Editor's Note: This blog post originally appeared here.
Congratulations! You have a Donor-Advised Fund (DAF) or Family Foundation, perhaps set up by your advisors in response to changing tax rules.
Let’s call it a tool. Why do you want that tool? What jobs do you want to accomplish (beyond tax avoidance)? Have you been handed a hammer when you really need to screw in some bolts?
As I’ve worked with donors and families, I’ve seen four core jobs. None of them are right or wrong. (If an advisor or consultant tells you otherwise, fire them.) They are:
- Lean grantmaking machine – essentially a formalized extension of the family’s checkbook and/or family’s business giving. You value efficient, low-cost operations and likely aren’t seeking advice on how or where to make grants. You may value some basic “have my back” support – ensuring that nonprofits you benefit meet some legal or fiduciary standards and are reporting back.
- Legacy steward – an active collector and transmitter of the family’s values, heritage, and story. You want to protect or enhance the family’s reputation and legacy, expanding it through permanently-endowed generosity over decades. Beyond genealogy work, you want help in connecting future generations to the family’s past, perhaps through family history books or documentaries. You might want to understand options for long-term naming rights on buildings or academic chairs, or gift planning techniques that endow your favorite programs.
- Philanthropic coach – a developer of family members’ philanthropic knowledge and skills. You want family members to discern their core values and principles and actively live generous lives. You’re likely interested in youth philanthropy activities, mission statements, family volunteer activities, or effective giving strategies. Growing a younger generation’s philanthropic skills might be a way to develop their leadership potential within the family business.
- Change agent – a catalyst for measurable community impact. You’re passionate about making a real difference, and that passion could extend beyond cash gifts and grants. You might create focused grant or prize programs. You might want to lead the work as a volunteer or as a social entrepreneur. You might want to influence policy or invest in for-profit solutions. You might want to ensure that nonprofits or schools are held to much higher standards and use best practices. You’ll try to avoid the predicaments of strategic philanthropy.
Some families, and their advisors or staff, will attempt to manage a multi-tool. You know – the thing you got in the drugstore that sits rarely used in your junk drawer or car? Sure, having the tiny screwdriver, knife, awl, and more in one contraption is handy in an emergency. But it isn’t useful when you really need to get the big jobs done. Your family may be better off doing one job well together before adding another.
Why is this important?
Whether your tool is new or handed down, functional or fixable, the important questions are: Is it the right tool for the job now? Do you want it to last? If so, will it still be useful in 20 years or more?
As you’re considering answering those questions, you’ll want to consider these issues:
- Evolving expectations – each family member (including a spouse/partner) will prioritize those four jobs differently. Over the years, family members’ priorities will change. What the founders need when they sell the business is different from what they need close to death. What a parent wants changes as children mature. Philanthropic cultures vary by generation, faith, heritage, and geography.
- Differing competencies – you’ll need contrasting skills to use each tool effectively. A lean grantmaking machine counts on efficient operations. The philanthropic coach needs people who listen well, help others discern and explore options, and help them grow as individuals, leaders, and givers. The change agent job could demand anything from an experienced program officer to communications strategist, and from impact investment analyst to public policy strategist. In addition, family members’ roles in governing the use of each tool will vary.
- Upgrading or expanding the toolkit – ultimately, the tool you have might be insufficient. Your DAF provider may not be able to deliver on the philanthropic coach jobs. Private foundation regulations may be too inflexible for your change agent jobs. Your local community foundation might balk at impact investing or being a legacy steward for multiple generations. Some families end up sharing a small drawer of tools – a private foundation and a couple DAFs, for instance. A few use an LLC as a large toolbox.
The moral of the story
My dad loaned me an old, small belt sander last summer. It died 15 minutes into my using it. Like a real man, I took it apart to see what was wrong. Of course, I had no idea what I was doing and took the re-assembled tool to the local hardware store. The repair counter advisor patiently explained that a tool like my dad’s wasn’t built to last or to be repaired cost-effectively. (I had to believe him – he looked and sounded wizened and had grease on his hands…). He guided me through options for replacements, asking me what I wanted to accomplish, how else I wanted to use it in the future, and how much I wanted to spend. I left the store satisfied and successfully sanded the crap out of our deck.
You and your family owe it to yourselves to visit with a trusted advisor who can help you ask and answer better questions about your philanthropic tool(s) and the jobs family members want to accomplish. The advisor who established your tool may not have that expertise or may only be compensated by selling one of the tools.
To find a trusted philanthropic advisor, these national organizations – NCFP, Exponent Philanthropy, and NNCG – have free lists. And, of course, feel free to contact me and I would be happy to connect with you good people and organizations across the country.