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Oct 22, 2012

Family Foundations

Mindful guidelines for selecting fund recipients.

Andy  Knott Senior Vice President

Andy Knott, CFP®, J.D., MBA

Senior Vice President

Wintrust Investments

The rise of family foundations has been a boon for local charities. In the Chicago area there are thousands, many of which are funded entirely by the wealth of a single family. Those foundations make annual gifts totaling in the millions of dollars to local and regional charities.

But how does a family pick a grantee as recipient of funds from its foundation? Are there strategies to maximize philanthropic value? It is easy to feel good because you have funded a foundation and made grants to charities, but how do you make sure you actually did good? A few guidelines to keep in mind:

 

Due Diligence

A good place to start is IRS Form 990. Charities must file this form annually, and it provides a nice snapshot of how the charity treats its assets. They can be found at Foundationcenter.org, one of several free databases. From there, do a Google search on the management team.

 

Eyeball Test

Evaluation wars have been fought for years by brighter minds than yours or mine, especially among the mega foundations like Rockefeller, Carnegie and, today, the Bill and Melinda Gates Foundation. It is unreasonable to expect a small grass-roots organization to present extensive evidence of success. Instead, family-managed foundations should take a more intuitive approach: find local wise men to identify promising candidates and then visit them. Look for business and a sense of tangible respect from the recipients. Also, satisfy yourself that the charity is more concerned about the fruits of its labor than making promises.

 

Start Small

If you are satisfied with the charity’s effectiveness, make a small initial grant. Later, once you have become a trusted supporter, dovetail philanthropy with marketing by sponsoring fundraisers or volunteering your time. Becoming a trusted supporter leads to networking opportunities, leading to introductions to other effective programs. It also puts you in the position to ask for improvements in accounting and reporting of outcomes.

In conversations with local families regarding their philanthropic activities, we have found that family foundations often outperform the mega foundations in terms of finding and tapping into truly effective local charities.

By following these basic guidelines, family foundations can make sound charitable gifts. In addition, families have also reported serendipitous benefits: early experience with giving by younger family members; distinct life-long learning opportunities about the needs of others; discovery or reinforcement of family values and history; and, engagement in like-minded activities and support projects that serve to build connections across generations.

To learn more about charitable giving, speak to one of our Financial Advisors. To learn more about our charitable giving program, Generations in Giving, please contact one of our Trust Administrators.

 

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North Shore Community Bank & Trust - Winnetka

576 Lincoln Ave.

Winnetka, IL 60093

Andy Knott, CFP®, J.D., MBA also serves clients by appointment at the following locations: