Additionally, research at the University of California, Los Angeles is pointing to the fact that altruism is hardwired into our brains.
At the end of the day, people start family foundations for the simple reason that they’re nice.
Scientific research aside, I can personally attest to the fact that there are plenty of kind, invested, generous people out there. People who want to give to others and to the world simply because they can. People who want to make a difference.
Dress it up in whatever fancy term you choose but, at the end of the day, people start family foundations for the simple reason that they’re nice, and they want to leave a cumulatively positive impact on the world.
People begin family foundations for any number of reasons, more than we can discuss here; however, the truth of the matter is that a family foundation often outlives the original grantor — or, in some cases, the entire family — that established it. Through the foundation, the family effectively leaves a legacy of philanthropy in their wake. This legacy can long outlast the people who acquired the wealth in the first place.
I currently advise a foundation in its third generation of trustees. While the husband and wife who established it are now deceased, the foundation has grown over time to a staff of seven employees, its assets have more than tripled, and it has evolved into a significant and institutional donor. The family that founded the foundation is no longer involved, but the foundation nonetheless lives on, achieving all of the goals the couple imagined during their lifetime.
For a more well-known foundation in this situation, look no further than the Ford Foundation, established in 1936 by a $25,000 gift from Henry and Edsel Ford. The foundation has far outlived its founders, and today is one of the largest international foundations in the world, with assets exceeding $12 billion. This results in annual giving of approximately $600 million per year.
Not only do family foundations create a legacy of giving, but they also establish a legacy of philanthropic practices to be passed down through the generations. It is rare to be able to continue instilling lessons about core values such as kindness, generosity, compassion, humility, and engagement in future generations beyond a person’s life span. Family foundations provide a unique opportunity to do exactly this.
Furthermore, family foundations provide a wonderful reason to bring families together. As children grow older, move away, and establish families and careers of their own, it often becomes increasingly difficult to bring everyone together and to engage in a meaningful way. Family foundations provide a unique avenue for families to connect with purpose, and to work toward a shared goal. Properly managed, this process can be a deeply enriching experience.
It bears mentioning that, throughout the years, I’ve often seen families start foundations for one of the reasons we’ve discussed, only to find that they are motivated to continue giving for other reasons. For example, a family might initially decide to establish a foundation based on the tax benefits it offers, but come to discover that the greater motivation to continue comes from the way the foundation brings them together as a family unit.
Throughout the course of my career, I’ve noticed a very interesting phenomenon. While families have the legal right to close their foundation down at any point in time for any reason, in my experience, none of them choose to do so.
The reason is simple: it feels good to give. It is gratifying to effect positive change in whatever way and on whatever level. The philanthropic pursuits of family foundations often become deeply ingrained in the family’s culture.
You can learn more about family foundations in Mission Possible on Amazon.
Bruce Raabe is the founder of Relevant Wealth Advisors. His extensive family foundation expertise in investment policy, asset allocation, and foundation-specific regulations has allowed him to develop an understanding of the special circumstances surrounding the financial needs and goals of family foundations.
Bruce is also a private pilot and enjoys outdoor activities with his wife, Sara, and three children. He holds several professional designations and regularly volunteers on numerous nonprofit boards in the San Francisco Bay Area.