A growing number of successful people have a strong urge to “pay it forward” by financially supporting causes and organisations that are near and dear to their hearts.
Many business owners already make regular charitable contributions. Once you become successful, your focus can extend to how you can help others who may not be as fortunate.
Getting your family involved in charitable giving helps create a powerful legacy.
Have you introduced your family to philanthropy? If not, you could be missing an amazing opportunity to teach your children about smart financial decision making.
Include your family in your decisions
If you’re like many people we work with, your financial concerns are focused on taking care of your family.
Family philanthropy is one great way you can do this. We’ve identified five good reasons to engage your family, including your children, in your charitable plans:
1. By working together you’ll define your shared values around wealth, community and building a better world
2. Helping individual family members identify their own specific charitable values and intentions
3. Making financial decisions as a team
4 .Learning about the power and responsibilities of wealth. This includes building it, growing it and using it to positively impact others
5. Developing important life and business skills—critical thinking and analysis, listening and communicating, negotiating and compromising to reach a desired goal
The family office approach: private family foundations
One tool that can maximize your charitable giving options and engage your family in philanthropy is a “Private Ancillary Fund” (PAF).
A PAF is a not-for-profit trust that’s primarily funded by a person, family or corporation. The assets in a PAF produce (normally tax exempt) income, which is used to support the operation of the private foundation. It is also used to make charitable grants to other charities.
While there are costs associated with creating and managing a PAF, there are benefits for doing so. Three of the most important reasons family offices choose to open a PAF include:
Caring. Philanthropy is about caring. A PAF is a very powerful way to convert caring into financial and related support for worthy causes. You need to care deeply about some charitable causes to justify establishing and running a private foundation.
Legacy. Many people create PAF’s to honor loved ones. They’re effective in binding a family together around something they consider meaningful. You should probably want to build a legacy—of one kind or another—if you choose to create a PAF.
Permanence. You can establish your PAF in perpetuity. This ensures that the charitable institutions and causes that are important to you will continue to be funded indefinitely.
PAF’s are especially compelling to families who are philanthropically inclined in these two areas:
1. Control. A PAF gives you significant control over the choice of charitable organizations you want to support.
2. Creating a legacy. Succession possibilities are unlimited in a PAF. This enables the family to exercise control across generations, helping them to pass philanthropic values and specific goals (as well as money aimed at those goals) to children, grandchildren, great-grandchildren and beyond.
BSW Inner Circle
ACKNOWLEDGEMENT: We have contextualized this article for the Australian market. We acknowledge its original publisher - BSW Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2017 by AES Nation, LLC.