Doing things differently

Foundations & Endowments

A step-by-step guide to transitioning private family foundation leadership

“There is no fixed point in time when philanthropic leadership passes from one generation to the next.” – Virginia Esposito, National Center for Family Philanthropy


Giving back as a family is a wonderful tradition. Some families even formalize their giving by establishing a private family foundation. But as younger generations become engaged in gift making decisions, generational differences in attitudes, perceptions, and beliefs often arise. In anticipation of this, it’s important for families to have a conversation about succession plans and how to pass on the tradition of giving, while keeping in mind the original purpose of the foundation. Succession planning is not a novel idea, but it’s often an avoided topic as nobody likes to acknowledge their own mortality.

As shared by Virginia Esposito, Sr. Fellow and Founding President of the National Center for Family Philanthropy, “We’re leading longer, healthier lives. Many family members with the most discretionary time to give are older. Many younger family members have responsibilities for education and for starting a career and a family. Further, with patterns of ‘family’ changing—divorce, multiple marriages, and having children later in life—the age span of most generations can be dramatic.”

The Future

No two generations are alike, and there’s no single way to prepare for transitioning leadership from one generation to the next. Younger generations have grown up in the age of technology. They often prefer things like online grant applications and conducting virtual business meetings. Younger philanthropists may have little interest in providing short-term solutions or funding the same projects year after year. Instead, they tend to focus on measurable outcomes and embrace projects that impart immediate satisfaction while addressing systematic change.

A Johnson Center for Philanthropy report, “Next Gen Donors: Respecting Legacy, Revolutionizing Philanthropy,” found that having information about an organization’s proven effectiveness or measurable impact before deciding whether to support it, was one of the five most important components of the NextGen philanthropic strategy.Disclosure 1 For this group, the prestige that comes with being a philanthropist isn’t necessarily important.

Next Generation Philanthropists are characterized by:

  • Use of foundation websites for accepting applications and viewing meeting materials
  • Hands-on approach to giving using techniques like venture philanthropy
  • Focus on specific measurable outcomes
  • Personal involvement with organizations often including board service or other volunteer
  • Leadership positions
  • Desire immediate satisfaction

The Traditional Approach

In general, older generations take a more relationship-based approach rather than relying on technology. This generation prefers written communication and welcomes face-to-face meetings. Older philanthropists are comfortable supporting the same project or organization from one year to the next, with a strong altruistic motive and a desire to ‘give back’ to the community. Recognition as a community leader and civic booster are often seen as an added bonus to senior philanthropists.

Traditional Philanthropists are characterized by:

  • Prefer to receive paper grants and meeting packages
  • More of a hands-off approach to giving
  • Personal involvement with the organizations is less important than making a meaningful charitable gift
  • Focused more on altruism than measuring impact

The Importance of Donor Intent

As leadership passes from one generation to the next, it’s important to ensure that the donor’s original intent is honored. Each succeeding generation is enriched by understanding the reason or reasons that led to the creation of the foundation, as well as its giving history. It’s also important that they understand their responsibility in preserving the family legacy so that they, too, can pass the reins on to subsequent generations. This isn’t to suggest that things must remain status quo.

The “Next Gen Donors: Respecting Legacy, Revolutionizing Philanthropy” report found that when respondents were asked if they will continue to focus their giving in the same areas as older members, there was little generational difference when it come to the areas of education and basic needs. However, the report found that younger respondents were less likely to give to arts and culture, religious, youth and family, health, community development and ‘combination’ organizations such as the United Way or Jewish Federations.Disclosure 1

Families are encouraged to avoid waiting to have a conversation about succession planning. Sure, there may be a family member or two who won’t welcome the conversation, or will argue that addressing the issue is more about replacing them than about a successful transfer of leadership from one generation to the next. And some of the younger generation may have their own reasons for being uncomfortable with the discussion. Typically, an unwillingness to engage in family philanthropy by the younger generation is often driven by one or more of the following six obstacles: family conflicts, lack of education, generational value differences, unclear expectations, insufficient sharing of information, and shifting missions.

The Way Forward: A Step by Step Guide

Succession planning is an ongoing process with no single way to complete the task. However, the four steps outlined below offer a useful roadmap to begin the process.

1. Start early—Engaging the younger generation in family philanthropy early can help minimize uncomfortable feelings that everyone has about the succession planning process. The younger generation can be encouraged to engage in philanthropy in a variety of ways: encourage them to volunteer at non-profit organizations; include them on site visits made by the foundation board; or assign them a small portion of the foundation’s total giving amount to fund grants.

