Family Foundations: Is a new generation leading change?

As a new generation starts to engage in philanthropy, they are setting up family foundations earlier, spending down their endowments sooner, and supporting broad-based causes such as homelessness rather than specific communities.

These are just some of the trends identified in a new survey conducted by the National Center for Family Philanthropy and Urban Institute, which was sponsored by The Philanthropy Centre at J.P. Morgan as well as several foundations.

Creating a benchmark

“This study is confirming important trends we’ve been seeing in philanthropic giving for some time,” says Diane Whitty, Global Head of The Philanthropy Centre and member of the National Center’s Advisory Committee. 

Although family philanthropy has risen dramatically in the 21st century, influenced in part by its popularity with entrepreneurs, the profile of this philanthropic group is not well documented.

“The vision behind the new study is to develop a national portrait of family foundations that can be used as the starting point for follow-up studies every three or four years,” explains Ms. Whitty. As a result, respondents were polled on their foundation’s generational makeup, values, giving patterns, and plans for governance and succession, among other qualities. 

More foundations, more giving

Nearly 70% of current U.S. family foundations have been established in the past 25 years, according to the study (which included results from 341 foundations, each with assets of at least $2 million and annual giving of at least $100,000). This is not only a reflection of the amount of wealth created during that period, but also of the interest among more recent philanthropists in forming foundations.

“It is also a sign,” says Ms. Whitty, “that there are many foundations in their earliest stages of development. So there are many decisions about succession, governance and grantmaking priorities that may yet need to be made.”

The study also reveals that, while both assets and giving at older foundations tend to be larger, younger foundations distribute a bigger share of their endowments.

Newer foundations give more

Shifting focus of giving

Generally, family foundations have a particular focus for their giving. Frequently, this centers on a community that is meaningful to the family—for example, where the business is located or where the family resides. While place-based philanthropy is still prevalent, the study found that issue-based giving is emerging as a significant goal.

This potential shift may mirror the younger generation’s own residency and travel patterns, as well as their identification with global causes and economic issues. As the study notes, this is a trend worth watching.

Giving trends among the newest foundations

Changing life spans

The accumulated wealth in older foundations mirrors their preference to establish family foundations in perpetuity. Only 3% of the older foundations are time-limited compared with 9% of foundations created from 1990 to 2009, and 19% created from 2010 to 2014.

Newer foundations plan limited life spans

Engaging the next generation

Regardless of duration or size, family foundations are engaging younger members in a variety of ways, including participation on their boards and group discussions about core values. They believe younger generations bring new ideas and vibrancy. However, there are challenges as well: 40% of study participants report younger family members have moved away from the foundation’s geographic location and are interested in different issues than the older generation.

More foundations engaging younger members

“These trends point to some important opportunities and challenges for both older and new family foundations,” says Ms. Whitty. “And that makes having a trusted and experienced advisor all the more important as newer foundations become established and older foundations transition to the next generation.”

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