Aligning Sources of Philanthropic Capital with Client Needs
Tax efficiency is a go-to when a family has a liquidity event. There’s often a rush to set up a Private Foundation (PF) and/or a Donor Advised Fund (DAF) and park some of the capital there while the family gets up to speed on how to steward the dollars.
Identifying a source before establishing the process can be a landmine. Fundamental questions like, “What do you want your legacy to be?” and “Who is sitting at the table making decisions?” are key to identifying sources that align with the family’s future needs.
If you’re thinking that most people don’t ask, much less know the answers to these questions in year one, you’re right. Attorneys who take the time to help clients parse these issues add value by eliminating confusion and aiding family cohesion.
Savvy families often have multiple sources of philanthropic capital and clearly defined uses. Mom and Dad may have a DAF for personal giving, the family may give strategically through a PF, and there may be a lead or remainder trust used for a specific time-bound portfolio of giving. There may also be endowments at hospitals and universities.
What follows are common sources (there are others) and ways to think about what might be right for your clients.
Private Foundations (PFs)
Private foundations, with a requirement to distribute 5% of the fair market value, are often used as legacy vehicles to maintain philanthropic capital in perpetuity. The foundation board is the fiduciary so clarity and communications about processes are critical. Tax returns and grants are public. Running costs can seem high, considering the excise tax, filings, and administration. Clients who benefit from PFs want to:
Engage family members across generations and sometimes across family lines
Build generational legacy
Maintain fiduciary control
Donor Advised Funds (DAFs)
There are three types of DAF sponsors: Institutional, Community Foundation, and Special Interest.
Institutional DAFs are supported by wealth management orgs such asFidelity Charitable and Schwab, which are among the largest
Community Foundations are regional re-grantors that have expanded their geographic scope to align with the interests of their donors
Special Interest DAFs are found at universities, faith-based organizations, and hospitals
The DAF sponsor is the fiduciary; the donor is an advisor in the relationship. As the fiduciary, sponsors have the right to determine if they’ll make a particular type of grant. Special Interest DAFs may aggressively solicit contributions. Understanding the communications process, the fee structure, and any specific rules for grantmaking that the sponsoring organization has, is critical to having success with a DAF.
The costs for DAFs are significantly less than those of a private foundation. There are no minimum distribution rules. The National Philanthropic Trust reported a 24% payout from DAF funds in 2023, so it’s clear that DAFs don’t have the same goal of preserving capital in perpetuity as often perceived in PFs.
Clients who benefit from DAFs:
Have the option to be anonymous
Do not retain fiduciary control therefore have lower risk and cost
Are backed up by diligence done by the sponsoring organization
Charitable Trusts
Lead and Remainder Trusts allow for distribution to family members and charities. Capital is released in a controlled way. They create both a cushion for individual family members and an incentive to be philanthropic. These are great tools to help stack availability of capital over time, sometimes skipping a generation. Their payout timelines provide another way to be intentional about planning.
Takeaways before setting up a source of philanthropic capital
Gauge your client’s appetite for engagement
Identify internal intent and who will be involved in decision-making
Understand goals of giving to align the right source or even stack sources
You can find The National Philanthropic Trust DAF Report here.
New Travel Restrictions: Critical Information for Affected Nationals, Their Families & Employers
Quick summary
The White House has reinstated and significantly expanded travel restrictions affecting 19 countries, with full travel restrictions on 12 nations and partial restrictions on seven others. The proclamation took effect on June 9, 2025, at 12:01 AM EDT, but contains important exceptions.
On June 4, 2025, President Trump issued a proclamation outlining full and partial travel restrictions on 19 total countries, with some exceptions for certain visa holders or Lawful Permanent Residents. The proclamation affects millions of people worldwide and is expected to draw legal challenges. For immigration practitioners, employers, and affected individuals, understanding the scope, exceptions, and practical implications of the proclamation is crucial.
Who Is Affected?
