What Should Philanthropists and Their Advisors Be Talking About?
Giving back can be one of your most rewarding activities, but it doesn’t come without challenges. Engaging an advisor to help you plan and work with you along the way can ease the burden and ensure you genuinely enjoy your philanthropy.
As we approach the end of the year, many people’s minds turn to giving. Maybe you’re realizing that you have more funds available than expected, or maybe you’re noticing an uptick in charitable solicitations in your inbox. Perhaps you’re resolving to be more strategic with your philanthropy moving forward. Whatever the reason, the end of the year can be a good time to not just think about your annual giving, but also plan for your long-term philanthropic legacy.
If you are fortunate enough to have the resources that allow you to be strategic about your philanthropy, you likely face decisions about the timeline for impact, the vehicles you could use to augment your philanthropy, and if and how you might involve your family. As professionals who have worked in this sector for decades, we encourage you to consider the questions below in discussions with your advisors (wealth advisors, accountants, attorneys, or philanthropic and impact investing advisors like Arabella), now and as your giving evolves.
Resources. It may seem obvious that you will need to know what resources you can devote to your philanthropy, but it’s a point that often doesn’t get the full attention it deserves. What resources are you truly willing to commit to your philanthropy, not just now, but in the future? Beyond the dollar amount you can give away today, what assets will you use to fuel your giving over the long term? What income and tax considerations influence those choices now and how could they change? Additionally, how much time are you interested in committing to your philanthropy? Some clients see philanthropy as a full-time job, while others rely on advisors like Arabella to do the legwork and save them time.
Goals. What are you hoping to accomplish through your philanthropy? Is there a specific topic, geographic area, or persistent problem you’re hoping to address? Are you driving for immediate results or do you plan to focus on the same goal for the long haul? What does success look like? Change can take time, and setbacks are common, so coming to grips with your own level of patience for change is an important consideration. Also, the type, amount, and timing of resources you will need can vary based on your goals.
Family involvement. Your family may already be involved in your philanthropy in some way, but it’s wise to consider how you’ll want to involve your family in this journey now and in the future. Are they interested and willing to be involved? It can be helpful to seek their perspectives early in the process of shaping your philanthropic vision, rather than trying to get buy-in from family once you have already charted your course. Sitting down with those who you expect to be involved will help guide your vision for your philanthropy. It will also help you assess your available resources (time, talent, treasure, and ties), both as an individual and as a family, to ensure your philanthropy aligns with your personal passions and the collective resources you have at your disposal.
Vehicles. Gone are the days when a private foundation was the only path for philanthropists. Now more than ever, there are greater options for philanthropists to manage and deploy their resources. Depending on your goals, timeline, and available resources, you may determine that a private foundation, a donor-advised fund, a charitable trust, or a combination of any of those vehicles is the best fit. How can you use intermediaries (such as our sister organizations the New Venture Fund, Windward Fund, Hopewell Fund, and Sixteen Thirty Fund), to increase effectiveness and efficiency? For each choice, there are tradeoffs to consider, such as your level of control, tax deductibility, and future flexibility with the funds. Is anonymity an important consideration? Some vehicles offer greater donor protection than others. Finally, a handful of philanthropists are considering emerging models, such as hybrid organizations and even noncharitable entities to achieve their goals, as well as engaging in impact investing in addition to traditional grant making. Are any of these new approaches a good fit for your vision?
We encourage you to consider these topics with your trusted advisors or to seek out other experts who might be able to guide you along this journey. You don’t need to know all the answers right away, but by taking the time now to at least identify what you know and what you don’t, you can significantly increase your prospects for success.
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Diana Tyler Heath leads Arabella’s work with families and individuals, helping them achieve impact in ways they find most meaningful. An expert in governance and strategic planning, Diana has helped clients, including a $1 billion foundation, structure their governance and staffing, build grant processes, and establish foundations from the ground up. She has also helped family foundations successfully integrate next generations onto boards, navigate leadership transitions, prepare for an influx of assets and growth in grant making, and refine strategy as their work evolves.
As general counsel, Andrew Schulz manages Arabella’s legal affairs, provides legal advice to the firm’s leadership and staff, and ensures that the foundations and independent nonprofits Arabella helps to manage, such as the New Venture Fund, are in compliance with the law. He has expertise in a broad cross-section of tax, legislative, and regulatory issues, including tax-exempt organizations, charitable giving, fiscal sponsorship, lobbying, political activity, and international grant making.