A common hope that many parents have is for their children to make a positive impact in society, whether it be within their own community or abroad. Families with strong moral, religious, or civic beliefs find it tremendously important that children grow up to become compassionate, generous adults and share in family philanthropic values.
So, what steps can families take in order to instill important, shared values and engage the next generation in charitable giving?
Determine Family Values
For many high net worth families, the primary focus of building a legacy is passing assets from one generation to the next, in an efficient and practical way. However, once the roadmap for these assets is in place, many fail to continue the process by skipping the conversation around family values – more importantly, how the beneficiaries can use those values as guidance as they become stewards of the family’s wealth.
Knowing and understanding values can be an important, thought-provoking exercise for families. Values are deeply personal, and can be defined as the moral and ethical principles traditionally upheld and passed on within a family; they are a unique heritage of goals and experiences. Family values are often reflected in charitable giving strategies, whether they’re influencing the causes to which a family gives, how much and how often they give, or how they give in general – with money, their time, or their personal capital.
Once a family’s values have been identified, writing a family mission statement to guide the family’s purpose through these values is a wonderful opportunity to capture your reflections.
Talk About Giving
It’s never too early for families to start talking together about philanthropy and giving back to the community! Sharing your passions, involvement in charity, and your growth as a donor with your children is an important step to helping them establish their own values and philanthropic ideas. Being a philanthropist can be an ongoing learning experience; the earlier a parent can give their children the opportunity to meet people from diverse backgrounds, learn about the community, and discover ways they can put their passion and skills to work, the sooner they can begin to make a positive difference.
Create Opportunities for Children to Participate in Charitable Giving
Families with significant wealth will at some point need to begin actively engaging the next generation in the family’s wealth planning – at Lake Street, we’ve found that having our clients’ children become involved in their charitable giving strategy is a wonderful start!
Encourage Volunteer Work
Parents can encourage their children to volunteer at a local organization; this works best when the children are able to consider and decide on the organization. Giving back to their community allows children to build character and gain confidence, all while learning new skills, developing maturity, gaining a new perspective on their own problems, and understanding civic responsibility. By gaining hands-on experience, the children have a better sense of how these organizations work, what their needs are, and how to prioritize giving down the road.
Establish a Donor-Advised Fund (DAF)
To facilitate charitable giving, families may consider establishing a donor-advised fund (also known as a DAF). A DAF is a giving account administered by a public charity such as Schwab Charitable or Fidelity Charitable, allowing the donor to make tax-deductible contributions up front and grant the funds out to public charities as they discover giving opportunities. Some donor-advised funds even offer “gift certificates” which can be deducted from the parents’ giving account and issued to the child, allowing them to use it to make a charitable contribution to an organization of their choosing. This allows the child to feel involved in the giving process by offering them the autonomy and control in how the gift is made, and the responsibility that comes with distributing assets mindfully.
Create a Private Family Foundation
Many families with significant wealth create a private family foundation as the primary giving vehicle for their family. A private foundation is an independent legal entity set up solely for charitable purposes. Most family foundations are set up to exist in perpetuity, meaning that control over the foundation is intended to be passed down to future generations, allowing a family the opportunity to accomplish many objectives, including philanthropic initiatives, family mission, and legacy. It can also be a rewarding opportunity to educate and engage multiple generations for decades to come.
Your choice of charitable vehicle, and how you decide to involve your children in the giving process, should be consistent with your family values and giving objectives. Children tend to be more excited by the charitable giving process if they are encouraged to give in alignment with their personal interests. A donor-advised fund or family foundation allows multiple family members to work alongside one another in addressing focused social needs – for generations to come.
If you would like to explore maximizing your impact on the causes and organizations that matter to you, and how you can get your children involved in this process, our advisors are ready to help.