Gift Hub

Human Flourishing in a Constitutional Republic

Jay Hughes is the best read and most cultured and probably the wisest of those writing about wealth in families. He has taken certain concepts (such as human flourishing and systems of governance) from political and moral philosophy, along with sources in psychology, religion, and literature to create both a vision and a methodology for perpetuating dynastic families. The truth is that this is an aristocratic vision going all the way back, and honorably so, to Aristotle's Ethics and Politics. What Jay helps wealthy families see is that their success is not just perpetuating the family wealth, but optimizing the family's lived life, their human potential, or human capital. So he talks in terms of developing each family member as a family asset. This means nurturing and cultivating human excellence, productivity, virtue, and wisdom. It also means, I would imagine, getting Junior elected to the Senate, and having Sister run the Family-Owned Bank, and Uncle run the NY Times, and so on, so that the family weaves itself into the power centers of our society in such a way as to become puissant and indomitable. From family, to clan, to dynasty. Aristocracy at its best works like that. At its worst such a system devolves into an Oligarchy, or Plutocracy. And in the ambit of these increasingly concentrated and interwoven power systems comes putsch, silent takeover, gilded lies backed by force, or Tyranny.

My question is this: Can we replant Jay's insights back into their native soil, that of the theory and practice of a just society? Can we ask what it would take not just for some disproportionately wealthy families to flourish, but what it would take for all families to flourish, whether they wear shirtsleeves or ermine?

If the goal is widespread human flourishing, up and down the social hierarchy, and if philanthropy, and personal leadership, and public service, are among the levers, and if social investing or mission aligned investing, and local organizing, and political action of informed citizens are among the levers, then we finally have a topic comprehensive enough to offer potential solutions.

With Catherine Austin Fitts I am trading ideas on mission investing, centered on not only giving but also on economic returns, and also on spiritual and humane social capital widely dispersed. I have learned from Jay how to help families last as economic and social forces for generations, "lest they go from shirtsleeves to shirtsleeves in three generations." (Becoming in the process much like you or me, as horrifying as that might seem to our dynastic clients.) From Catherine, I am a learning how ordinary people can prosper, even when their efforts are sabotaged by those in high places (be they dynasts or parvenus) who have every advantage, including wealth, political power, secrecy and sometime access to illicit force, and who may act as parasites, or tapeworms, upon or within the body politic, flourishing at our expense.

Of course, it matters whether the "dynasty" an advisor seeks to preserve is a restaurant owning family in Smallville, a farm in Nebraska, a locally owned bank in Canton, or a multi-billion dollar family firm with tentacles in think tanks, media, politics and the like. If we are to build and preserve thriving dynasties, I hope they are small, local, and community-spirited. To that effort I lend, and Catherine, I believe, would lend a willing hand.  And in fact while that (the world of small town entrepreneurial families)  is not Jay's world, it is the world of most wealth advisors and attorneys who read his work.  Philanthropy embedded in community, responsive to ethical, humane, spiritual and democratic traditions, in which families give back to help others flourish as they have flourished; well, that is part of the good life in a just society. That is maybe how Aristotle translates in a Constitutional Republic in which we all have an equal right to the pursuit of happiness, or human flourishing, in our families great and small, whether in pinstripes or work-shirts.  It would also be  interesting to hear from Bill Schambra on such themes. 

The Philanthropic Ecosystem: Who is King of this Jungle?

I meant "queen."

Inspired Philanthropy: Collaborating for The Commonweal

Competing or Completing? Beyond Planned Gifts as Transactions

In 2002 Robert Sharpe wrote an interesting article for Trusts & Estates, "Competing or Completing? Balancing the roles of various professionals in planning charitable giving maximizes the benefits for all."  I would like to second the spirit of his piece, while recommending that we as diverse professionals go beyond collaborating on specific "gift transactions" to collaborating on an overall legacy planning process of which the specific gift transaction is but one tactic or strategy. My sense is that such a collaborative process would transform our field for the better, move more money, and make our donor clients much happier and more fulfilled. In the process we advisors and gift planners will do ok too.