Complete Travel Restriction (12 countries): Citizens from the following countries face a full suspension of both immigrant and nonimmigrant visa issuance:
Afghanistan
Burma (Myanmar)
Chad
Republic of Congo
Equatorial Guinea
Eritrea
Haiti
Iran
Libya
Somalia
Sudan
Yemen
Partial Restrictions (Seven countries): Citizens of these countries face suspension of immigrant visas and B-1/B-2 (business/tourist), F, M, and J (student/exchange) visas, with reduced validity periods for other categories:
Burundi
Cuba
Laos
Sierra Leone
Togo
Turkmenistan
Venezuela
*Egypt remains under review and could be added to future restrictions.
Critical Exemptions
The proclamation includes several important exceptions for protected individuals, those in special visa categories and those granted an exception from the Attorney General or Secretary of State:
Protected Individuals:
Lawful Permanent Residents (green card holders)
Anyone physically present in the United States on June 9, 2025
Valid visa holders as of June 9, 2025
Dual nationals traveling on non-restricted country passports
Special Visa Categories:
Immediate relative immigrant visas (IR-1/CR-1, IR-2/CR-2, IR-5) with DNA evidence
Afghan Special Immigrant Visa holders
Adoption cases (IR-3, IR-4, IH-3, IH-4)
Athletes competing in major sporting events
Diplomatic visa holders (A, G, NATO, certain C visas)
Refugees and asylees (though subject to separate restrictions)
Case-by-Case Exceptions:
On a case-by-case basis review, the Attorney General and Secretary of State may grant exceptions where travel would advance critical U.S. national interests, including participation in criminal proceedings.
Timing and Scope
The ban applies only to individuals outside the United States on June 9, 2025, who do not have valid visas. No existing visas will be revoked solely due to this proclamation.
Periodic Review
The restrictions will be reviewed every 90 days initially, then every 180 days, potentially leading to modifications or removals from the list.
Legal Landscape and Challenges
The Supreme Court’s 2018 decision in Trump v. Hawaii may make it difficult for opponents to challenge this proclamation, as the Court upheld presidential authority under INA §212(f) for national security-based restrictions. However, such actions must be “justified and demonstrated by the administrative record,” so the Trump administration will likely need to demonstrate justification for this expansion to succeed in a legal challenge.
Immigration advocacy groups are already preparing legal challenges, and we anticipate court filings soon.
Practical Advice for Affected Individuals, Families and Employers
Immediate Actions
Return to the United States Before June 9: Those currently abroad with valid status should consider immediate return
Document Review: Make certain all immigration documents are current and properly maintained
Legal Consultation: Seek immediate counsel to assess exception eligibility and strategic options
Ongoing Considerations
Travel Restrictions: Even exempt individuals may face increased scrutiny at ports of entry
Family Separation: The proclamation may keep family members separated who are abroad and subject to restrictions
Employment Impact: U.S. employers in healthcare, technology, and education sectors may face significant workforce disruptions
Current Visa Holders
While existing visas will not be revoked, renewal applications may be denied once current visas expire. Non-immigrant visa holders already in the U.S. who travel abroad would be subject to the proclamation when they try to return.
Economic and Humanitarian Impact
State Department data shows that in fiscal year 2023, nationals from the 12 fully banned countries received over 112,000 visas, while those from partially restricted countries received nearly 115,000 visas. The 19 affected countries represent over 475 million people.
Looking Ahead
This proclamation represents a shift in U.S. immigration policy and reasserts presidential authority under INA §212(f) to address national security concerns through targeted entry restrictions. Given the administration’s stated goal of expanding immigration restrictions, affected individuals and their legal representatives should anticipate continued policy changes and increased enforcement.
Nebraska Governor Signs Bill to Amend Healthy Families and Workplace Act
On June 5, 2025, Nebraska Governor Jim Pillen signed Legislative Bill (LB) No. 415 that clarifies and amends the Nebraska Healthy Families and Workplace Act (NHFWA) passed by voters in November 2024, which provides earned paid sick time (PST) to most Nebraska employees. The bill will become effective in time for the October 1, 2025, start date for the state’s PST requirement under the NHFWA.
Quick Hits
The Nebraska Healthy Families and Workplace Act requires most Nebraska employers to provide earned paid sick time, starting October 1, 2025.
On June 5, 2025, Nebraska Governor Pillen signed a bill that clarifies and amends the Nebraska Healthy Families and Workplace Act.
