The year 2020 presented a crisscross of different crises that begged the question for many who are fortunate enough to ask: What more can I do to help?

At our firm, we have facilitated numerous conversations with clients and their families who felt compelled to begin philanthropic efforts this year, or to do more than they have in the past. In particular, we saw an increased interest among our client families to help improve people’s access to affordable housing across the nation as demand soared amid the Covid-19 pandemic. Families worked with nonprofits to both increase the supply of quality homes as well as advance racial equity and promote upward mobility in this long-segregated market.

For those looking to make a positive impact, whether it’s directed at relief for those affected by Covid-19, involvement in social justice initiatives or investment in companies combating climate change, here are a few considerations:

Find The Right Cause
There are endless causes to support, and it can be overwhelming figuring out where to begin. An important first step for families engaging in shared giving is to determine the impact they strive to have on the world. This begins with exploring their motivations, giving values and focus areas and creating a mission statement. That mission should be crafted with input from multiple generations of the family, where all its members see their interests represented. This will keep them all engaged and create enthusiasm about giving. The mission should be refreshed as the family grows, so that future generations will stay passionate about philanthropy and involved for decades to come.

Multi-generational families do not always share the same interests and passions for causes. Even when their values do align, the causes they want to give to may not. For instance, family members may share the value of community but live in different places around the globe, so the communities they want to support may be different.

We recommend that families work on governance at the onset, agreeing to engage in shared giving that’s focused on causes where there is a consensus of interest, and we encourage individuals to support their passions with their own resources. When the family members differ about these passions and the conversations are difficult, we recommend, when appropriate, that they use third parties to help them communicate with one another. This ensures that all their viewpoints and concerns are accounted for and that the family’s joy in making a positive impact on the world is not tainted by polarizing opinions or beliefs among its members.

Find The Right Vehicle
Once the family has decided on their giving goals and defined their mission, the next step is for them to figure out the appropriate giving vehicle or strategy to accomplish their objectives.

The vehicle that’s chosen will depend on factors such as the family’s contribution amounts, interest and engagement. It will also depend on the importance to the family of control, privacy and the giving time horizon. Some vehicles to consider include:

• Foundations: These are nonprofit, charitable organizations managed by trustees or directors that must administer grants worth 5% of their value annually.
• Donor-advised funds: These are private funds organized by a third party that manages charitable donations.
• Direct/planned gifts: These are donations to single charities made during or after an individual’s life.

Each of these options offers unique benefits and requires different logistical approaches. For example, foundations and donor-advised funds are similar in nature, but the management styles are vastly different. In a foundation, the individual or family oversees the governance, distribution and reporting for the entire process, while in donor-advised funds, a third party handles the administrative duties. Either option can be used to benefit the same charitable cause, but one structure might be more appropriate for an individual’s or a family’s lifestyle than the other. In particular, older generations looking to pass down their wealth may favor a donor-advised fund over a foundation because it is less burdensome on their heirs.

Philanthropic Investing To Double The Impact
Whatever strategy or vehicle the family selects, they’ll want to invest the funds so that they can grow until they’re used for giving. And those funds can be put into impact investments that also support a family’s goals—for instance, into companies that support diversity, equality, education, health care, clean energy, the environment or workforce development. Families can employ values-aligned investing strategies; environmental, social and governance (ESG) strategies; thematic options; or catalytic impact investing, which focuses on higher-risk or lower-return investments meant to have an outsized impact.

Find A Sustainable Approach
We encourage families to discuss their interest in partnering with organizations and to define when and how the family will commit to multi-year gifting. Take families’ work with nonprofits. Right now, we’re seeing non-profit organizations struggle to stay up and running as they deal with a greater demand for services coupled with increased financial strain. Families so inclined can make sure their impact work continues when they partner with a non-profit by committing multi-year grants.

But efforts like these require a sustainable approach. To ensure long-term success and a lasting impact, families and their advisors should proactively define things like foundation governance, including the foundation board’s bylaws, due diligence and evaluation processes, multi-year grant criteria and leadership succession plans.

Then there is the matter of succession planning for those who will take over the family’s philanthropic efforts. We know many families strive to pass down the value of generosity to the next generations, and shared family philanthropy is an opportunity to accomplish that. We encourage families to engage children from a young age in volunteering and learning about the power of philanthropy.

All too often, we see wealthy individuals who are incredibly passionate about the charities in their lives or those who have set up a foundation but have not taken the time to integrate their families into the process. When the families engage younger members early on, it allows those younger members to learn from their elders and practice before they take the reins. It’s critical to multigenerational sustainability.

With 2020 behind us, we must remember that one person and one donation—no matter the size—cannot solve all of society’s problems. And while there's no one-size-fits-all approach to giving, integrating consistent and sustainable philanthropic considerations into financial planning is one way to create change moving forward. We remain encouraged to see so many inclined to use their wealth in ways that positively impact the community and world. To ensure a lasting impact, families should work with an advisor to choose the giving option that is best for them.     

Jill Shipley is head of family governance and education at Tiedemann Advisors LLC.