When we think of planned gifts as  specific  vehicles, like a donor advised fund, or a charitable remainder trust, offered by both nonprofits and for-profits we might ask, as Robert Sharpe does, whether the two distribution systems are competitors or complements.  Considered in that way, a life insurance agent "selling" a Charitable Remainder Trust payable at death to charity Y is competing with charity X who might have written the CRT payable to them. Likewise, Fidelity might compete with a community foundation for donor advised fund assets.  But let us say that the topic is not promoting a specific gift vehicle, or making a sale, but helping the donor client create an overall plan that is both prudent and inspired. (Prudent means a plan that takes care of the client and the client's family come what may. Inspired means having a positive impact on the community.) How then do the players arrange themselves around that program or process?  A case study may help us get the issues in perspective.

Case Study: Beyond Transactions to Prudent and Inspired Collaboration

Mary and John are worth $10 million, most of it in their closely held business. They are both 55. Both are active in the business and own 100% of the stock. They have two children, Alan and Marcie. Alan is a painter in NYC, barely getting by. He is single. Marcie is married with two children. She is the Comptroller in the family firm.  John and Mary are active in Holy Name Cathedral in Chicago where they live.  They have thought about spending more time working with the Church and less time in the business.  They dream of devoting their lives to working with disadvantaged children, instilling faith and character in children at risk.  Not only would they like to do more volunteering, they wonder if they might fund or endow a program and a facility. A local competitor has been making overtures to the family to sell the business.  Here are the questions on Mary and John's  mind. (These questions have been elicited in part by their lead advisor and in part through their own reflections.)

Questions

• Should we sell, retire, and spend more time on volunteer work with the Church?
• If we do sell at the proffered price will we have enough to live on for the rest of our lives?
• Are we protected against major downside risks (death, disability, falling markets, liability, lawsuits, sickness, long term care needs, property and casualty losses)?
• If we both die tonight, we owe what in estate tax? $3 million?
• Can we reduce estate taxes in favor of the Church?
• If we sell out to the buyer, where does that leave Marcie? Will she be out of a job?
• If we sell to the outsider what will be the capital gains tax?
• Should we find a way to keep the business in the family?
• If so should it go to Marcie? And if so what do we give to her brother, Alan?
• Should we divide our estate half and half for the kids? Or should Marcie get the bulk of it because she has helped us build the business?
• If we let Marcie run the business when we retire, and she pays us some consulting fees so we have money to live on, and she then runs the business into the ground where does that leave us?
• Can we afford to do more for Holy Name today? If we sell? At death?
• How can we structure our affairs so we could do more now, later, and at death for Holy Name, minimize income tax and estate tax, while also taking care of ourselves and our children?
• How can we balance all this?
• Where do we start?
• Who can help us?
• Should we ask Marcie and Alan what they think? (If only they ever agreed about anything!)
• Who should be at the legacy planning table when we sort all this out?

Exercises

1. Check the questions you think need to be answered by someone.  Put a Y by those you can answer all by yourself from your seat at the table.
2. Ask yourself which professionals are needed to do justice to this fact pattern? Attorney, CPA, Financial planner who can do a comprehensive financial plan,  financial product salesperson, planned giving consultant, banker, business valuation expert, other?
3. Is there a logical order as among: goal clarification, fanning philanthropic intent, running financial scenarios, explaining planning concepts (including but not limited to giving opportunities), communicating with children, finalizing the overall plan, implementing products, legal documents, and gifts?
4. Is the logical order the order you employ in your work with donor/clients?

Observations and Suggestions

• Most financial salespeople and most gift planners working for nonprofits "pitch" rather than plan. They lead with a solution before understanding the pertinent context. ("Prescription before diagnosis is malpractice.") We as a field have to get past this package sale mentality for larger client/donors who have complex needs and whose potential gifts merit lots of tender loving care.
• The family above might need a charitable remainder trust, or a foundation, or a donor advised fund, or a charitable lead trust, or an outright gift, or a bequest, but it is way premature to pitch any of those. We have not even finished the fact-finding and goal setting.
• Well over half the challenge in working with complex situations like the one above are the human dilemmas, not the financial conundrums.  The issues in the case above are those of love and money, of fairness, and the push pull between self interest and giving, between playing it safe for self and family, and doing something wonderful for the Church as soon as possible.
• To resolve such dilemmas good planning will run scenarios and quantify the possible consequences of all the permutations and combinations of tools, tactics, and techniques, but in the end the family must wend its own way in this "dark wood" of moral and prudential choices.
• Some family decisions are made with advisors. Others on our knees in prayer, or in the dark of the night, tossing and turning. What is at issue here is the trajectory of many lives.   
• The family needs an open ear. They need someone they can trust, not just to run the numbers, do the legal work, plead for the needs of the Church, sell financial products, or close various aspects of the "case." They need a friend with an open ear, who will listen as they feel their way through this dark wood.
• The trusted advisor, or confidant, can be anyone on the team. But the trusted advisor cannot just be a special pleader. He or she will get paid in one way or another, and will represent this or that position at the table, but the trusted advisor rises above his or her professional specialty and his or her way of getting paid, and earns the right to be the trusted advisor by simply listening, processing the information, and allowing the family to make its own best decisions. The trusted advisor may also slow down the process, involve other needed specialists, or towards the end, gently urge the process to a conclusion.
• The default choice in a case like the one above is for the family to play it safe. They might well say, "Charity starts at home," if the Church is too urgent about philanthropy. Given the parents unresolved dilemmas, given the murk and uncertainty, the most likely outcome is to do not much, or not much right now.
• If properly planned a case like this could well result in a gift to the Church of several million dollars. But the Church won't get it for asking. They won't get it for pleading. And they are not likely to get it by pitching Charitable Trusts in a vacuum. They need to be at the planning table, or within earshot of it, as the whole plan comes together.
  