On November 5, 2024, Nebraska voters overwhelmingly approved Nebraska Initiative 436 (also known as the Healthy Families and Workplace Act), which requires employers to begin providing earned paid sick time (PST) to most Nebraska employees on October 1, 2025. On May 28, 2025, the Nebraska Legislature passed Nebraska LB No. 415, which clarifies and amends the NHFWA.
The Amended Nebraska Healthy Families and Workplace Act
Under the NHFWA, most Nebraska employers must provide earned paid sick time to employees starting October 1, 2025. The law exempts employers that are federal or state governments or political subdivisions of the state.
Under the NHFWA, employees earn one hour of paid sick time for every thirty hours worked. Employers with twenty or more employees can cap accrual and use of PST at fifty-six hours per year. Small employers (defined by the amendment to include employers with eleven to nineteen employees) can cap accrual and use at forty hours each year. Employees can carry over all unused PST at the end of the year, but carryover does not affect the annual accrual and use caps that are based on employer size.
LB-415 clarifies and amends the NHFWA as follows:
Exempt Employees. Seasonal and temporary workers employed in agriculture and employees under age sixteen are not eligible to earn PST.
Small Employers Exempt. Small employers with fewer than eleven employees do not have to provide PST.
Waiting Period for Accrual. Employees begin earning PST after working eighty consecutive hours in Nebraska, but employees can use PST as it accrues.
Existing Paid Time Off Policy. Employers are not required to provide additional paid time off under the law if they have a paid leave policy that meets the following requirements: the policy permits employees to take paid leave in an amount that equals or exceeds what is required by the NHFWA and that can be used as paid sick time. Employers are not required to allow accrual or carryover beyond their existing paid time off policies.
Paid Leave Provided Between January 1, 2025 – September 30, 2025. Paid time off provided by an employer on or after January 1, 2025, that can be used for the reasons covered by the law will be counted toward the employer’s annual obligations to provide PST in 2025.
Payout of Unused PST. The law does not require employers to pay out unused PST at the time of separation.
No Private Right of Action. Employees do not have a private right of action under the law.
The amendment did not change most other key provisions of the NHFWA including:
Carryover. Employees may carry over all unused PST, but carryover does not affect applicable accrual and use caps based on employer size. An employer may avoid carryover by paying out all unused PST at yearend and frontloading the employee’s annual allotment of PST at the beginning of the subsequent year.
Rate of Pay. Employers must pay PST at the employee’s normal hourly rate and with the same benefits, including healthcare benefits and accrual of paid time off (including accrual of PST).
Reasons for Use. Employees may use PST for (1) their own or a family member’s mental or physical illness, injury, or health condition; or (2) closure of the employee’s place of business or child’s school due to a public health emergency.
Notice of Use. An employer requiring notice of use of PST must have a written policy outlining a reasonable procedure for providing notice.
Increments of Use. Employees may use PST in the smaller of one-hour increments or the smallest increment of time used to account for other types of absences.
Documentation. Employers can request documentation to support PST use when an employee uses PST for more than three consecutive days.
Administrative Penalties. Employers that violate the NHFWA can be subject to administrative penalties of up to $500 for a first violation and up to $5,000 in the case of a second or subsequent violation. An employer with an unpaid citation is not eligible to contract with the state until the citation is paid.
Employers must provide written notice of the NHFWA by September 15, 2025, and display a poster at the employer’s worksite thereafter. Employers can provide electronic notice to remote workers or if the employer does not maintain a physical worksite. Current employees who have worked at least eighty hours in Nebraska will begin earning PST on October 1, 2025. All other Nebraska employees will start earning PST once they have worked at least eighty hours in the state. The Nebraska Department of Labor issued guidance in the form of frequently asked questions (FAQs), which should be updated to incorporate updated guidance following the passage of LB-415.
Key Takeaways
Starting October 1, 2025, most Nebraska employers must allow employees who have worked at least eighty hours to start earning paid sick time at a rate of one hour for every thirty hours worked. Employers with fewer than eleven employees are exempt from the law. Employers with eleven to nineteen employees can cap accrual and use at forty hours per year. Employers with twenty or more employees can cap accrual and use at fifty-six hours per year. Employers with an existing paid leave policy need not provide additional paid leave under the NHFWA if the policy provides an amount of leave equal to or greater than that required by the law, and which can be used as paid sick time. Employers can count paid leave that was provided to employees between January 1, 2025, and September 30, 2025, toward their annual obligation for PST if the paid time off was available for use as paid sick time as provided by the NHFWA.
