Donor intent and family foundations can be a dangerous mix

Money can be an enormously destructive force within families—even money dedicated to charitable purposes. This is true even with careful planning. If your philanthropic goals include operating a family foundation, the challenge of preserving both your donor intent and the integrity of your family relationships is significant. 

As a donor, it’s easy to overlook the fact that disbursing a family’s philanthropic assets can become a contentious process, often complicated by the introduction of multiple marriages, half-siblings, and so forth. It is easy to overestimate feelings of familial fidelity and ancestral deference when members become dispersed by generations, locations, and experiences. 

As Paul Schervish, director of the Boston College Center on Wealth and Philanthropy, pithily puts it, “Affluence and wealth are like electricity. They can light up your house—or burn it down.” This takes a toll on family philanthropy, warns Al Mueller of Excellence in Giving. “People give away somebody else’s money differently than they give away money they had a part in making.”

An example: the Surdna Foundation

A recent and well-publicized family feud centered on philanthropy involves the Surdna Foundation, one of the larger charities in the U.S. with $1 billion in assets. Surdna is over 100 years old, and 380 living adult descendants of the founder are kept abreast of the foundation’s work through regular emails and reports. Some of the descendants are unhappy with the news they’re getting and believe their voices should carry some weight even though they are not on the foundation board. 

According to The Chronicle of Philanthropy, almost two dozen of these descendants signed a letter to the board in May 2018 decrying an exaggerated focus on social-justice causes which they claim the foundation’s creator, John Andrus—an investor and businessman in pharmaceuticals, real estate, railroads, and utilities—would have found objectionable. The dissenting family members particularly balked at the pending hire of a new foundation president with close ties to progressive politics.

Until his death in 1934, Andrus’ main philanthropic support went to mainstay charitable institutions like hospitals, schools, churches, and orphanages. Unfortunately, Andrus left behind no statement explaining his donor intent, no instructions around board membership and succession, and no mission details beyond the boilerplate “religious, charitable, scientific, educational and eleemosynary purposes….” Perhaps he assumed his family would follow the clues he left behind in his own giving. Perhaps he intended for them to have complete flexibility. What seems certain is that he did not intend to launch a bitter—and public—family dispute eight decades after his death.

The challenge of ideological giving

Kim Dennis of the Searle Freedom Trust cautions that family foundations are most problematic if your central purpose in giving is philosophical or ideological. “Family members do feel more of a claim to the money than non-family members do, so I think donors should weigh what matters more to them. Often, they want to blend the family and the purpose, and that’s very hard to do. It can work—it has in our case—but if you really care about the mission that much, don’t expect to be able to include your family members and have that succeed. A donor might create a family foundation expecting to unify family members.  But money is a divisive thing: You put it out there and it’s more likely to create conflict within a family than to bring everyone together.”

Frances Sykes of the Pascale Sykes Foundation chose to sunset her philanthropy partly to lighten the load for her heirs. “I don’t want to burden my children with causes they might or might not believe in,” she says. “Why should I burden them with trying to carry through my intent, which might not be their intent?”

A cautious step

The questionable track record of family foundations around donor intent has prompted many donors to approach family giving cautiously, or steer clear of it altogether. Regardless of precautions, sooner or later a family foundation that operates in perpetuity requires you to entrust your donor intent to future generations.

“Donors need to be honest with themselves,” advises Keith Whitaker of Wise Counsel Research. “Am I willing to let my family members do what they think is best at a future time, and I’ll trust them to know what ‘best’ means at that point? Or am I seeking to change the world in a particular way? If so, then I better do it while I’m living.”