Transitions in Philanthropy: Passing the Baton to the Next Generation

Among the more than 30 private foundations that partner with Pacific Foundation Services on their philanthropy, many are start-up, first generation enterprises founded by the people whose personal wealth is fueling their charitable giving. An even larger proportion, however, are family foundations that are managed by second-, third-, fourth- or even fifth-generation descendants of the original donors. Every family foundation will reach a point in its lifecycle when it must plan its legacy and consider the role of the next generation. When that time comes, approaching the transition with care and deliberate planning will make it more meaningful, inclusive, and effective for all involved.

Strategies for Inter-Generational Giving

PFS works with a number of clients on inter-generational giving and we’ve seen firsthand the benefits of taking a thoughtful, progressive approach to engaging the next generation in family philanthropy.

For some clients, inviting younger family members to attend the foundation’s board meeting can be an insightful way for them to observe the process while board members discuss and approve grants. Another strategy is for the Board of Directors to set aside funds for the next generation to make small grants to the nonprofit organizations of their choice. Enabling them to test the waters in this way helps them to learn about their own philanthropic interests and how to identify a cause and related organization to support.

Inter-generational family retreats can also provide a robust forum for younger family members to learn about the roles philanthropy and nonprofit organizations play in society, discuss their family foundation’s current grantmaking, and engage the family members of all ages in discussions to identify their own values, interests, and goals related to giving.

Aligning Around Shared Values

By definition, family foundations bring together the inspired impulse to give back on one hand, and the unique dynamics, talents, expectations, and roles inherent to all families on the other.
Philanthropy is a values-based practice, and charitable giving is often an imbedded family value that gets passed from generation to generation. Yet newer generations inevitably bring their own unique passions, skills, and experiences, and with them, different perspectives on philanthropy.

Program Officer Shawna Hamilton offers this sage advice. “When exploring values-based decision making with the next generation, particularly those under 25, keep it interactive. Use tools that young people use—namely, technology—like apps, polling features, and even virtual reality for a virtual site visit.” As several PFS clients have learned, devoting time to understanding and articulating values across generations can be an extremely enlightening and bonding process that reveals common interests as well as new possibilities for advancing the greater good. As Shawna notes, “if the next generation sees that you’ve thought through a meaningful user experience targeted to how they interact with the world, trust builds and the values discussion flows.” It’s also important to understand and anticipate that the issue areas of greatest importance to younger generations will likely be different than the generation currently managing the foundation because, not only are their experiences unique, they also anticipate different challenges during their lifetimes.

Key Considerations When Engaging the Next Generation

While every family foundation is unique in its composition, methodology, and strategy, there are certain considerations that can aid any foundation preparing to pass the baton to their descendants.

First, bear in mind that younger family members, particularly school-aged children, may not know what a nonprofit or foundation is and what it does. Offering a primer about the sector, how these organizations function, what they do, and how they impact society is a natural and important place to start. It’s also helpful to initiate younger generations by providing age-appropriate opportunities to learn about and practice giving back. From involving young kids in a food drive, to bringing teens and twenty-somethings on site visits to nonprofits, finding opportunities to learn and make philanthropy more tangible will motivate them to get more involved.

Examining and clarifying your family’s philanthropic philosophy and intent will also ease the process. Considering how and when your foundation will be ready to accept younger board members, establishing a minimum voting age, deciding how flexible the foundation is willing to be in evolving its grantmaking, and making these determinations explicit in your bylaws will minimize confusion and streamline the process.

Once these high-level determinations are made, families can delve more deeply into important questions about their foundation’s funding approach, geographic and issue area focus, and discuss considerations such as due diligence, grant amounts, the time horizon for commitment(s) to particular nonprofits and causes, and the level of impact your family hopes to have.

Lastly, it’s important for any grantmaker to thoughtfully consider the relationship between a foundation and a grantee. When a foundation gives a grant to a nonprofit, it is essentially starting a relationship with that organization, and there is a power dynamic that comes with discretion over much-needed funding. As part of that dynamic, it is helpful for all grantmakers to understand the toll on a nonprofit of applying for a grant–in terms of staff time, infrastructure, research and skill set–and consider this when developing guidelines and criteria for grants.

At PFS, we value long-term relationships with our client community and it’s a privilege to partner with clients as they navigate generational transitions—and we’ve seen firsthand how philanthropy can be a powerful agent for family bonding, fun, shared meaning and ultimately, forging a lasting legacy.

To learn more about generational transitions in philanthropy, talk to your team lead here at PSF. We recommend these additional resources:

Learn Philanthropy Expert Q&A
GuideStar Teaching the Next Generation About Philanthropy
The Millennial Impact Report