A family legacy is about more than passing down assets
For many families, financial security creates an opportunity to ask a deeper question: What
positive difference do we want our resources to make? A family charitable giving plan can turn
that question into a shared practice. It can help relatives discuss values, learn to evaluate
nonprofit organizations and make decisions together. Families do not need exceptional wealth to
start: volunteering, recurring gifts and a modest annual giving budget all provide useful entry
points.
Start with a family giving conversation
Set aside time to discuss the causes each family member cares about. Invite different
generations to share experiences, including needs they see in their own communities. You can
ask: Who do we hope to help? What change would we like to support? How will we evaluate
results? How much can we comfortably commit without compromising retirement, emergency
reserves or other family responsibilities?
Create a simple family philanthropy process
Consider a written mission statement, an annual giving budget, a short list of causes and a
recurring review meeting. Give younger family members age-appropriate roles, such as
researching a charity, volunteering or presenting a proposed grant. Encourage independent
thinking; a shared family purpose does not require everyone to support exactly the same
organizations.
Direct gifts and donor-advised funds
A direct donation to an eligible charity is often the simplest route. A donor-advised fund (DAF)
allows a donor to contribute to an account administered by a sponsoring charitable organization
and then advise on grants and, where permitted, investments. Once donated, the sponsoring
charity has legal control of the assets; recommendations are not binding. A DAF may help
organize multi-year family giving, but sponsoring organizations set fees, permissible grants and
succession rules. [1]
When a private foundation may make sense
A private foundation can provide a formal vehicle for governance, grantmaking and long-term
family involvement. It typically requires more expense and oversight than direct giving or a DAF.
The IRS requires annual Form 990-PF reporting and imposes rules concerning distributions, self-
dealing, certain business holdings, investments and charitable expenditures. Family control is not
unlimited; grants benefiting insiders or other impermissible transactions can result in penalties.
Families considering a foundation should involve qualified legal and tax advisors before
establishing one. [2]
How charitable giving fits into financial and estate planning
A thoughtful strategy connects giving decisions to liquidity needs, tax circumstances, retirement
income and estate documents. Appreciated assets, lifetime gifts and planned gifts at death can
have different tax consequences, but no one strategy fits every household. Deduction limits and
eligibility rules also vary by recipient, asset and tax year. Coordinating financial, tax and estate
professionals can help translate intentions into a sustainable plan.
Frequently asked questions
Do we need a private foundation for family philanthropy? No. Direct gifts, volunteer projects
and donor-advised funds may accomplish many family goals.
Can children participate in giving decisions? Yes. Researching causes and helping evaluate
outcomes can be useful learning experiences at different ages.
Who makes final decisions about DAF grants? The sponsoring charity retains legal control;
donors have advisory privileges. [1]
Make giving part of a lasting family plan
Wealth can create options, but purpose gives those options direction. At Patron Partners, we help
families consider how charitable goals fit into financial plans and coordinate with their tax and
legal advisors when specialized expertise is needed. If you would like to explore a family giving
strategy, contact Patron Partners to begin a conversation about the legacy you want to build.
Sources and further reading
1. IRS, Donor-Advised Funds
https://www.irs.gov/charities-non-profits/charitable-organizations/donor-advised-funds
2. IRS, Private Foundations
https://www.irs.gov/charities-non-profits/charitable-organizations/private-foundations
3. This article was adapted from educational material originally published in VFO Inner Circle Special Report by John J. Bowen Jr., © 2022 AES Nation, LLC. All rights reserved. Content has been rewritten, updated, and expanded by Patron Partners for educational purposes.
Important disclosure: This article is for general educational purposes only and is not
individualized investment, tax, legal or medical advice. Information and rules may change.
Consult appropriately qualified professionals about your specific circumstances. No strategy is
guaranteed to produce a particular result.