Family philanthropy describes charitable giving by a family through any of a number of options, including family foundations, community foundations, foundations tied to a family business, gift funds, banks, religious or ethnic federations, and collaboratives of donors. Like all donors, family philanthropists are motivated to give something back -- to make a difference.

The family philanthropist, however, commits to doing so together with family members. Family philanthropy enables donors and families to build their experiences, traditions and values into their charitable giving. The family foundations now passing leadership on to the third, fourth and even fifth generations are a testament to the lasting impact that family philanthropy can have on both the family and the community it serves.

Donors and families seek to meet a wide variety of goals through their philanthropy. Some of these include:

• Giving back to the community in which the family cares deeply
• Creating a family legacy
• Supporting an issue (or issues) about which the family cares deeply
• Passing a tradition of giving onto their children and grandchildren
• Memorializing a relative and his or her values
• Uniting a family with a shared sense of purpose
• Fostering an environment where others can succeed

To determine the number of family foundations, we have to rely on an educated guess. New family philanthropies are created each day, and the IRS does not ask private foundations to specify whether or not a family manages them. Of the approximately 40,000 private foundations in existence, it is estimated that approximately two-thirds -- between 25,000 and 30,000 -- are family managed. More than 90 percent of these family foundations have less than $10 million in assets, and approximately three-quarters have less than $1 million in assets. On average, these funds distribute approximately five percent of their assets each year, as required by law. These figures suggest that family foundations give out grants totaling some $5 billion per year.

Community foundations, other public foundations, and banks help manage a variety of donor-advised funds and other vehicles for family philanthropy. There are more than 500 community foundations across the country, some of which have dozens or even hundreds of family-advised funds. Gift funds run by financial institutions, which first came on the scene in the early 1990s, also have experienced rapid growth and marked interest among family donors. Others give through family businesses, federations and collaboratives.

Today, more people have greater amounts of wealth than ever before. The early 1990s have seen record gains in the stock market and astounding growth in new industries, which have led to an environment in which there are more than twice as many millionaires as in 1980. More women have become responsible for their own wealth, and their own philanthropy. Tax laws, while changing periodically, provide a variety of incentives for giving. How these potential new philanthropists will structure their giving is still largely unknown.

We do know that donors are choosing to give through a wider variety of mechanisms than ever before. Gifts to community foundations have tripled in the 1990s. More private foundations have been formed in the past 10 years than during any other similar period in history. In addition, there are a growing number of wealthy individuals choosing to give without a legal structure (such as a foundation) or to give through collaboratives and organizations that didn't exist just a few years ago. Donors are choosing to set up gift funds offered by financial institutions and others. As more and more donors choose to be personally involved in their charitable giving, the range of philanthropic options will continue to adapt and grow. It is important to note that families often meet their charitable goals by participating in a combination of these options, including individual, direct giving.

Economists forecast that bequests totaling more than $10 trillion will be made to the next generation of Americans between 1990 and 2055. The future of philanthropy will continue to be shaped as this transfer of wealth begins to take place. Evidence for this may be found in the increasing numbers of families looking for advice and support in inspiring and training new generations to become part of the family philanthropy, beginning in some cases with small children.

Family philanthropies support a wide variety of causes. They can fund on an international, national, statewide, or local scale. Many focus their giving where the donor lived (or lives) or where the family made its wealth. Other philanthropies concentrate on one or several subject areas, such as cancer research, housing or the arts. Subject-focused funders may also limit their giving to a specific city or region.

Any or all of the following considerations may shape the focus of a family's philanthropy:

• Their motivations for giving

• Their approach to structure and organization

• Their personal giving interests

• Their level of assets

• The number of family members and the geography that separates them

• The number of generations and family branches available to participate

For those just starting out or those in some stage or renewal, here a few questions to ask yourself:

For the donor and the family:

• What values do you share as a family?

• What values does/did the donor particularly represent?

• What shared experiences, traditions and practices have helped to define your family and will likely shape your philanthropy?

• Why is it so important to the donor and to the family that family be involved in philanthropy?