Why the Family Office of the Future Needs Refreshed Operating Models
Advances in tech and a need for talent highlight opportunities for family offices to evolve, Wharton Global Family Alliance survey shows.
In brief
Risk management is among top priorities, but implications can be easy to overlook in outsourced services, data protection and succession planning.
Generative AI remains on the sidelines for now, but family offices can begin strengthening the foundation for the technology and exploring use cases.
Ernst & Young LLP (EY US) and the Wharton Global Family Alliance (Wharton GFA), a world-leading research forum created by the Wharton School of the University of Pennsylvania and the CCC Alliance, formed a three-year collaboration to advance knowledge on issues and trends impacting multigenerational family businesses and their offices. This article is an output of the collaboration and represents EY US’s views on the findings of the 2024 Family Office Benchmarking Report by the Wharton GFA.
Family offices face the need to re-evaluate their operating models over the near and long term, and they are increasingly choosing to leverage external providers specialized in a particular area of need. However, new research in the Wharton Global Family Alliance’s 2024 Family Office Survey shows the inherent obstacles to making the change from a do-it-yourself group to a lean, flexible organization capable of selecting and managing world-class partners.
It’s an exciting time for family offices to reframe potential challenges as competitive advantage. These relatively small organizations are tasked with implementing and working successfully with a huge array of disruptive new technologies. They must address a complex world that demands access to better information, as well as young workers who expect to be freed from low-value tasks by automation, outsourced services and increasing AI. Leveraging and controlling information means balancing risk and opportunity — AI, for example, promises to deliver extraordinary results, but users quickly realize that managing it requires a deep understanding of its inherent biases and opaque decision-making processes. And as family offices forge new relationships, each one exposes the family to new privacy concerns, and it requires management to focus on collaborating with firms that are often vastly larger than their family office clients.
It is therefore no surprise that family office respondents in the Wharton survey say their main priority currently, aside from driving higher investment returns, is managing risk. And when asked about their main risks, they cite information security and cyber risks, reputation management and privacy, and financial fraud and identity theft — all of which are part of the technology risk profile and supported by the back office. They are reflections of how much family offices have evolved in the past few years, as well as how much more that they can achieve with proactive consideration.
In this environment, technology, people and processes must all evolve in parallel. If a family office is working with new technology, they are confronted with the challenge of marrying it with existing staffing, governance and processes. Given the difficulty of hiring, we are forced to consider hybrid operating models that create access to different pools of talent, including outsourcing to service providers that have equal if not better capability and scalability, creating a new paradigm of sophisticated co-sourcing. Yet if handled improperly, such new operating models expand risk, not manage it. And with so much disruption in the present, it’s easy to lose sight of the future in the form of succession plans.
Methodology of the Wharton survey
The online survey instrument was developed and distributed in Q1 2024, both directly to family offices and through a select number of firms that have family office clients. Survey respondents are from 21 countries spread across North and South America, Europe, the Middle East, Asia and Australia. In the Wharton sample, 47% of the family offices serve 1-3 households, about 25% serve 4-6 households, and about 28% serve more than 7 households. About 30% of sample family offices employ 4-7 professionals and about 25% employ over 12 professionals. With respect to the assets under management, 34% of respondents have less than $500 million, 24% have $500 million to $1 billion, and 42% have greater than $1 billion.
Here are four areas of focus for striking the right operating model and moving into the future with confidence.
Talent and outsourced services for family offices
Data protection and its role in enabling the future
Generative AI: being positioned for tomorrow
Further into the future: succession planning
Chapter 1
Talent and outsourced services for family offices
Family offices are increasingly gaining specialized help during a disruptive time for tech and talent — an approach that can pay dividends but also can entail new forms of risk.
Chart description: The types of services and activities that are enabled through the use of a family office and a breakdown of who provided the same services and activities without a family office. Asset allocation ranks as the most-enabled activity, which was typically done by in-house staff.
