As the end of the year approaches, many of us are reflecting on the season of giving — a time when donations play a critical role in sustaining charitable organizations. With ongoing global challenges, including the war in Ukraine, lingering effects of the pandemic, and economic uncertainty, many nonprofits are feeling the strain. With a change in administration on the horizon, the landscape for nonprofits may shift, bringing both new opportunities and challenges. Personal donations are down, and the need for support is more urgent than ever.

This year, we encourage you to be more intentional with your giving — focusing on smart, strategic ways to make a meaningful impact. Here are some updated and practical tips to guide your charitable giving in 2024:

1. Give Smart, Not Just Cash

While a cash donation may seem easy, it’s often not the most tax-efficient way to give. Instead, consider donating appreciated assets like stocks, mutual funds, or real estate. These assets can offer significant tax advantages since you can avoid paying capital gains taxes and still take a charitable deduction for their full market value. Other assets, such as life insurance or IRA distributions, can also be valuable gifts. Be sure to consult your financial advisor for tailored guidance.

2. Plan Ahead — Don’t Wait Until the Last Minute

Waiting until the final days of December to make a charitable donation can result in delays. If you’re giving through a Donor-Advised Fund (DAF) or contributing non-cash assets, it may take extra time to process. Start early to ensure your gifts are counted for the year and reach the organizations in time to make an impact.

3. Avoid Giving Over the Phone

Phone solicitations may be tempting, but they come with risks. You can’t always be sure who’s on the other end of the line, and giving personal or financial information over the phone can open the door to potential scams. If you’re interested in supporting a cause, ask the organization to send you more information via mail or email, and then make your donation through a secure website.

4. Make Charitable Giving a Family Tradition

Gathering around the dinner table at Thanksgiving is the perfect time to discuss giving with family members. Talk about causes that matter to you, and encourage younger generations to understand the importance of giving back. Discuss how you can collectively support causes that align with your values, and consider giving together as a family. It’s a great opportunity to teach generosity and cultivate lifelong habits of philanthropy.

5. Keep It Flexible — Avoid Over-Restricting Your Gifts

Nonprofits often need unrestricted funds that can be used where the need is greatest. In a year when rising costs are affecting every sector, many organizations are facing challenges in covering basic operational expenses. If you’re asked to donate to a specific program or project, consider asking if a general operating gift would be more helpful. Unrestricted gifts give nonprofits the flexibility to respond to immediate needs or unexpected challenges.

6. Focus Your Giving

The sheer number of causes vying for your attention can be overwhelming. However, research shows that focusing your charitable efforts on a select issue or cause not only helps create more impact but also provides you with greater fulfillment. Whether it’s climate change, education, reproductive health, or local community support, think about where your time, money, and passion can make the most difference.

7. Give to Areas with Urgent Needs

Certain causes require immediate action. For example, organizations providing disaster relief, mental health support, or assistance to communities affected by long-Covid or climate change may need funding now to meet urgent needs. If you care deeply about an issue that has both immediate and long-term impacts, your donation could help accelerate the response or provide critical resources to those on the front lines.

8. Consider Donor-Advised Funds (DAFs)

If you’re not already familiar with Donor-Advised Funds (DAFs), now is the time to explore this giving vehicle. DAFs allow you to make a charitable contribution, receive an immediate tax deduction, and then recommend grants to your chosen charities over time. They offer flexibility, ease, and tax benefits, making them an efficient way to manage your philanthropy. Check with your investment advisor or local community foundation for more information.

9. Say No to Obligatory Giving

It’s easy to feel obligated to give to every charity that asks, especially around the holidays. However, it’s important to resist the pressure to donate to causes or organizations that don’t align with your values or interests. Don’t be afraid to politely decline requests. Try using a simple phrase like, “I’m focusing my giving on other causes this year,” or “I’ve supported this organization in the past, but I’m choosing to direct my gifts elsewhere this time.” Remember, your charitable donations should be meaningful, not just a form of social obligation.