• How do/can family members participate -- even beyond the board?

• How are younger family members acquainted with the work of the foundation? How are they trained to take a role? How are they selected for the board or for other roles within the foundation/giving program?

For the donor(s):

• How have you involved others in developing the vision for the foundation/giving program?

• What are you trying to accomplish for the family and for the philanthropy? Do others understand those goals?

• Does your vision reflect both your optimism and your trust -- of your family and your community?

For other family members and future generations:

• How well do you understand the donor's intent in establishing the philanthropy?

• How do you interpret your responsibility to represent both the donor's and the public trusts invested in you?

• Do you see this is a family endeavor or a source of personal privilege?

• How will issues of family -- including family dynamics and interpersonal issues -- be dealt with in the giving program?

• Is there a clear understanding of the "life expectancy" for the family's philanthropy?

• Are family members expected to develop their own philanthropic vehicles or to contribute to a shared one?

In terms of generations participating in a family philanthropy, the transition from second to third generation is often identified as a "critical" stage of development. This is usually when a family decides among three options:

• To maintain the foundation as a family philanthropic enterprise in perpetuity;
• To divide the foundation -- whether formally or informally -- into several funding streams dictated by individual family members or branches of the family with no unified grant program; or
• To "spend out" the foundation.

Reasons why this seems to be an important stage of development are numerous. One significant reason is that, in most cases, the second generation shares a common experience. The second generation of trustees is usually comprised of siblings who grew up in one household experiencing a commonly held set of values communicated through the donor(s) as a parent(s). It is likely that the second generation also maintains a strong sense of identification with the family philanthropy, particularly if they were present for discussions around the establishment of the family giving program.

The complexity of another family "branch" is normally not an issue until the third generation becomes active in the philanthropy. The introduction of a third generation (comprised of cousins) establishes the family foundation as a more complex vehicle involving more people with individual interests. This range of interest places different demands on the family and the foundation. The issue then becomes how to organize the philanthropy efficiently so that the grant making remains responsive and flexible, and all trustees feel involved and engaged. Given that cousins frequently have primary professional interests other than the family's philanthropy that compromise their level of engagement, tough question s come into play. It is up to the family to develop the enterprise so that it accommodates differing philosophies that are mutually supportive.

Often at this stage of development, the second and third generations will begin to articulate the role that the family's philanthropy plays in their lives. A discussion about family and philanthropy -- past, present, and future -- may take place in a retreat setting. Questions posed to boards at this time might include:

• Is service as a trustee stimulating and rewarding?
• Are you familiar with the family's philanthropic history?
• Do you have a clear grasp of your board's responsibilities and your own fiduciary responsibilities as an individual trustee?
• Are you pleased with the direction the family philanthropy is taking programmatically?
• How do you feel about spouse participation in the philanthropy? About non-family participation?
• What types of training would be helpful to orient new board members?
• Is there a need for formalizing the selection procedures for new trustees? Should board terms or other limitations on board service be considered?

Clear and concise guidelines help to decrease the number of inappropriate inquiries and proposals you will receive. Guidelines can take the form of a letter or brochure or be featured in an annual report or Web site. Your guidelines should be simple, and should clearly provide the following:

• A brief history of the foundation
• A mission statement
• List of legal and other documents required for proposals to be considered
• Subject(s) that you support and/or do not support
• Your geographic focus (if any)
• How you prefer to be contacted
• Proposal deadlines and information on how funding decision are made

According to the Foundation Center, some of the characteristics you will want to look for include:

• Evidence that the program is effective in its community and addresses an existing need
• A history of funding by other sources, whether governmental or private
• Demonstrated sound fiscal management
• A strong, involved board
• Committed volunteers
• Qualified staff
• A realistic budget

If you are considering funding nonprofits that are just getting started, some of the questions you will want to ask may include:

• What is the track record of the organization's staff leadership?
• Who serves on the board? Are there other volunteers?
• Will support to the organization encourage other donors to give?
• Does the organization have realistic program and budget expectations?