Within the focus area of people, family offices rely on an array of advisors, as shown in the chart above, whether for common needs such as banking, accounting and legal services or even for less common items like education of family members and philanthropy. On average, family offices spend almost 40% of their budgets on outsourced services (about 30% in investment management as well as 10% in other areas such as back-office support services). With the exception of real estate assets and principal (direct) investments, which are generally managed in-house, the management of other asset classes is outsourced to specialist managers.
By leveraging multiple providers for non-investment services, family offices are gaining specialized help in a difficult market for talent — an excellent strategy in a very dynamic environment. Doing so does not come without risk, as they are also opening themselves up to greater complexity that must be managed. Further, more and more vendors in the market are looking to capitalize on the trend of buy rather than build and may not yet be fully qualified to offer complex and high-touch service needs in a cost-effective manner.
In terms of operating models, single-family offices are also considering new ways of leveraging external providers to support or operate certain functions that require the need for specialized platforms and resources, the separate EY Single Family Office study found. Many single-family offices are collaborating with external partners to support their agenda around risk and operational scalability. Our survey found that more than 90% of single-family offices are either currently leveraging or are considering co-sourcing functions related to risk management across the operating model.
Part of this acceleration toward third-party support stems from a broader set of external service providers — not just law and tax/accounting firms but also banks and others — with enhanced capabilities to support an outsourced model through greater scale and broad expertise to leverage. Such vendors are increasingly adopting institutional-grade industry accreditation to validate their process and control environments, with System and Organization Controls (SOC) and International Organization for Standardization (ISO) badges.
We recommend:
When outsource providers play a significant role in your operating model, bring the same controlled rigor (if not more) to evaluating and monitoring your partners at a board or committee level, just as you would oversee your internal executive team. That is typically done through better governance and oversight frameworks, in the form of service-level agreements (SLAs) and key performance indicator (KPI) regimes in service contracts, as well as advanced data management capabilities that look across platforms and systems.
Look to technology vendors or outsource service providers that have SOC or ISO accreditation as part of the selection or annual review process.
When a vendor says it leverages AI, do further diligence on what that means — is it bringing optical character recognition or machine learning capabilities on data, or supporting with workflow efficiencies, or making actual decisions?
Chapter 2
Data protection and its role in enabling the future
Family offices know that data is crucial to becoming better organizations and must be protected. But the Wharton survey reveals gaps between what family offices are saying and what they are doing.
In the Wharton survey, family offices realize that data underpins their future and must be protected, crossing the domains of technology and processes. As such, family offices want to do more with their data. Yet those intentions must be matched with concrete plans and risk management.
About a quarter of respondents to the Wharton survey (24%) say that their family office or its personnel data has been compromised/breached by hackers or other unauthorized users — a jump from 16.7% in 2022. And of that group, 34% say the breach was slightly or moderately costly, while 8% say the fallout was extremely costly.
On average, family offices employ less than one FTE IT professional and few of these are cybersecurity experts. Even though family offices have identified cybersecurity risk as a top concern, responses indicate that they are not taking sufficient steps to address these risks. Family offices must ensure that cyber and IT risks are evaluated and that response plans are vetted, drawing from a risk framework developed at a board level.
In general, the information technology department in a family office supports a broad range of services, delivered by both in-house IT staff and external vendors. Less than 30% of family offices carry cybersecurity insurance (down from 45% in 2022) despite the potential costs associated with a data breach. However, 75% of respondents reported that they have experienced phishing attacks, compared with 60% in 2022 — a 15-percentage-point increase.
Chart description: The areas within the family office that are evaluated to measure cybersecurity protocols. “Network, cloud and data center protection” was most highly evaluated with 82%.
The technology stack of a family office is truly mission critical as it enables many of the tasks associated with financial management, information consolidation and aggregation, along with client reporting. Wharton survey respondents tell us that they choose such a platform primarily based on how well it can adapt to the specific context of the family office, along with ease of use and accessibility. Cost and complete confidentiality, the other criteria offered in the survey, tie for the lowest ranking — another warning sign that security isn’t always treated as a priority.
Chart description: The criteria a family office uses to choose the best consolidation and/or aggregation platform. “Adaptability to my context” was the highest-ranking choice.
