Family foundation a way
to teach heirs, do good

Much of the family wealth in the Northwest is family made, not the inherited money you might find on the East Coast. As an entrepreneur, you had an idea for a business and were determined to see obstacles as challenges to be tunneled under or circumnavigated in some other way. The same can be said for professionals who have grown their careers to the highest levels.

You feel blessed, but also maybe a little conflicted. You want to contribute to the improvement of the greater society, but how? You want your children to also be blessed but have heard horror stories about “entitled” kids and wonder if the next generation understands what it takes, as well as the responsibility you feel, about your wealth. You want your kids to be better off than you were, but with a humbleness and confidence that they, too, can make a difference.

Let’s look at a couple of ideas. First, Ron Blue, in his book “Splitting Heirs: Giving your Money and Things to Your Children Without Ruining Their Lives,” has a principal called the Uniqueness Principal. It states, “Love your children equally and, as such, treat them uniquely.”

This is difficult to do because we have this notion that we are being fair by being equal in our distributions. Do our children really need the same things? Have you ever seen this cause resentment?

He has another principal called the Wisdom Principal and it states, “Transfer wisdom before transferring wealth.”

I like these concepts. How many “next generations” have been or will be ruined by not having the tools necessary to manage the responsibility of a business or family wealth, and do so with a quiet confidence?

Let’s try this on for size: Now that you’ve made it, you should give it all away. Uncomfortable, isn’t it? Yet you have this desire to help while teaching your next generation.

This brings me to the concept of the family foundation. Historically, private foundations were only available to the ultra-wealthy, due to the cost and complication of foundation administration. Traditionally, $1 million to $2 million was the MINIMUM entrée. Fortunately, this is no longer true.

Sure there are community foundations, and they do a great job. But what if you want to start your own family foundation, allowing your kids to experience the joys of giving while educating them on the causes important to you through the hands-on experience of a financial-giving vehicle?

What if, during this process, you could come to understand your children’s passions through the regular family meetings set up expressly for the purpose of roundtable discussions about the causes being supported? What if, while you wanted to engage in philanthropy, you also still wanted to have a say in the causes supported and the investment adviser you have been using during the growth?

According to Matt Cone, senior managing director of the Northwest Region for Foundation Source (www.foundationsource.com), “Private foundations give families the most flexibility and control of any charitable vehicle, providing an immediate tax deduction for grants that are made in the future. The donor determines who sits on the foundation board, how the assets are invested, and how they are distributed, including grants to charities, scholarships, assistance to families in need, international granting and more.”

Outsourced service providers such as Fairfield, Conn.-based Foundation Source now exist to help keep private foundations running smoothly and in compliance with federal and state regulations so families can focus on their philanthropy. Foundation Source makes it possible to establish a new foundation with as little as $100,000 yet provides services that are robust enough for foundations up to $250 million and more.

During this season of Thanksgiving, take the opportunity to consider these ideas with your family. Imagine the power of the conversations surrounding THAT roundtable.

Imagine if, over time, you could transfer your wealth of knowledge and then come to understand how capable your kids really are to run the next generation of your business? Who knows; then they may want you to retire — and you might feel that you could hand over the reins. THEN what would you do? What more could you accomplish?

Dale Terwedo, certified as a CFP, ChFC and CLU, is principal of Terwedo Financial Services LLC, an independent financial services firm in Edmonds. In practice since 1983, Terwedo is affiliated with FSC Securities Corp., Atlanta, Ga., a member of SIPC/NASD. For more information, visit www.tfsadvisors.com, send e-mail to retire@tfsadvisors.com or call 425-776-0446.