Advice for Family Foundations Looking to Avoid Succession Pitfalls
Advice for Family Foundations Looking to Avoid Succession Pitfalls
Although every family foundation is unique, sooner or later they all face succession issues that can lead to problems for family members and others involved, the New York Times reports.
Rifts may arise when too many — or too few — family members vie for a seat on the board or when family members disagree over the donors' original intent, on how to divvy up grants, or even on what constitutes family. "Large families have to decide which generations come onto the board and what to do about in-laws and divorces," said Council on Foundations president and CEO Steve Gunderson.
While experts say many pitfalls associated with family foundations can be avoided simply by donors making their intentions clear from the start, they also advise donors not to place too many restrictions on future generations. For instance, Douglas Rothermich, vice president for estate planning and trust consulting at TIAA-CREF, advised a family that was interested in creating a foundation to further a particular type of medical research to consider what might happen if that research were so successful there was no longer a reason to fund it. The family decided that in such a case the foundation should focus on another area of medical research.
According to Sharna Goldseker, director of a consulting division at the Andrea and Charles Bronfman Philanthropies, one of the best ways for founders to communicate their goals is to involve the younger generation in the foundation while older members are still alive. Interpreting the donors' original intent — or deciding how far to stray from it — becomes trickier once the founders have died and future generations begin to focus on issues that many not have been problems when the foundation was established.
Such tensions can be exacerbated when families grow too large and members of the extended family are excluded from the foundation's board. In those cases, family members may end up taking turns on the board, or the board may set aside pools of money from which non-board family members may make discretionary grants. Alternatively, when there are no descendants of the original donors left — or none willing to serve on the board — the options include dissolving the foundation and distributing its assets to various charities it has supported, or allowing it to continue as an independent foundation.
"Usually the founding documents will have some kind of an 'atom-bomb' clause," said Judy Lau, a financial adviser who specializes in multigenerational wealth management. Such clauses can be influenced by any number of factors, Lau added. "Some people are more interested in funding a cause [beyond their lifetimes], while others are more interested in getting their kids to work together."
Tarquinio, J.
“Foundations Face Pitfalls When Heirs Take Over.”
New York Times
11/10/08.
Primary Subject: Philanthropy and Voluntarism
Location(s): National
FC012664
| 
print
e-mail