10. Maximize Your Giving Potential

As the year closes, look for ways to maximize your giving. If you’re fortunate enough to have a matching gift program through your employer, be sure to take advantage of it. Additionally, some charitable organizations offer benefits like donor recognition or membership programs that can enhance your giving experience and provide an added sense of connection to the cause.

Final Thoughts

As you plan your end-of-year giving, remember that your donations matter more than ever. Charitable organizations face increased demand for their services while grappling with decreased resources. Start early, be thoughtful in your giving, and focus on causes that resonate with you personally. With a little planning, you can make a meaningful difference and feel good about the impact you’ve created in 2024.

Wishing you a joyful and fulfilling holiday season, filled with both giving and gratitude.

Note: an earlier version of this blog post was published here in 2022. 

… in multigenerational family foundations

Renee Sovis, 21/64 Certified Advisor

Maybe the answer to this age-old adage would be the same whether we’re discussing family foundations or not.  At any rate, the stakes are high when we’re talking about the charitable stewardship of potentially millions of dollars.

Take this scenario, for example: The family matriarch established her foundation in her lifetime and planned for it to be funded at her demise.  She appointed her two kids, their spouses, and her four grandchildren to be part of the board of directors, but left few other directions for the management of the foundation.  “They know me, they know how I would spend the funds.  I trust them to work out any issues that arise,” she assumes.  The family, however, isn’t on the same page:

“My mother was always involved at her synagogue.  She’d want us to focus on Jewish issues, here and abroad.  She would love it if we made several small gifts each year to support programming at Hillels across the state,” states the eldest son.

“Well, she told me personally that she hopes we’ll give only to her local community.  I know none of us live there anymore, but it was important to mom,” argues a daughter-in-law.

“Grandma loved her dogs more than us; she’d want us to focus on animal welfare.  Also, I’m more interested in giving large gifts that can make a big impact now.  Why wait?” says Grandchild One.

“Can I give money to my friend’s new nonprofit in Brazil?” asks Grandchild Two.

Even among the most loving and cooperative families, this is a common situation.  As a result, uncertainty and confusion can disrupt the flow of funds being directed to worthy causes.  So what’s the best way to avoid disagreements and disappointments?  It’s simple: Avoid assumptions.

Founders can avoid assumptions and enhance impact by taking a two-pronged approach.  First, it’s important to document your wishes, your interests, and your intentions.  Mission, vision, and family values are all important considerations that will give direction and purpose to your family giving.  Do you hope the foundation is perpetual, or should it sunset after a few generations? These two scenarios change the management of the foundation substantially.  Second, start giving while living, and involve the next generation (and maybe even the next) as soon as possible.  Early involvement in the family’s philanthropy from each generation will make generosity a habit and not a chore.

What does this look like and how can it be done?  Luckily, there’s no one right answer to what it might look like; it depends on your goals and where you currently lie on the continuum of giving.  It might involve talking to your young children about the importance of community, welcoming the next generation on site visits, or volunteering as a family at the local food pantry.  If you’re farther along on the continuum, the next generation may already be sitting on the board.  A thoughtful strategy will make this a successful and fulfilling endeavor for all.

And when do you start?  Now is always the best time to start.  Whether your family is already introducing the next generation to philanthropy, or your board needs more guidance and support (like our example family), a skilled advisor can help you and your family find direction and joy from your giving.  Your shared values, your philosophy about money, and your motivations for giving are all key ingredients to explore within the family foundation setting, and these conversations take time.  Again, a skilled advisor can provide guidance so that your family can avoid what happens when you assume.

Tips for the first generation:

• Start early. Set up your foundation with the next 5, 20, and 100 years in mind.  What does it look like?  Is it still around?
• Your children aren’t mind-readers.
• Be open. Understand that what the world needs may be different in a few years’ time.
• Be humble. You have much to share and a long professional career to guide and inform your decisions.  But don’t let your experience close you off to new ideas and innovation.
• Be flexible. Feedback and suggestions from the next generation will fuel the family foundation engine.  After all, the future is in their hands.

