For families of means, there are plenty of reasons to consider establishing 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 of our clients, the most important benefits of a foundation are those that help them ensure that the next generation will be responsible stewards of their values and wealth.
The Ideal Training Ground
A private foundation is like “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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Foundation for a Legacy of Giving
When a family decides to establish a private foundation, the process naturally sparks discussions about what the family wants to accomplish with their charitable funds. These conversations can be a springboard for exploring the family’s priorities, offering a rare opportunity to uncover what matters most to individuals and what core values the family shares. Ultimately, the family can distill this conversation's fruits into an external mission statement for the foundation. However, this process might also give rise to an internal mission for the family itself.
Whereas the external mission details what the family wants to accomplish for others, an internal mission focuses on the family’s goals for itself. Many Foundation Source clients use an internal mission statement to articulate their intentions to strengthen family bonds, forge a distinctive identity and optimize time spent together.
Connection to Each Other and Future Generations
In this day and age, it’s common for families to spread out all over the globe. Education, job opportunities and marriages exert their gravitational forces, pulling family members away from one another. For many families, the foundation becomes the glue that holds the family together, even when they live in different ZIP codes and time zones. Having a common cause and a formal vehicle for advancing it provides a “non-Thanksgiving” reason to meet regularly.
Finally, because private foundations can be established to exist in perpetuity, they can link the founders to generations of the family they will likely never meet. The foundation conveys the founders’ cherished values, hopes and dreams from one generation to the next. And, as the foundation’s assets grow in a tax-advantaged environment, it can become a philanthropic heirloom of substantial worth, empowering each generation to embrace the family’s legacy and add to it themselves.
-
Amazon’s Try Before You Buy Is Ending — Here Are the Best Alternatives in 2025Amazon is ending its Try Before You Buy program on January 31, but you still have options. Discover the best alternatives, including clothing, eyewear and styling services.
-
Stock Market Today: Stocks Slip as Inflation Worries RiseConcerns over price pressures are growing ahead of next week's Fed meeting.
-
Secure Your Retirement Paycheck: The Power of Three BucketsPutting all of your nest egg in one basket is risky. Try putting it in three buckets for short-term, medium-term and long-term needs instead.
-
Five Reasons You Might Hate Your Insurance Company (and Why You Shouldn't)Stories about insurance companies letting down their customers are easy to come by, but there's another side to many of those stories.
-
How to Get Your Kids into Investing: A Family Project to TryTo teach your children about investing, put your money where your mouth is with this fun and potentially profitable exercise.
-
Risk On, Risk Off: The Mr. Miyagi Approach to Retirement PlanningThe first 10 years of retirement are some of the riskiest for your investments, but channeling your inner Karate Kid may help defend your funds against losses.
-
Opportunities and Challenges When You Inherit an IRANew SECURE 2.0 Act rules have kicked in to reshape distribution and taxes for inherited IRAs and retirement plans. Read on for strategies to help beneficiaries.
-
Getting Divorced? Beware of Hidden Tax Traps as You Divide AssetsDividing assets fairly in a divorce means looking beyond their current values and asking whether they'll create tax liabilities — or tax breaks — in the future.
-
All-You-Can-Eat Buffets: Can You Get Kicked Out for Eating Too Much?Don't plan on practicing your competitive-eating skills at an all-you-can-eat buffet. You can definitely get kicked out. Plus, don't be a jerk.
-
A Social Security Storm Is Gathering: Here's Your Safety PlanIf Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
