January 2021

How To Give Back In Meaningful, Sustainable Ways

By Jill Shipley, Head of Tiedemann's Family Governance and Education

The year 2020 delivered a crossroads of crises that begged the question for many who are fortunate enough to ask: What more can I do to help?

At Tiedemann Advisors, we have facilitated more conversations with clients and their families who felt compelled to start—or increase—their philanthropic efforts this year compared to years prior. In particular, we saw increased interest to improve access to affordable housing across the nation as demand soared due to the pandemic. Families worked with nonprofits to both increase the supply of quality homes as well as advance racial equity and promote upward mobility in this long-segregated market.

For those looking to make a positive impact, whether that’s directed at relief for those affected by Covid-19, social justice initiatives, or companies combatting climate change, here are a few considerations:

Find The Right Cause

There are endless causes to support, and it can be overwhelming figuring out where to begin. An important first step for families engaging in shared giving is to define the impact they strive to have on the world. This begins with exploring their motivations, giving values, focus areas and defining a mission statement. That mission should be crafted with input from multiple generations, where all family members involved see their interests represented. This enables engagement and buy-in that ultimately creates enthusiasm around giving. The mission should be refreshed as the family grows to keep future generations passionate about philanthropy and engaged for decades to come.

Multi-generational families do not always share the same interests and passions for causes. Even when values align, the cause may not. For instance, family members may share the value of community but might live across the globe and desire to support their own communities. We recommend families develop governance at the onset, agreeing to engage in shared giving focused on causes where there is a consensus of interest and encouraging individuals to support their passions with their resources. These conversations can be undoubtedly difficult, and we recommend, where appropriate, to utilize a third-party to help facilitate communication between family members. This ensures all viewpoints and concerns are accounted for and the joy of making a positive impact on the world with family is not tainted by polarizing opinions or beliefs.

Find The Right Vehicle

Once you decide on your goals related to shared giving and have aligned on a mission, the next step is to figure out the appropriate giving vehicle or strategy to accomplish your objectives. Factors such as contribution amounts, family member interest and engagement, the importance of control, privacy and time horizon should be explored. Depending on a family’s goal and timeline, there are multiple options to explore – and understanding the differences between each vehicle ensures a family’s wealth is working hard to make actionable change. Some vehicles to consider include:

• Foundations: A nonprofit, charitable organization managed by trustees or directors that must administer grants worth 5% of its value on an annual basis

• Donor-advised funds (DAF): A private fund organized by a third-party that manages charitable donations

• Direct/planned gifts: A donation to a singular charity made during or after an individual’s life

Each of these giving vehicles has unique benefits and logistics to consider. For example, foundations and donor-advised funds are similar in nature – but the management styles are vastly different. For foundations, the individual or family oversees the governance, distribution and reporting for the entire process, while for a donor-advised fund, a third party handles those administrative duties. Either vehicle can be used to benefit the same charitable cause, but one structure might be more appropriate for an individual’s or a family’s lifestyle over the other. In particular, older generations looking to pass down their wealth may favor a DAF over a foundation because it is less burdensome on their heirs.

Find Ways To Integrate Philanthropic Investing To Double Your Impact

Whatever strategy or vehicle you select, you will need to invest the dollars not being gifted in a certain period so they can grow. Impact-invested capital can help facilitate the growth of companies focused on or committed to practices that support diversity, equality, education, healthcare, clean energy, the environment and workforce development, among others. Families can employ values-aligned investing strategies, Environmental, Social and Governance (ESG) strategies, thematic options and catalytic impact investing focusing on higher-risk or lower-return investments, with an assumption of outsized impact.

Find A Sustainable Approach

To ensure long-term success and a lasting impact, families and their advisors should proactively define governance such as board bylaws, due diligence and evaluation processes, multi-year grant criteria and leadership succession plans.

Take nonprofits for example. Right now, we’re seeing organizations struggle to stay up-and-running as they deal with a greater demand for services coupled with increased financial strain. For those who are inclined, partnering with the non-profit by committing multi-year grants is helpful to make sure the impact of their work continues. At Tiedemann Advisors, we encourage families to discuss their interest in partnering with organizations and to define when and how the family will commit to multi-year gifting.

On the succession-planning front, we know many families strive to pass down the value of generosity to the rising generations and shared family philanthropy is an opportunity to accomplish that. We encourage families to engage children starting at a young age in volunteering and learning about the power of philanthropy. All too often, we see wealthy individuals who are incredibly passionate about the charities in their lives or those that have set up a foundation but have not taken the time to integrate their families into the process. Early engagement allowing family members an opportunity to learn from their elders and practice before they take the reins is critical to multigenerational sustainability.

With 2020 behind us, we must remember that one person and one donation—no matter the size—cannot solve all of society’s problems. And while there's no one size fits all approach to giving, integrating consistent and sustainable philanthropic considerations into financial planning is one way to create actionable change moving forward. We remain encouraged to see so many inclined to use their wealth in ways to positively impact the community and world. To ensure lasting impact, be sure to work with an advisor to choose the right giving option that is best for you and your family.

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The above post was also published as a byline article on FA Magazine on January 5, 2020.

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