From the COVID-19 pandemic to geopolitical tensions, challenges at home and abroad over the last few years have caused some donors to revisit their approaches to philanthropy, according to a recent survey published by Rockefeller Philanthropy Advisors. The report focuses on strategic time horizons and examines why some philanthropists are choosing to adopt a time-bound approach in their giving—as opposed to planning to operate in perpetuity. One concern donors cited when considering the switch was that future activities “would not align with the donor’s original intent.”
However some philanthropists, especially those with family foundations, see value in extending their charitable giving by engaging in philanthropy over multiple generations. This approach also requires vigilance and intentionality in how donor intent is honored over time.
To ensure their donor intent is preserved and effectuated, philanthropists should address any potential succession problems before death. In their 2014 book “Mission Drift,” Peter Greer and Chris Horst underscore the concern many donors still feel today in their observation that “the founder’s passion rarely translates to subsequent generations of leadership. Too often, the passions of the first generation become the preferences of the second generation and are irrelevant to the third generation.”
Consider the similarities with succession planning in business. Hand-picked successors can, and often do, change the values of companies and misguide the founder’s original mission. Many founders are disappointed to see these changes in culture instituted by their successors. These same succession risks apply to philanthropy, particularly after the donor’s death.
Lawyers and consultants help donors document their intent to perpetuate the donor’s philanthropy. Mission statements alone don’t work, so donors essentially try to develop comprehensive business plans in perpetuity for their philanthropy. Such an exercise should clue the donor into the challenges and risks of perpetuating their donor intent for multiple generations. Crafting these governance documents to ensure donor intent is a common strategy among family foundations, but it rarely works. Many deceased donors are rolling over in their graves from the unintended gifting their successors are granting with their residual wealth. This is a systemic problem for donors.
Despite the overwhelming risks of donor intent drift, donors still try to perpetuate their intent long after their death. They often begin and end the search for their philanthropic successor by selecting family because they feel their philanthropy is a form of inheritance. While a family member might be the best successor, the search for a successor to preserve donor intent should be driven by philanthropic values, not family lineage. Donors insistent upon trying to perpetuate their intent after their death should separate inheritance from philanthropy. Too many donors see them as the same.
Managing donor intent in perpetuity using family lineage is risky. Likewise, trusting your donor intent to an unknown successor someone else selects, even if it is not a family member, carries similar risks. Donors should consider trusting their donor intent to a successor they know shares their philanthropic values. Even then, the donor’s successor should be obligated to spend down the donor’s wealth within some defined time period after the donor’s death. Otherwise, donors should be aware that the risk of drifting donor intent increases the longer after death the donor tries to perpetuate the philanthropy.
Martin Garcia is the chairman of Pinehill Capital Partners and founder of the Garcia Family Foundation, which is dedicated to supporting at-risk youth, military families and public policy that promotes free markets and individual liberties. Garrett Garcia is the chief financial officer of Pinehill Capital Partners and president of the Garcia Family Foundation.