In sum, we find that many ultra-wealthy inheritors are actively seeking ways to use their fortunes more effectively and make a meaningful difference to society and the planet. They are intent on acquiring both the skills and the network needed to make an impact, while studying how their peers and others with compatible interests have chosen to approach philanthropy.


Taking The Reins
Our survey showed that many ultra-wealthy inheritors are also motivated to take a leadership role in their charitable endeavors, with 72.8% of the 114 ultra-wealthy inheritors saying they expect to be extensively involved in deciding which charitable causes to support.

For ultra-wealthy inheritors, it’s not enough to back worthwhile causes. They also want to get results and expect to play a role in ensuring that this happens to their satisfaction (Figure 1). About half of inheritors surveyed plan to focus their efforts on making charitable projects more effective, whether it is through streamlined operations, more efficient use of capital or fund-raising. An even larger proportion, about two-thirds, plan to evaluate the impact of their gifts and measure the results of the underlying charitable organizations in order to fine-tune their philanthropic activities.

Ensuring that their inheritance is being used wisely and effectively is of critical importance to many wealthy inheritors, so it’s no surprise that many of them are exploring methods that allow their assets to have the maximum impact.

There are numerous ways to get more impact out of charitable dollars. It’s not about getting better results from non-profit organizations, but rather about getting better results from the management of funds earmarked for gifting.

According to the survey, 29.8% of ultra-wealthy inheritors are taking steps to improve the results they get from their charitable assets.

There are many reasons for such a low response rate, including restrictions related to the legal structures and vehicles used in the estate planning and charitable giving process. However, the most pervasive reason that so few super-rich inheritors are leveraging their charitable assets is simply a lack of knowledge. It’s due to a dearth of expertise among the inheritors themselves and their primary advisors in this specialized field that leads to the underutilization of charitable funds. By contrast, nearly 63.2% of ultra-wealthy inheritors are strongly interested in learning how to leverage philanthropic monies so that more assets can be directed to the causes and organizations they care about.

There are a number of ways to leverage philanthropic monies. On the personal side, various trusts can transform assets into greater charitable dollars than direct donations. With respect to private foundations, some examples of leveraging philanthropic dollars include:

• Issuing debt.

• Incorporating charitable life insurance on a corporate basis.

• Hedging portfolios.

At a minimum, ultra-wealthy inheritors must be able to make informed decisions. This necessitates a basic understanding of the options available to them, the advantages and disadvantages of each option in the context of their own goals, and the anticipated consequences.

Conclusion
Through a combination of research and hands-on work with wealthy families, we’ve found that the social impact of philanthropy is more important to younger generations than older ones, and more important to inheritors than it is to wealth creators. Furthermore, because wealthy inheritors feel drawn to charitable causes and want to use their family’s wealth to leave a mark on the world, the majority need guidance when defining their goals, identifying the appropriate methods and vehicles to achieve those goals, and connecting with similar individuals who are willing to share their own perspectives and experiences.

As a result, philanthropy is one of the key topics that advisors and wealth managers can use to engage and develop a dialogue with younger family members and demonstrate their expertise and role as a trusted and essential partner. 

Richard J. Flynn, is the managing partner of Flynn Family Office. He works with families, entrepreneurs, executives, athletes, artists and entertainers to create customized financial strategies. He can be reached at [email protected].

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