One way that family offices are strengthening their risk profiles is by leveraging external service providers that have prebuilt institutional-grade capabilities. A side effect of looking to these vendors for services comes along with the vendor’s track record of meeting the needs of other large allocators (such as fund managers and public pensions) with tighter operational risk requirements.
Recommended service
We recommend:
Before signing with a new vendor or service provider, review service contracts for considerations such as ownership of data (what they can use your data for and whom they can share it with) and data retention and retrieval after the service terminates.
Perform appropriate due diligence on a managed service provider outsourced IT. Examine how many other single family offices they service, the service location and familiarity with the technology the family office uses.
Ensure your risk management framework addresses cyber risk in line with the spread of your information across partners, especially if your operating model heavily relies on outsourcing. Consider leveraging vendors that support institutional allocators and that meet their risk management needs.
Chapter 3
Generative AI: being positioned for tomorrow
Talent and data are essential for advancing the most disruptive technology since the internet: GenAI. Family offices are mostly not leveraging GenAI yet, but they should be cautiously exploring it.
Chart description: How Artificial Intelligence tools affect family office investment management processes. Most respondents, 56%, said it had no effect.
Since becoming more simplified and consumer-facing, GenAI has rocketed up boardroom agendas — but at family offices, which are rightfully cautious, its impact is largely still not yet being felt in their operating models. Among respondents, 10% reported that they use AI tools to generate new investment ideas and themes, but 56% answered that AI tools have no impact on the investment management process and 25% responded they do not know the impact yet.
GenAI has multifaceted use cases. For instance, GenAI can be used to query existing financial data to create future scenarios or return just-in-time analysis that might take an analyst several hours. More broadly, overall decision-making capabilities about many data-driven topics can be enhanced with GenAI, and everyday worker productivity can be boosted as well.
As familiarity with AI tools and their capabilities increases, family offices are more likely to embrace adoption. But today, that feels like a farther-out future: on average, family offices tell us that they have just 0.5 IT professionals on staff, who are typically more oriented around the “boxes and wires” of keeping technology operating instead of AI-specific domains. Another challenge is that many family offices invest in private markets, where unstructured data sets are not as accessible for identifying patterns, trends and correlations.
So what should family offices do now with GenAI? It’s better to leverage partners first as you build up your internal capabilities and adopt more specialized use cases within your organization. The first step is education to level up skills in the office and provide growth opportunities for employees, raising retention. The earliest use case could be using GenAI tools to work more efficiently: drafting communications, summarizing data, preparing family presentations and other tasks, guided by a thoughtful human worker.
Recommended service
We recommend:
As part of any strategy, the data component again looms as a primary concern. Data storage, construction and management are key foundational elements of GenAI, which can also present new risks to manage and information to keep secure.
Think about privacy and setting some ground rules on use. For example, uploading information to a public AI model poses a security risk, and data stored in the cloud for use by AI can also be breached — therefore, proven partners should be relied upon for AI tools, which must be thoroughly vetted. And relying on AI tools for decision-making could also compromise the fiduciary duty of care in ways that are difficult to understand.
Understand that “has no effect” is likely the wrong answer — the technology is poised to change business-as-usual in every sector. At a minimum, your vendors should be more heavily involved in GenAI, which should affect how you select and evaluate them.
Chapter 4
Further into the future: succession planning
Facing a mix of so many opportunities and challenges today, family offices are evolving dramatically — but they cannot lose sight of the people issues of tomorrow, particularly succession planning.
Forty percent of family offices in our sample were established after 2000. The original wealth creators account for 27%; 31% of the principals or beneficial owners of the family offices are in the second generation, while 25% of the principals or beneficial owners of family offices are in the fourth generation or later. Therefore, the good news is that most of family offices polled have some experience with a handoff from one generation to the next.
But while the operating entity may be prepared for succession, the family itself may not be. Families that have experienced disruption often experience issues on the family side, which damages the symbiotic relationship with the family office. About 40% of respondents reported that they have a formal succession plan for the leadership of the family office (moderately higher than 2022). And that figure is even lower — around 20% — for the family and for professional management of the family office, both of which represent double-digit declines from 2022. Additionally, a third of respondents reported that they have an informal succession plan (perhaps a verbal agreement).