Competition or Collaboration?

• So, if you represent the Church, as a fundraiser, what is your next move with this family? My sense is that the best move is to presume upon the common bond of religious faith, and the common bond of Holy Name Cathedral, to simply listen. Emerge as trusted advisor, or as confidante, or as an advocate for the fellow parishioner's better angel, the client's best self. Then, convene the team. Stay quietly involved as the team works forward.  Continue to cultivate and to act as sounding board.  As the team plans the options, your role  as  gift planner will come into focus, and you will get your chance to discuss the gift options in the context of the overall plan.
• If you are tax, legal, or financial advisor, what is your next move, if you are first person to whom these clients turn? Will you or won't you contact the Cathedral? Maybe that will depend on how the Cathedral has positioned itself in town and with you. Do you think of their Stewardship Committee as fellow professionals who will assist in a team effort, or do you think of them as special pleaders with a one track mind, or as well meaning people who have no sense of the proper process, and who are always closing for action prematurely?
• Ideally, Holy Name has cultivated the professional community and positioned itself as a caring team member. If so, whoever gets the case going will feel at ease involving the others who need to be at the table to do justice to this family's plan.
• If we all were to operate in this spirit we would do better for our donor/clients and they in turn would do better for their heirs and for the community.

Practical Steps for Nonprofits, Donors, and Advisors

1. Check out the Resources tab at Inspired Philanthropy.
2. Appendices A and B outline a simple process for bringing donors, advisors, and nonprofits together in common purpose.
3. Consider an event or series of events to educate all three groups.
4. Tracy Gary and I have intentionally put this material out there for all to use. We believe in cooperative advantage and in public goods. We don't want to corner the market on philanthropy. We know that others can adapt these materials to their own communities and make them their own. We want that. Out of such experiments, we want to create an informal learning community so we can uplift giving and givers. The spirit is not unlike "Leave a Legacy."
5. Per Tracy, the materials in the Appendices go over well with their intended audience. In her words, "They love it and money is moving."
6. If you do improvise your own approach to the issues discussed above, please share the results with me, either in comments left on the blog or by email, so we can learn together.

Legacy Planning: A Fool's Advice and a Knave's Rebuttal

Legacy Planning Process: Who is a stakeholder? Who is heard? Who is talked about in absentia? Who speaks for whom? Who makes decisions on whose behalf? Who lives with those decisions after the fact?

Stakeholders: Parents, children, grandchildren, generations unborn; nonprofits and society at large; living creatures large and small; those employed by or customers and constituents of family controlled entities (businesses, trusts, foundations, lobbying arms, newspapers, think tanks, social ventures, nonprofits, governmental entities, oval offices, moats, and dungeons); the attorney, CPA, trust officer, insurance professional, financial advisor, family psychologist, philanthropic consultant, fundraiser, religious and moral advisors.

Scope of The Wealthy Family's Vision, Mission, Strategies, Tools, Tactics, Implementation: Personal wealth and personal time and talent; family wealth time and talent; connections, board positions, "pull";  societal needs; the capacities of others to be led, mobilized, activated, or deluded whether within hierarchies, publics, or lattice structures of friends and  friends of friends (movements, cabals, private societies, taste making, trend-setting, heroism).

The Dynastic Dance: In the dance of the elements above who leads and who follows over what range and in what order?

