Choosing the Best Way to Give

How a family office can buoy your philanthropic goals

The other day, a new client came to us inspired. He wanted to start a charitable organization that would help young adults get a start on their careers. His idea was to provide grants for ancillary professional costs such as books, exams, tutors, licensing fees and such. A few of his friends said he should start a foundation, but he had little idea of what a foundation was, let alone all the other possible vehicles for charitable giving. He asked our Exclusive Family Office (EFO) team for help assessing his options and setting up the right type of organization to fulfill his mission.

A family office is an organization that designs the family financial strategies, implements the plans, and administers financial transactions for generations of wealthy families. So, the task of sorting out the proper funding structure for his charitable desires falls right into the expertise of Aspiriant’s EFO team.

To help him make the best gifting decision for his financial situation and goals, we walked him through several steps.

Learning his story

With all new clients, we spend time understanding who they are, how they got here and where they would like to go. We chat about their experiences with money, their values, their successes and challenges, their families, and the legacy they would like to leave. Understanding what makes them tick helps us give personalized, holistic guidance.

This client is a top lawyer who loves fighting for justice and making things right for his clients. What makes him so successful is he never stops doing things with passion — as a lawyer, teacher and author — while living a full life.

Understanding his purpose

The first thing we did to determine the best charitable vehicle for him was to really understand what he wanted his entity to accomplish and how much involvement he planned to have. The type of entity would depend greatly on whether he wanted to receive public donations or seed it with strictly family funding, and whether he wanted to issue grants to individuals or to institutions.

Part of his dream was to create a platform for recipients to share their stories. So he wanted to give individual grants, but he also wanted the flexibility to give to charitable organizations as well.

Assessing the impact

Once we understood his goals, we helped him assess the amount to contribute by evaluating the income tax consequences and the implications on his personal cash flow. By painting what-if tax scenarios, we determined he’d save $410,000 in taxes for every $1 million he contributed. This helped him decide how much to give and when to make contributions.

Selecting the right vehicle

Knowing the purpose and the impacts, we could now make a recommendation on the type of entity to set up. The options included a donor advised fund (DAF), a public charity or a private foundation. By evaluating the various types, he was able to get a clear picture of the process to establish one, the personal involvement needed, and IRS guidelines he would have to work within. Because of his granting and donations requirements, he decided to go with a private foundation.

Setting up the foundation

With a decision made, our wealth managers began the application process for tax-exempt status with the IRS. Our strategic planning specialists completed the legal paperwork to set up the foundation right away. Because he wanted to give individual grants, he needed an administrative management structure. We helped hire and draft an employment agreement with an attorney to administer the foundation.

We also helped restructure his estate plan and portfolio to determine if he could donate appreciated assets, as well as the allocation of investments and cash to donate. Happily, he was able to make a sizable donation before year-end and leverage significant tax savings. Moving forward, his EFO team will help with the financial administration of his foundation, including the accounting, tax compliance and grant disbursements.

Managing a foundation is only a part of the complexities that come when your wealth expands — and when it does, so does the need for a family office team. Ultimately, our client wanted to get into the driver’s seat of his financial life and achieve more with his wealth. Having clarity through the myriad of complex decisions is the difference between an idea and a dream come true. A family office team handles the burdens of financial management, estate planning, philanthropic giving and tax management, so he can have peace of mind about the charitable giving decisions he’s made and spend more time enjoying the life that inspires him.