Spending Down Your Family Foundation (Before your Kids Do!)

“A dollar spent today has more value than a dollar spent 10 years from now” (pfc.ca)

When our children were young, I remember an article that mocked the “Baby Boomer” generation for acting like they “invented” children. It didn’t take long for me to realize that we belonged to that very generation and, indeed, we thought that we were doing a much better job than our parents in raising children. 

Personally, I have learned a lot from OUR kids. They treat their children even better than we treated them and prioritize finding a balance between personal happiness and financial responsibilities. My son has said to me more than once: “You should work to live, not live to work!”

Of course, generalizing attributes of any group of people is oversimplifying. However, this current working generation appears to be much more concerned with the well-being of others than we were. They value quality time with loved ones while also displaying altruism and a willingness to work and contribute towards making the world a better place. They want their children to understand and address issues like homelessness and the plight of the marginalized TODAY. But is that perhaps because they have not known how to save for the extended periods of loss that their risk-averse grandparents have known?

Our parents, who came from the “Silent” generation, were farmers, refugees and factory workers who would do just about anything to pay the bills. Many of them lacked a college education. They lived through the Great Depression of the 1930’s, endured the long years of the Second World War, and have been criticized for turning those times of deprivation into fostering the machinery of capitalism. They wanted to avoid “spoiling” us by instilling a strong work ethic in us. They taught us to look out for ourselves, and to give to others as needed, without asking too many questions. As long as those on the receiving end were also frugal and willing to work hard, our parents were content.

If we truly listened to our parents’ experiences, we understood their desperate efforts to keep their heads down, work hard and make a better life for the next generation.  But interestingly, many Baby Boomers now freely spend the hard-earned inheritance left by our parents without much consideration. We still maintain a judgemental posture towards our giving, sometimes asking for excessive measuring of the outcomes. We are often criticized for only giving when we can benefit from tax deductions and other charitable mechanisms we’ve “invented.”

Rather than letting our children have the fun of spending money on shiny things like some of us have been able to do, Baby Boomers are being “smarter” by making our children work for their money. Consequently, many of us are channeling potential inheritance funds into family foundations, supposedly benefitting our preferred charities rather than giving the money to our children. Or – is it? If we also leave large chunks of funds to our children, could the foundation actually be more about the perceived importance we feel when we’ve set up a foundation with our name on it as a “legacy?”

In my work assisting generous individuals with their charitable giving, I’ve observed that family foundations seem to only thrive when there are sufficient disbursements available to hire administrators and staff to effectively navigate the rules established by the original donor. Otherwise, the responsibility can lead to frustration by the (usually lone) administrators. This is especially acute when, decades later, more urgent needs arise in the world – and sometimes even within the donor’s family!

Younger “Boomers” are increasingly opting for Donor-Advised-Funds (DAFs) which provide a charitable tax benefit today with ample time to decide which charity to support. Unfortunately, this means that people in need are left waiting for our kindness! Once again, it contrasts with what I perceive the actions of our children would be, if they were controlling our funds.

My point and opinion are that if a family foundation lacks sufficient funds to generate substantial dividends for charitable giving, there’s no need to flatter yourself by setting up a foundation. There is not even a need for setting up a DAF if the only persons benefitting today, are those receiving commissions.

So – my advice?  Unless there are many millions in your control, just give the money away. Reserve enough to live frugally. Maybe even pass some along to those who love you and/or will look after you, and spend the rest down.

1. Find a great charitable giving advisor (like me!:-)) who can guide you in identifying reputable organizations sure to address what you know needs to be changed today.
   
2. Then take your kids’ advice and have fun; embrace the joy of generosity and change the world! If our children succeed, they will have invented a better world.