• Who leads as to the vision of a better life for the family, of better family members (more fully developed as ethical, capable and engaged human beings) in a better world for all?
• Who is heard when the wealth is set up for the children? Are they?
• Who speaks for the complexity of the plan, and how all the entities and tools will be managed?
• Who visualizes and scripts the ongoing family chronicle, the story of the family and its origins and ends?
• Who works across the generations, and the silos of expertise, to make the plan, like a Constitution, a living tradition?
• Who governs and manages the ongoing work of the plan, and the entities it controls?

Leverage Points For Social and Family Good

Negative

• Advisors who say, "Whatever you want, Boss, I am here to serve" are necessary, like soldiers whether in the army or the mob, but they are not to control the process of setting the vision, the tone, the spirit, the meaning or the purpose.  They may call themselves "Trusted Advisor" and compare themselves to Richelieu, but they are Toadies all the same, unless they challenge as well as serve the vision.
  
• Parents who make decisions as to vision, goals, end results wanted, without consultation with their own better angel, without consultation with other stakeholders, such as children employees, nonprofits of importance to the family, and fellow citizens.
• Advisors, heirs, and others who seek to win at the other's expense, jockeying for power, wealth, access, and control as in the court of the Medicis.

Mixed

• Clients and advisors who see giving as a tool or technique of tax reduction, and never get around to talking about social purpose and effect.
• Trusted Advisors who thoughtfully elicit but never challenge vision and values. ("Values-neutral values-based planners.")
• Fundraisers and planned giving officers who extract cash and assets for social good without knowledge of, interest in, or concern for, the larger plan of which the giving is a part.
• Moral and religious professional advisors who preach a general sermon, then bow on the church steps and shake the wealthy parishioner's hand, or invite the wealth holder to a private supper to discuss the vestry committee and its works, leaving any particular discussion of the donor's morals aside.

Positive

• Parents who include children and other stakeholders early in the process to help crystalize the vision.
• Advisors who convene rather than control, who listen for vision, not just opportunities for this or that tool or planning technique.
• Advisors who work as a team, keeping one another informed within a sense of common purpose.
• Advisors who have the courage and skill to play devil's advocate, or Socratic questioner, around an emerging vision that is shallow, half considered, or riven with contradictions, family dysfunction, and vanities.
• Nonprofits who have an effect at the vision level, not just around a gift, but around a sense of what it is for the family to live a good, ethical, or noble life, within a good or just society within a thriving natural world.
• Children who do their own planning well, and ask parents if they can be included in the larger family planning sessions at least as to goals. (" But Dad we would rather have a foundation get that money.....")
• Fools who turn the world upside down, if only by aping the advisors with their long faces, long ears, and long tails.

My Own Tutor's Rebuttal

Well, I showed this post to my mentor, the Happy Tutor, Dungeon Master to the Stars, over in Wealth Bondage, America's Most Wonderful Company. I wanted to make sure that this post was not offensive in any way to the higher ups. I don't want Candidia, our mutual boss, to be upset with me. I need a job and I need the money, such as it is.  Teaching philanthropy may be a load of crap, but it sure beats loading body parts into the freezer in the Chill Room.  Tutor's comment was, "Never send a Fool to  do a  Sadist's job, Phil. Send those wealthy sons of bitches over here and I will beat into their bottoms what you fail to drive into their numb skulls." Tutor was drunk at the time, and it is probably unfair to quote him out of context -  a Dumpster full of Garbage where he holds court, naked and unashamed on his own time, after work.

Closing Comment to My Fellow Professionals in Wealth Bondage

We can't save the wealthy from themselves, contrary to what Tutor may think. But we can get rich off them, and escape a beating ourselves, if you follow my advice above. Moderation all things. If you get too idealistic you are setting yourself up to fail. It is not our decision whether the client wants to save the world, rule it, or destroy it. Give the customer what the customer wants, make a ton of money, and give your own opinion, when it is less risky to do so. Now, back to work, there is a fresh load of body parts down on the loading dock.  Get it cleaned up fast. The motorcade from DC is arrives in 30 minutes. We got a Dynasty to plan here folks.

The Tyranny of (Some) Major Donors

Jeremy Gregg of Central Dallas Ministries continues the conversation about major gifts versus many small gifts.  The post is long, carefully reasoned and balanced. Here is one bit that caught my attention:

And yes, as a fundraiser whose organization relies on major donors, I can tell you that there are people who have given upwards of $100,000 per year who suddenly stopped giving because we invited the wrong speaker to an event or our CEO made a comment with which they disagreed.

