My parents are in the process of establishing a family foundation, and we are wondering if you have a list of common mistakes that other donors have made in planning for a family foundation?
A foundation is a business enterprise and, like any good business enterprise, a little bit of planning goes a long way. What can go wrong, you might ask? Well, plenty. Poorly planned foundations typically make many of these common mistakes:
- The founders did not consider the appropriate life span for the foundation.
- The foundation’s bylaws do not specify how the officers are to be elected.
- The bylaws do not specify how important decisions are to be made.
- The articles of incorporation and bylaws are vague and boilerplate, and they provide no guidance for future trustees.
- The articles of incorporation and bylaws are so detailed and specific that future trustees have minor roles and little incentive to serve.
- The founders did not discuss whether future trustees could suggest grants for their personal interests.
- The founders did not set forth the mission and goals of the foundation.
- The founders did not record their personal values and charitable interests.
- The founders or trustees appointed the least-qualified member of the family to manage the foundation.
- The board has not involved the next generation in the operations of the foundation and, when the time comes, the new trustees have not been prepared to serve.
Excerpted from Why Family Foundations Lose Their Way: A Founders’ Guide to Long-Term Philanthropic Success published by Neithercut Philanthropy Advisors.