CASE STUDY:
The parents’ estate plan calls for major funding of a family foundation if the children can work together and agree on a purpose.
ISSUE:
If the children have diverse interests and live far from one another, can they come together and run the foundation once their parents are gone?
PROJECT DESCRIPTION:
The elderly parents had been very successful in business and had set aside significant funds to be used for charitable purposes upon their demise. These funds might be distributed to local charities, or they could flow into a family foundation if the children could work together to manage the foundation.
We were contacted by a family office representative to see if we might be able to help this family.
In our assessment, the family needed to establish a mission statement that would give direction to the work of the foundation. If the parents and the children could work together and reach a consensus regarding the purpose of the foundation, the parents would likely agree to fund the organization.
In addition, there were questions about how the foundation would operate: How would it be staffed? How would decisions be made? In a sense, who would control the foundation? Thus, the family also needed to establish a formal grantmaking and decision-making process that would give comfort to all involved as to how the foundation would function.
Mission statement. To develop a sense of purpose or direction, we interviewed each family member to determine the patterns of past giving and the family’s values. Through this process, we were able to identify common interests and ideals. With this information, we were able to compose a mission statement that both honored the founders’ interests as well as those of the next generation. We met with the foundation’s board and, with some adjustments, the organization adopted its first mission statement.
Grantmaking Process. A sense of purpose was a good start, but how would applications be solicited? Who would do the due diligence? How would decisions be made? We worked directly with the board members to develop a process by which applications would be invited and processed. One of the children had experience with nonprofits, and it was agreed that she would serve as the contact person for the foundation. We developed a flow chart to help the family understand how applications would be handled and what they should do if they were approached for a grant. Further, this process made it clear that no decisions would be made without a formal board meeting, when all members would have a vote — and unanimity or consensus would be sought in every case.
As a result, the parents made an initial contribution to the foundation of $2 million, with the expectation that $50 million would be forthcoming should things go well.
RESULT:
Over a period of nine months, we helped this family find a focus for its giving that all members endorsed, and we helped establish operating procedures that will allow it to function efficiently and effectively going forward. Thus, for the first time, the family had a sense of how it would work together cooperatively to fulfill its charitable interests.