Philanthropy isn’t only learned at home; schools play a role as well. Starting as early as kindergarten, children are involved in philanthropic activities such as book and clothing drives, or collecting money for a favorite charity. Some schools even have formal coursework, school-based programs, and summer camps focused on philanthropy. These programs allow the younger generation the opportunity to become involved, find organizations or causes they are passionate about, build their confidence, and create their own impact. Encourage your children to participate in any opportunities available to them, and volunteer to help. Ms. Esposito counsels, “When inspiring your child to care about generosity, community and the role of philanthropy, emphasize some level of personal investment. This is not the time to teach them that philanthropy is about giving away someone else’s money. Consider a matching gift for time and contributions rather than discretionary gifts. Value a young person’s personal charitable interests even if they depart from the shared work the family does together.”

Once the younger generation is actively engaged, a more formal approach to succession planning can then begin.

2. Leverage your philanthropic ‘tool box’—Philanthropic advisors use a number of age and situation appropriate tools to jump start the engagement of the next generation in a private foundation’s philanthropic giving. In addition to junior decision making boards, there are advisor led workshops, themed card decks, giving challenges, external board service, and a host of related charitable giving opportunities. Families should consider all of their options and select the best fit for their leadership life cycle.

One of the most popular tools listed above is the creation of a secondary or ‘junior’ decision making board. This type of board allows the younger generation the opportunity to become engaged in the foundation’s grant making process on a smaller scale. Allocating a portion of the required yearly distribution to this board allows them the opportunity to make decisions independent of the primary board, introduce new projects to the foundation, and create their own philanthropic identity—all while honoring the original donor’s intent. It’s important for the junior board to be familiar with both the family history and giving history of the foundation as well as the decision making processes.

It’s also imperative that all board members are aware of mandatory required distributions, qualifying expenses, prohibitions against self-dealing, and conflicts of interest. Serving on a junior board allows the younger generation to begin learning about the strict regulatory environment surrounding private foundations. The creation of a junior board lays the foundation for a smooth leadership transition. It also prepares the young, new board members to be knowledgeable, experienced and committed.

3. Make it a part of the strategic plan—Some foundations choose to make succession planning part of the overall strategic plan. While conducting strategic planning, these foundation boards will carve out time to devote to succession planning. Engaging a consultant or independent third party to facilitate the succession discussion can help to alleviate some of the stress often associated with the process. When family members come to the table with an open mind, willing to ask and answer questions and share their experiences and concerns, common ground can be found to move forward while honoring the past.

4. Embrace a multi-generational approach—The National Center for Family Philanthropy encourages a multi-generational approach to philanthropy that leverages the wisdom and experience of senior leaders, combined with the energy and new ideas of younger family members. The ultimate goal is to benefit from multiple perspectives and different experience levels. According to Ms. Esposito, “Not only can governance be enhanced but there can be a deeper appreciation for family legacy, the talents of family members, and the inspiration of working across generational, geographic, and family branch lines.”

Sir Winston Churchill said, “we make a living by what we get, we make a life by what we give.” Private family foundations play a vital role in philanthropy. In 2020, giving by foundations totaled $76 billion: representing 17% of all giving in the U.S.—the largest share on record.Disclosure 2 By embracing succession planning now, you can help protect the vital place of foundations in giving. While first steps may be a bit unsteady, beginning these conversations now pays immeasurable dividends in the future.

About Truist’s Foundations and Endowments Specialty Practice

Truist has more than a century of experience working with not-for-profit organizations. Fiduciary stewardship is the heart of our culture. We’re not just a provider, but an invested partner—sharing responsibility for prudent management of not-for-profit assets. Our client commitment, not-for-profit experience, and fiduciary culture are significant advantages for our clients and set us apart. The Foundations and Endowments Specialty Practice works exclusively with not-for- profit organizations. Our institutional teams include professionals with extensive not-for-profit expertise. These professionals are actively engaged in the not-for profit community and are able to share best practices that are meaningful to their clients. Team members offer guidance and advice tailored to the various subsets of the not-for-profit community, including trade associations and membership organizations. Our Practice delivers comprehensive investment advisory, administration, planned giving, custody, trust and fiduciary services to trade associations, educational institutions, foundations, endowments and other not-for profit clients across the country.

Need help in planning your foundation’s succession or preparing the next generation to take the reins? Contact your Truist relationship manager or investment advisor or call us at 866-223-1499.