This is the downside of major gift programs: the tyranny of the donors.

Working on the other side of the table with wealthy people who are used to being in charge we as advisors know the magic word is "Control." Some consider this tyranny, I suppose, though I have always found that I agree with with the views expressed by my sole patron. She did not get where she is without always being right.

Gen Y and The Changing Leadership in Philanthropy, Reflections on a Conversation with Sharna Goldseker

A few days ago I had interviewed a remarkable woman, Sharna Goldseker. Rather than posting my thoughts I have been mulling over her remarks. Here is something she wrote at age 26, the beginning of her life story as a wealthy heir within the Jewish tradition of love and justice. Here is a piece about her one year later. Here is where she works now, at age 33. And here. And here is a recent piece she wrote about generations of Jewish giving. What have I learned from Sharna?

• There is hope, if Sharna and friends are any indication.
• A prior generation made much of the dark side of money, and the baleful effect of inheritances. The literature of sorrow on that score is vast, but Sharna seems to bear no such resentment towards her forbears. She speaks for a generation (Gen Y) that is online, connected, alert, and not given to secrets, privacy, and safe places. She is out there.
• When I work around major money I try to ask, thinking of advisors, clients, and nonprofits, "Who leads and who follows in the dance?" Sharna has taught me to ask that question of the heirs as well. In the inter-generational wealth transfer process, thinking now of grandparents, parents, and grown children, who leads in the conversation about giving? About social responsibility? About all the money? (Not just the charitable budget or foundation money.)
• Increasingly, I am hearing that it is the Gen Y heirs who are stepping forward to say, "Mom and Dad, please, why the secrecy? I Googled you when I was 12. I know more about the family finances that you may think. Let's talk about our money, the future of our family, where and how to make a positive difference."
• Along with Sharna's network I would also instance Resource Generation, and I am sure there are others, in which Gen Y heirs connect as peers, raise their own awareness and prepare to enter the family conversation and family traditions of giving.
• Since age-mates have more influence on children than do parents in those critical years from puberty through early adulthood, it makes sense for wealthy parents to find a healthy and engaged peer network for the rising generation. Sharna tells me that this is getting easier, since the up and coming generation is networked online. So, national conferences and local meet ups are good, but less necessary than in the past.

One further line of thought. As an aging Boomer who has been online now for almost 10 years, I find I have two networks of close colleagues and friends. One is work related and my age, more or less. The other is online-related and Sharna's age, more or less. Connecting these generational networks and conversations may be critical for the health of our society. If Sharna's networks are online they have a stake in the all these emerging technology based communities we see springing up from Facebook, dating sites,  to Ning, Civicspace, Razoo, and many others.  How will the new funders collaborate with their equally talented but resource starved peers to create a better and more just, a more truly "flat" networked world? Who will lead in the generational dance, as Boomers become inheritors, while simultaneously planning their own legacies? Will Gen Y stakeholders insist on entering the space in which all the family money is planned, not just the philanthropic money? Will they be active in helping set the family vision of what a great inheritance and legacy might be? I hope as I age that the Gen Y world-changers, including my own children, will wheel me into their circle and let me listen, babble a little, and dribble on my bib.  If they need a token elder to murmur a secular blessing, I volunteer.  Would a beard long and white add gravitas?

Leadership Coaching for Philanthropists?

The Chronicle notes that executive coaching is increasingly popular among nonprofit leaders.  I wonder what role it might play with philanthropists? Professional advisors generally are not good at eliciting the client's "highest and best self," or giving birth to the leader's latent self.  (Socrates spoke of himself as being "the midwife of the citizen's soul.") In addition, advisors are not generally project managers and have a hard time keeping the client and the work on track. So, perhaps, there is a role for executive coaching for high potential people as they transition to philanthropy, or as they move from reactive giving to transformational or inspired civic leadership. I don't know too many people who play this role of coaching philanthropists of vision and follow through.  I guess, I am trying out for the job, in my capacity as pro bono Morals Tutor to America's Wealthiest Families. Ah, if only like Socrates I could wander about "coaching" those who fled me.  Didn't he cage a living mooching on his rich friends? Refused to charge a fee, unlike the Sophists. Never had a job as far as I know. "Pay it forward," as Tracy Gary says.