Upfront Philanthropy: The leading questions for the wealth strategy team

At The DeBoskey Group, we often talk about the philanthropic strategist’s role in family planning as a partner in a group of advisors that address the various components of wealth planning and strategy. The wealth management and investment advisors will be the experts helping to determine what proportion of a client’s assets can be positioned for growth, dedicated to heirs and apportioned for philanthropic endeavors.  The tax and legal team will provide an analysis of the tax advantages and disadvantages of various options and design the structures that allow for these decisions to be executed.  These two groups of advisors may see a lot of interplay and iteration on options and decisions.

Philanthropic planning is typically thought to follow this cycle once the other advisors have helped set a financial course and determined certain legal and tax structures.

However, this somewhat linear approach ending in philanthropic strategy may not be optimal.  As I sat in a few roundtables recently listening to the types of decisions and concepts that these other advisors deal with, I was struck that the philanthropic angle needs to be considered MUCH earlier and consistently in decision-making than perhaps assumed by all of us: the wealth creator/family, the other advisors, and even by many philanthropic strategists.

There are several philanthropic strategy questions that are best considered upfront in the process of discussions about wealth strategy.  The answers to each of these questions have significant implications for all of the advisors at the table.

  • How important is being a philanthropist in relation to other wealth goals?

If being a philanthropist is an important goal for the individual/family then that will need to be as-      certained and communicated so that it is given priority and careful consideration as options are put together.

  • Do you want philanthropy to play a role during your lifetime or after you die?

Giving during your lifetime requires deep planning to gauge timing, charitable amounts, governance structures, etc.  It is a different assessment than establishing bequests and trusts in your estate plan.

  • Do you want your philanthropy to be “strategy” driven or “tool” driven?

“Strategy” driven philanthropy is centered on the objectives or the impacts that you want to make which can be accomplished through a variety of tools including grantmaking, program-related investments, mission-related investments, advocacy, coalition-building, etc.  The strategy is the driving force, agnostic about the types of tools that will be used to achieve the outcome.

“Tool” driven philanthropy means that the tools are the determining factor vs. the strategy.  For example, if you are interested in only making grants to nonprofits than that will be the chosen tool and the use of that selected tool will help drive the decisions and approach to creating impact.

For example, a strategy-driven approach may benefit from a flexible structure, such as an LLC or a private foundation, that allows for a variety of tools to be employed.  Private foundations can make grants to public charities, they can also:

  • Run programs, provide services, and conduct direct charitable activities.
  • Provide aid to individuals and families for disaster relief and hardship assistance.

Alternatively, a Donor Advised Fund can usually only make grants to established 501c3 organizations. Some Donor Advised Funds allow for Mission-related and Program-related investments; others do not.

Bringing philanthropic strategy into the conversation earlier and as a consistent component of wealth strategy discussions allows for a more intentional approach to achieving important outcomes.