Tips for the next generation:

• Ask questions. You don’t know what you don’t know — but your elders may assume you know, you know?
• Your parents aren’t mind-readers.
• Be open. You have new and exciting ideas.  Remember to be respectful of what has been, but be responsive to new needs.
• Be humble. The first generation will have much experience and know-how.  Learn from them.
• Remember, the future is in your hands.

About the author:

Renee Sovis is vice president of Neithercut Philanthropy Advisors.  As a 21/64 Certified Advisor, she assists families and foundations with multigenerational engagement and facilitation.

Wait.  I thought endowment was permanent, but recently the New York Times reported:

Met Opera Taps Its Endowment Again to Weather Downturn

The company has withdrawn nearly $40 million in additional funds from its endowment to cover expenses, but sees signs it may be emerging from its post-pandemic woes.  [i]

Nonprofits typically seek endowment gifts and give assurance to donors that the gifts will be invested in perpetuity, and only a small percent (usually 4 or 5 percent) will be used each year.  Nevertheless, there are plenty of examples of a public charity using its endowment to pay operating expenses during extraordinary situations, such as the 2008 recession or the Covid pandemic.

So, are endowments permanent — that is, perpetually untouchable — or not?  This raises a lot of accounting and legal questions, which we won’t endeavor to answer.  Even so, an informed donor should be aware of a few issues: [ii]

1. Donor-restricted endowment and Board-restricted endowment are quite different; the latter remains in the Board’s purview to allocate for operating expenses if necessary. Donor-restricted endowment is expected to be restricted permanently, never to be spent down.
2. There are cases where donor-restricted endowment has been spent by a charity during dire circumstances. If this violates a donor restriction, is there any recourse or accountability?  A donor might sue, or the attorney general might investigate, but in practice this very rarely occurs.
3. A savvy charity might clear the spending of perpetual endowment with any donors extant or the attorney general’s office before the expense.  And a savvy donor might consult with legal counsel before making a substantial endowment gift.
4. Community foundations offer an interesting option for folks interested in supporting endowment. By creating or giving to an “agency endowment fund” at a community foundation, a donor can be assured that the fund will never be used for general expenses, even in the worst-case scenario of the charity going out of business.

In any event, donor-restricted endowment is designed to be permanent in theory, but there are times when this rule is violated.  Discerning donors interested in giving to endowment might ask a nonprofit about these issues.

[i] https://www.nytimes.com/2024/01/25/arts/music/met-opera-endowment-finances.html

[ii] Endowment defined:  The principal amount of gifts and bequests that are accepted subject to a requirement that the principal be maintained intact and invested to create a source of income for a foundation or public charity.  Donors may require that the principal remain intact in perpetuity, or for a defined period of time, or until sufficient assets have been accumulated to achieve a designated purpose.  (2019 Council on Foundations – Commonfund Study of Investment of Endowments for Private and Community Foundations.)

Call it what you will, but once again the idea of non-perpetual foundations is back in the news.  Recently, The Wall Street Journal rejoined this conversation with an article called “Philanthropists Discover the Value of “Sunsetting.”  This piece might be better titled “WSJ Discovers the Value of Sunsetting,” as the issue has been a popular one in the philanthropy world for decades.  Indeed, we have written on this issue frequently.  (See here.)

Sunset dates have many benefits, and these have been well described elsewhere.  Yet the media tends to focus on the potential for a foundation’s focus to evolve over time, and this discussion is often draped in liberal vs. conservative terms.  In our work with family foundations, we see a somewhat different issue.  Founders often want their foundation to go on forever and provide a common philanthropic enterprise for the family.  That is, the founders want to give the family purpose and to keep the bonds among family members strong — especially if the family business has been sold.  This plan works great when the children and, later, the grandkids join the board.  But add two more generations, and the second-, third-, and fourth-cousins have much less in common; did not personally know the founder; and typically don’t share the interests of the founder.  As such, we advise that you think about having a sunset date when your grandchildren are of an age when they will no longer be able to manage the foundation.