The foundation for success relies on parallel governance, in which the family office provides operational confidence to the family member owners, who in turn return a patient capital base to the family office for investing and growth. Among the challenges they face, family offices primarily cite the young age of the next generation for planning their future roles (39%, compared to 26.2% in 2022) and the potential discomfort in discussing this sensitive subject matter (30%, a jump from 13.1% in 2022). And 22% say that no next-generation member is qualified to lead the family or family office, about the same as in the prior survey.
Chart description: The challenges facing family offices in respect to succession planning. The highest-ranking answer with 39% indicated “the next generation is too young to plan for their future roles.”
When it comes to trustees (who ultimately can control investments and businesses if deposited in trust), 58% of respondents reported that they are individual family members, while 50% reported that the trustees are non-family individual advisors. Based on our experience, an individual trustee tends to be an older generation, again raising the issue of succession.
Recommended service
We recommend:
Understand that transition planning can take a decade or more and that the best time to start thinking about family governance is before changes occur or transitions begin. Today’s owners should mentor the owners of the future for the cohesion, stewardship and competency needed to sustain a healthy business for generations.
Establish separate governance structures for the family and the family office, with clear communication and direction flowing between the two. The family governance focuses on developing a harmonious and capable shareholder base, while the office governance oversees strategy, growth and performance.
Regularly scrutinize who your trustees are and how they are qualified, with clear metrics. According to the survey, the most important criteria for selecting a trustee are privacy and confidentiality followed by loyalty and independence. Are these the best priorities?
Summary
To rapidly adapt to technological advancements and gain specialized services amid talent shortages, family offices must explore new operating models with a focus on effective governance and strategic planning. The Wharton Global Family Alliance’s 2024 Family Office Survey reveals the nuances between managing risk and capitalizing on it, showing areas that are being overlooked in a disruptive business environment.
The Angel is in the Details: Grant Agreements that Matter
Philanthropy is designed to make the world a better place, but the angel is in the details.
The relationship between donors and organizations, whether it’s a major medical institution or a small local nonprofit, are never adversarial …until they are. One of the best ways to ensure satisfaction is to clarify expectations and build a tight and clearly written agreement around a grant.
There’s no central data-base tracking litigation between grant makers and grant receivers, but common knowledge is that lawsuits are few and far between. Even so, consequences for poorly-thought-through grant agreements can be pernicious and include family or community infighting, reputational disparagement, and disillusionment with the art and science of giving.
Many donors and tax advisors focus on minimum annual distributions and look to move money fast but there are multiple ways to meet distribution requirements. Structured agreements are a blueprint for the future that help both donors and grantees navigate expectations.
Using a corporate contract template for grants can be both off-putting and insufficient. But, yes, there needs to be a set of standard clauses like terms, termination, arbitration, and indemnification (which is typically mutual) but there’s much more needed.
Here are three scenarios (there are many more) about what can go wrong:
A donor family funds a lab at a university that costs $1 million. It’s a meaningful donation for the family and they visit it periodically and talk about it with pride. The director who led the lab retires and a new director comes in with different needs and purposes. Within five years of the gift the lab is gone, and the family name has been removed – and they found out when they brought their granddaughter to see it. No one ever called them.
A couple funded a new engineering center at a day school their daughter attended. They wanted to give back to the school that supported their child and made a $3 million dollar donation on the recommendation of the Head of School. After five years there isn’t a plan or budget, and the center isn’t built. Funding paid in full has been generating interest that is not designated to the project.
Through their foundation, a family funds a new program at a cost of $500 thousand dollars, designed to educate at-risk youth over a ten-year period in the community where they built their business. After three years the organization moves the program to another site because it was not sustainable where it was. The family wants their money back.
Engaging clients in building a detailed outline that includes:
The client’s understanding and goals for the near- and long-term expectations
The organization’s goals and capacity to carry out the grant
Terms that describe the triggers for distribution meaning time and accomplishments in advance of future payments
Metrics for evaluating the grant
Details about communications expectations both internally and publicly
Contingency specifications, especially in the case of capital projects, that might include right of first refusal
Consider developing a plain language template for private foundation clients that can be adjusted to meet the criteria and expectations, in terms of time, funding distributions, and short- and long-term expectations of the investment, and to support your clients in finding their better angels.