As we all know, it is possible for an individual to give directly to a charity. So why do certain wealthy families choose to give via a family foundation rather than directly writing a cheque to the charity? The answers vary from one family to another but the following reasons are common to most:
- To establish a legacy. The act of creating a permanent vehicle for their giving says a lot about an individual’s or family’s commitment to a particular cause, and with increased commitment comes increased recognition. This desire to be remembered also extends to deceased loved ones with foundations set up “in memoriam” being the perfect example.
- “Institutionalizing” a culture of giving within the family. Family foundations are often important family affairs with various family members sitting on the board along with trusted advisors. This encourages the education of the younger generation in matters of giving and creates a culture of philanthropy within the family.
- Benefiting from tax credits. Foundations are registered charities under the Canada Income Tax Act, which means they do not pay tax on their investment income and they can issue a tax receipt for donations received.
- Maximizing the impact of their giving. Although it is possible for philanthropists operating as individuals to have a significant impact, the structure, focus and permanence of foundations make them especially effective at bringing about change in those areas they were set up to address.
While there might be some differences in How philanthropists who choose to set up family foundations give, the Why is the same as for any donor: they give in order to bring about a better tomorrow for their communities and the world at large.
Ligia Peña, M.Sc., CFRE, President of Diversa Consultants, has more than 10 years of experience in fundraising and communications and has collaborated with a variety of charitable and non-profit organizations ranging from the community to international development groups. Ligia’s company, Diversa, specializes in helping small and mid-sized charities with their fundraising and communications.
(Cross-posted at Diversa.ca)