Are foundations an old fogey giving tool? Mark, I didn't mean to suggest exactly that. Rather, in doing planning for clients around self, spouse, kids, taxes and society, the conversation goes too often like this:
- Want to reduce taxes at death?
- Prefer to give the money to charity rather than the gummit?
- Want to retain control of the part you can't keep?
- Want to give your kids a way to get a salary and trip to Acapulco for Board Meetings?
- Want your kids never to have to buy a lunch again?
- Mix and mingle with influential persons?
- Well, a foundation will accomplish all that.
When you ask a person who has had a foundation established for such poor reasons, they will say, "I have no idea why I have this thing. What a burden. What a hassle." If you ask what social purpose the foundation serves, they might say, "To help humanity." Asked how, they might say, "Well, we give to our church and the museum."
Probing deeper you might discover that he wants to support mission work in Africa, and is thinking of taking a year off to work in the mission fields himself. She is a painter with an interest in helping high school kids develop their artistic gifts. Probing deeper you discover that what they really want is to be reassured that they can throw it all over, and start afresh in a new life actively engaged in what they love. You also discover that their kids have moved out of town and have no interest in mission work or art. So, in the end, it would seem that a foundation may have been a mediocre recommendation at best. Maybe the family should ask what a decent inheritance might be for the kids, put that aside, then calculate a nest egged needed to maintain the lifestyle, and then look upon the balance as "social capital," spending it down during a joyous and fulfilling lifetime. As the parents get more engaged in their causes, they may decide that at death the balance goes directly to the church or an arts organization.
So where is the sale? With a foundation, managing the money. With direct gifts, and a dwindling asset base, two parties are being generous, I guess. The donor and the money manager both deserve a plaque. For enlightened advisors a happy, generous, client is a good source of future work and referrals. For many advisors the conversation bulleted above is about it.
Sadly, we could equally well bullet a fundraising conversation, from say the planned giving director at the museum. There the conversation will generally come back to the museum and ways to give to that one organization. All else, like mission work, proper inheritance for the kids, a nest egg to support retiring early, is a distraction from the focus on raising funds for a specific institution.
How can enlightened advisors work with donors and nonprofits to achieve more total giving, more satisfied clients, and a buzz among a community, leading to better outcomes for all? I think about this a lot, talk about it whenever I can, and watch eyes glaze among advisors and planned giving people. The ones who get it are the donors. And guess whose money it is? ("Mine!" says the advisor, I manage every penny." "Mine," says the nonprofit, "we are in the will." Taking the donor aside, I will whisper one of Blake's aphorisms, "The cistern contains, the fountain overflows." "It is your money, your life and your chance," I will say to the donor, "to have the impact you want right now." That absurd counsel of perfection is why I live on the streets naked, as a pro bono Morals Tutor to the Stars.)