Some time ago, The Wall Street Journal reported that two of Paul Newman’s children were locked in a legal dispute with the board members of the Newman’s Own Foundation.[i]  Created in 2005, the foundation owns Newman’s Own Inc., the specialty food company that uses Mr. Newman’s name and likeness.  The profits of the food company are accrued by the foundation, which reports it has given $600 million to charities over the last 40 years.

Mr. Newman, the famed actor and entrepreneur, died in September 2008.  From the start, the profits of his salad dressing empire have been given to charities — and that practice was to continue after his demise.  But who would run the foundation?  Who would make the decisions and have the ability to direct grants?

The foundation appears to have been entrusted to two gentlemen, both friends and professional advisers of Mr. Newman’s.

Now, some 15 years after Mr. Newman’s death, two of his daughters have filed a suit in which they allege:

• Major conflicts of interest among board members.
• Lavish travel by the board and staff, including a personal driver for one board member.
• Last-minute changes relative to the foundation in Mr. Newman’s will just months before his death, when he was not competent.
• Violations of donor intent by abandoning some of Mr. Newman’s favorite charities and interests.
• A reduction in the funds promised to be made available for Mr. Newman’s children’s personal giving.
• A change in the methodology that calculates the company’s payments to the foundation.

In fairness, some of these charges stem from the behavior of one of the original trustees, who resigned after an internal investigation.  Today, the board appears to be composed of experienced leaders.

But at least some family members remain very unhappy and feel betrayed.  We presume this is not what Mr. Newman wished.

Some will see this as an issue of donor intent.[ii]  That is, they point to the professionalization of the foundation and the evolution of its focus as evidence of a drift from the founder’s intention, much like the legendary case of the Ford Foundation.  In our view, this critique may well have merit; we are big believers in donor intent.  (And in this case, both sides may think they are the true followers of Mr. Newman’s intent.)  The solution might have been to appoint family members to the board, instead of (or as well as) Mr. Newman’s professional advisers.

Yet, we also see this as an example of the fundamental difference between two different types of foundations.  Is the foundation’s purpose to focus on one issue, or several issues?  Or is its mission to keep the family together and provide a common philanthropic enterprise for Mr. Newman’s children and grandchildren?

In practice, it is difficult to mix these two paths.  If the purpose of the foundation is to help disadvantaged youth, then the foundation will likely hire the appropriate experts and its mission may expand or change as the foundation learns more and as public policy evolves.  In this case, family members may not be involved and may well be unhappy with the direction of the foundation both because they have less influence and because the foundation has changed.

If the purpose of the foundation is to provide the family with a common philanthropic enterprise, then the family should be well represented on the board and they can work together to direct the foundation’s work.  In this case, the foundation might drift in new directions as the interests of the family change.  Yet, at least the family members will be less likely to complain.[iii]

In the end, there is no simple solution to avoid these types of problems.  Families and their lawyers may experience conflict despite the best planning.  However, we find in our work with families that there are a few reliable ways to avoid much of the potential for disputes:

• Founders should write a clear, unambiguous mission statement.
• The rules for trustee succession should be documented.
• The desired lifespan of the foundation — that is, is it to be time-limited or perpetual? — should be established.

Finally, these important messages should be shared with the appropriate family members early and often.

_____________________________________________________________________

[i] wsj.com/articles/paul-newmans-daughters-sue-newmans-own-foundation-11661284893

[ii] news.bloombergtax.com/tax-insights-and-commentary/newman-daughters-lawsuit-against-foundation-pivots-on-tax-code

[iii] As a caution, we should add that it is also common for one arm of the family to gain control of the family foundation, while another less-represented arm complains about the drift from the founder’s intentions.