A Family Foundation Trustee “To Do” List

Meg Lassar Analyst Strategic Philanthropy 15 June 2012

A Family Foundation Trustee “To Do” List

·        Define board structure and responsibilities.

According to the National Center for Family Philanthropy, only 37 per cent of family foundations have written documents outlining the key responsibilities for board members. Trustees must ensure that such “job descriptions” exist so that future board members know what is expected of them when it comes to leadership. Similarly, trustees should develop criteria for board eligibility (e.g. age minimums, volunteer experience, areas of expertise, etc.) and ensure that procedures for electing or appointing new officers are outlined in the foundation’s bylaws. They might also consider self-imposed term limits in order control board size and allow for younger generations to experience board leadership.

·        Discuss foundation lifespan.

The majority of private foundations are set up to exist in perpetuity and most have no language in their bylaws concerning lifespan. Rather than establishing a perpetual foundation by default, trustees should question which structure (perpetual or time-limited) best suits both the family’s needs and the philanthropic mission of the foundation. For families looking to “attack today’s problems with today’s money”, spending down their endowments within a specified time frame might be an appropriate strategy.

·        Draft a spending policy.

While two‐thirds of private foundations have a written investment policy, only 39 per cent have a written spending policy. And most of these spending policies simply default to the legally required minimum payout rate for US-based private foundations which is five per cent of the previous year’s assets. However, trustees can work with their wealth manager to develop a policy based on rigorous analysis of how various distribution formulas will advance the foundation’s mission, be it to involve future generations in the family’s philanthropy or to address the urgent social issues of today. In the face of market volatility, spending policies can provide a roadmap for how future generations of trustees should deal with decreased assets and increased nonprofit need.

·        Involve the next generation of foundation leadership.

Involving children and grandchildren in the foundation can play an important role in preparing younger generations for wealth and responsibility. By starting the succession planning process before the need to transition leadership arises, current trustees can ensure that members of the next generation have time to develop the governance and grantmaking skills they will need to be successful trustees.

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