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For families of means, there are plenty of reasons to consider establishing a private foundation: tax savings, control over assets and the ability to give back using a broad range of philanthropic capabilities, such as program-related investments and grants to individuals.

But for many of my clients, the most important benefits of a foundation are those that help them ensure that the next generation will be responsible stewards of their values and wealth.

The ideal training ground

A private foundation is like “an estate plan in action,” because the skills needed to run one are identical to those the next generation needs to manage their inheritance. By learning how the foundation maintains its investments, conducts due diligence before making a grant and measures its impact, heirs learn essential business skills.

And by participating in group decision making, advocating for their positions and resolving disagreements with other members, young people acquire the social skills that are key to leadership.

Beyond the acquisition of financial and business skills, many families of wealth are concerned that their success will kill their children’s ambition — especially if their wealth passes to their children before they have had a chance to develop sufficient maturity. For these families, a foundation is a perfect fit, because it enables the next generation to participate in wealth and understand both its power and responsibility — all without taking control of it. By having a say in the foundation’s governance and work, children witness the impact of their decisions and learn the value of money in ways no lecture can ever hope to match.

A legacy of giving

When a family decides to establish a private foundation, the process naturally sparks discussions about what the family wants to accomplish with their charitable funds. These conversations can be a springboard for exploring the family’s priorities, offering a rare opportunity to uncover what matters most to individuals and what core values the family shares. Ultimately, the family can distill this conversation’s fruits into an external mission statement for the foundation. However, this process might also give rise to an internal mission for the family itself.

Whereas the external mission details what the family wants to accomplish for others, an internal mission focuses on the family’s goals for itself. Many Foundation Source clients use an internal mission statement to strengthen family bonds, forge a distinctive identity and optimize time spent together.

Connection to family

In this day and age, it’s common for families to spread out all over the globe. Education, job opportunities and marriages exert their gravitational forces, pulling family members away from one another.

For many families, the foundation becomes the glue that holds them together, even when they live in different ZIP codes and time zones. Having a common cause and a formal vehicle for advancing that cause provides a “non-Thanksgiving” reason to meet regularly.

Finally, because private foundations can be established to exist in perpetuity, they can link the founders to generations of the family they will likely never meet. The foundation conveys the founders’ cherished values, hopes and dreams from one generation to the next. And, as the foundation’s assets grow in a tax-advantaged environment, it can become a philanthropic heirloom of substantial worth, empowering each generation to embrace the family’s legacy and add to it themselves.

© 2021 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.