There are plenty of reasons for high-net-worth clients to consider establishing a private foundation: They will enjoy tax savings and control over their assets, for starters. Also, they can use creative techniques to fulfill their philanthropic goals—say, by offering scholarships and program-related investment loans. Or by running direct charities or engaging in impact investing.

But when you put those things aside, there’s another reason prized by many of the foundations we support: It gets their families involved. A private foundation can help families strengthen their bonds in several ways.

It Helps Forge a Family Identity
By setting up a foundation, family members are prompted to explore their fundamental values. Once they explore these, they will articulate them in a mission statement that explains why the foundation exists. An effective mission statement will help the family set goals, make decisions and adjust plans in a purposeful and organized way. It can include broad goals (for example, offering better access to education for underprivileged populations) as well as specific actions the family wants to take together (for example, launching a training program to encourage careers in STEM). The mission statement can also address the ways the family can strengthen its own bonds.

It Helps Pass On A Legacy of Giving
Our modern culture offers fewer opportunities for families to naturally pass their core values to future generations. For centuries, parents and guardians had the greatest influence on the belief systems of their children. Elders and youngsters lived, worked and worshipped alongside one another where everyday actions and words helped convey attitudes and priorities. Today, many children are heavily influenced by forces outside the family unit—from the voices they hear regularly through screens, social media, discussion forums and other platforms. This means the first ideals and behaviors they embrace may not reflect their family’s values and may even conflict with them. 

Given these new factors, a foundation offers a solution: It gives families a structure around which to gather and discuss the issues that matter most to them, communicate with one another and collaborate on things that are meaningful to them.

It Helps Dispersed Families Connect
People often get pulled away from their immediate families by job opportunities, education and marriage, and as they scatter across the country or the world, it gets harder for them to stay connected, even with Zoom calls and texting.

Again, a foundation can offer a potential solution to this problem, because it’s something family members can rally around. Not only does it give family members a way to reaffirm their commitments to one another and the family legacy, but it gives them reasons to get together regularly, both to ensure the organization’s proper governance and to review its activities.

It Helps Teach Kids Life Skills
The children, teens and young adults of wealthy families often learn many of life’s lessons by running or participating in the inner workings of the family’s foundation. After all, these entities are like estate plans in action—the skills somebody needs to effectively operate one are many of the same skills children would need to handle their inheritances and become productive adults. A foundation is also an ideal training ground for business and professional development. Younger generations can learn valuable business skills by seeing how the foundation manages its investments, conducts due diligence for grants, and measures its impact. And by participating in group decisions, advocating for their viewpoints and resolving disagreements, the kids can learn social skills essential to effective leadership.

How the foundation employs family members varies. Some members can either volunteer to assist with their foundation’s operations or the foundation can employ them to serve in various management positions.

It Helps Foster Multigenerational Engagement
Family philanthropy is about working together to make the world a better place. With a private foundation as their charitable vehicle, your wealthy clients can foster invaluable relationships across many of their families’ extended branches. When older members involve their children and grandchildren in efforts such as defining a mission, conducting research, making site visits and reviewing grant proposals, it gives the younger generations the desire, confidence and skills they need to extend their families’ legacies of good works and generosity well into the future.     

Hannah Shaw Grove is the chief marketing officer of Foundation Source and the author of The Family Office: Advising the Financial Elite.