One of the most common philanthropic clichés is that family foundations produce family harmony.  I was recently at a forum of advisors to ultra high net worth clients.  In a moment of candour, someone asked “has anyone used family foundations to promote family harmony, and has it ever worked?”  The answers from the room were uniformly, “yes” and “no”.  Despite the myth of philanthropy as a domestic panacea, the reality is more complex.  And the equation of “philanthropy = harmony” may be outright wrong.

The Myth

This myth is primarily propagated by the wealth management industry.  Family harmony is an emotionally compelling idea, and it’s a totally understandable pitch.  Philanthropy is grounded in personal values and has the goal of providing public good.  It’s positive and community focused.  It helps us look beyond personal consumption to the larger world – to engage with the lives and needs of others.  Surely, mere exposure to so much positivity, managed in a well-governed legal structure, will have a positive affect on families.

The Reality

The reality is somewhat different.  Of course, there are many family foundations – whether standalone private foundations or thoughtfully managed donor advised funds – that have harmonious families at the core.  There is inter-generational family participation, healthy exchange of ideas, strong sense of purpose, and impactful grants and charitable programs.  And many families develop or refine this positive working relationship through their foundations, underpinned by good governance, mutual respect, and hard work.

There is maybe an equal number for whom the foundation becomes a place of conflict.  Family tensions exist well before the foundation, and the foundation structure and philanthropic focus is insufficient to wipe them away.  Foundations provide a space for grievances to well up.  At its worse, a family foundation may become a battlefield.  High hopes; scorched earth.

Unfair Expectations

This myth generates unfair expectations.  The purpose of a foundation, to borrow the language of trust law and the Income Tax Act, is to be exclusively charitable.  That needs to be the primary focus, not family harmony.  Greater family harmony may grow out of philanthropic action, but it should not be the top goal.  It’s often hard for founders and family members to understand that separation.

It’s also unfair to family members, especially in the next generation.  The foundation may be thrust upon them.  To quote one industry article on the subject: “Involving children in the family’s charitable efforts teaches them values of generosity, gratitude and kindness.”  That is certainly an ideal outcome, but the pedagogical expectations can be a trap. Adult children invited to the table may resent the expectations, and that can heighten power imbalances and historical misunderstandings. The foundation may become of test of loyalty and good behaviour, and in the complex emotional life of families, it can lead to negative conduct.

Control and flexibility

A classic family foundation mistake is establishing a single mission or focus – and assuming everyone will agree to it.  This may be a reflect action. The parents have their existing charitable priorities and commitments.  Or it could be a conscious goal and the result of an extensive mission development process that sweeps everyone along to the big idea.  This assumption of unanimity may be reinforced by power and economic imbalance between generations.

In my experience, there is greater family unity if there is more flexibility or autonomy for family members to support their own causes.  It’s a paradox. Discretionary granting budgets are a helpful tool, and many foundations have no single purpose that all members need to support. In summary, one cause produces dissenters; many causes and individual autonomy produce mutual respect and greater understanding.

Estate Planning

Family foundations are often established and funded by will, sometimes with the expectation that family legacy and harmony will result. Generally, my advice to donors and founders is that degree of family involvement should serve the goals.  If you want your foundation to support a particular charitable purpose appoint a board or advisors who are knowledgeable and aligned.  There may be no family members involved.  If you want full, equitable involvement by family, don’t make any restrictions on charitable purposes or mission.  It’s useful to share your wishes in writing, but don’t use a dead hand to rule from the grave.

Wisdom and Humility

Founders of family foundations typically have great insights into the dynamic of their family and the strengths and weaknesses of individual members.  Parents know their kids and know their family dynamic.  They know if a family foundation – with full family participation – makes sense.  And most don’t engage in magical thinking.  They don’t believe the higher purpose of charitable foundation will inspire everyone to sing kumbaya in four-part harmony.  It’s valuable to tap into that wisdom and experience, and don’t push the harmony myth.

Also recognize that impactful philanthropy comes in many guises.  Some G1 founders don’t get their kids involved in the family foundation until later.  Others engage only the members of G2 that have the greatest interest and inclination.  Some by-pass foundations all together and give directly to charities in the community.  All are valid ways to give and engage.  So, it is best to tone down the expectations. Family can be harmonious with family foundations, but foundations aren’t a primary cause of harmony.