Sponsored by Cadence Bank
By Felix J. Meneses, Senior Vice President, Trust & Estates Manager, Cadence Bank
Many of the families we work with today are increasingly concerned about how they can ensure their personal values are successfully transferred to the next generation. In particular, they’re worried about how wealth and privilege can interfere with their ability to communicate and instill positive values in their children.
These families often walk a fine line. They want to transfer assets to their children in order to provide them with a level of financial security. While at the same time ensuring that their personal values of hard work, philanthropy and shared responsibility are also passed on to their kids and grandkids.
A Powerful Tool
One of the most effective ways to accomplish this goal is to develop a family philanthropy and giving strategy. This can be a powerful tool not only for transferring wealth, but also for instilling values that can last for generations.
Devising such a strategy helps ensure that issues surrounding both family wealth and family values are openly discussed among all family members early on. This can help your heirs better understand their specific responsibilities for maintaining the legacy and values you’ve cultivated over your lifetime. True success can come not only from providing the next generation with financial security but, more importantly, in teaching them how to use it with intent and purpose.
Each member of your family can play a role in the process of developing your philanthropic strategy. Even young children can provide some input into decisions about how the family will give money to different charitable organizations and causes. As the kids age, they can take on increasing levels of responsibility in developing and adjusting the plan.
Family Values and The Philanthropic Mission Statement
The first step in creating a family philanthropy strategy is to come up with a philanthropic mission statement. Among other things, this statement should outline your family’s pillars of giving — or, in other words, your philosophy and priorities when it comes to charitable giving.
The mission statement should also honor your family’s heritage as well as discuss how your family thinks about money and wealth from a broad perspective. This will help put wealth and finances in the proper context — as essential parts of their life, but not the most important aspects of life. The statement should emphasize that non-financial values like hard work, integrity, and personal and social responsibility are just as important as finances.
Your mission statement should detail your charitable values and priorities. For example, have you and your spouse regularly contributed money to certain charitable organizations, such as your church or a non-profit that focuses on feeding and sheltering the homeless? If so, include this in your overall strategy and mission statement and encourage your kids in a discussion on how giving to these organizations connects to your family values.
Once your philanthropic mission statement is in place, there are a couple of important operational opportunities to transfer important family values through purposeful integration with family members.
Operationally, the family philanthropy should establish an annual giving cycle. This is simply a specific time each year in which the family researches potential grant recipients and makes their annual gifts. Each member of the family can contribute to the submission process. For example, they can research potential candidates by volunteering at the charity, if appropriate, or through some other prescribed hands-on approach. That direct participation can help forge a powerful connection with the charity and the impact it is making.
Often, families can formalize this process by putting in place junior boards. These operate as subcommittees to the actual governing board of an established family foundation. The governing board simply allocates a small percentage of the overall giving to be advised by this junior board.
Generally, a junior board is comprised of family members between 13 and 20 years of age who are given specific guidelines for selection of a charity. These guidelines could include hands-on research up to and including volunteer requirements prior to submitting a selection for consideration. Important lessons on leadership and decision making can come from these experiences.
Vehicles for Family Philanthropy
In addition to family foundations, there are several other vehicles that can provide additional structure for fulfilling your family philanthropic mission statement. Here are some of the most popular:
Donor Advised Funds (DAFs) — These are charitable funds established in your family’s name at a specific charitable organization. As the donor, your family directs how and when the charity receives donations. In addition to being fairly easy to establish, one big benefit of establishing a DAF is that you can give away assets and claim a charitable deduction now and then decide later which charity will receive the donation.
Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs) — These trusts are private funds used by families to donate money to charitable organizations. With a CRT, whatever money is left in the trust after you and your spouse pass away will pass tax-free to the charities you’ve chosen. With a CLT, the charities you’ve chosen will receive fixed payments for a period of years, after which time the remainder of assets will transfer to your beneficiaries.
In summary, remember that family philanthropy can extend beyond giving wealth to the giving of time and energy. Therefore, your family philanthropy strategy should include a discussion of how family members can volunteer with the charities they’re funding.
There’s no better way than volunteering for children and grandchildren to see the true impact of their financial giving and generosity on the lives of others.
For more information about estate planning, download our free e-book, “Estate Planning: Why It’s Important and How to Get Started.” Or contact Cadence Trust & Asset Management at 214-365-7004 with your estate-planning questions.
Felix Meneses joined Cadence in 2016 as trust and estates manager. He brings more than 26 years’ experience in financial services and previously served as the managing director and division investment executive for US Trust’s Private Wealth Management division. Meneses earned a finance degree from the University of Texas at Dallas.
Cadence Bank is an $11.3 billion regional bank with 65 locations in Alabama, Florida, Mississippi, Tennessee and Texas that provides a full range of innovative banking and financial solutions. The Cadence team is committed to exceeding customer expectations and helping clients succeed financially. Cadence Bank, N.A. is a subsidiary of Cadence Bancorporation (NYSE: CADE).
This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.