When a foundation is initially created, its governing documents are a creature of circumstance—usually, there is some tax or charitable impulse that is driving the creation of the foundation. The attorney or accountant prepares the same forms/documents, and even if the attorney asks about governance and a mission, the discussion is often limited. For the living donor, the immediate answers can be very simple—the donor wants to be in control of the foundation and to maintain the flexibility to make decisions as the donor sees fit. That makes sense—the donor can make his or her own decisions, and doesn’t necessarily need to put together a mission statement to explain his or her thinking—which may change as the donor develops his or her philanthropy.
That all works, until the donor isn’t around. Succession planning is about what happens when the donor is dead or incapacitated and can’t make decisions themselves. Succession planning answers who will make decisions for using the funds and provides criteria for making those decisions.
Every foundation has a succession plan. In some cases, the donors have carefully considered the plan; in others, the succession plan is by happenstance—the trustee of the donor’s estate planning trust makes decisions by default, and is given no more guidance than to make distributions for charitable, educational, religious, and scientific research. Or, a common default in some documents is that the probate court divvies the funds up among charities.
In order to put together a comprehensive strategy for foundation succession planning, the leaders of the foundation should identify their purposes behind the foundation and its grantmaking activity. A donor may consider creating a “donor intent” statement or statement of values that helps future decision makers to make decisions. The foundation may also consider creating or adopting grantmaking guidelines that identify the expected criteria for grants. These may be as simple as “to continue making grants to organizations that I supported personally during my life” or a mission to effectuate some change in the world (or something in between).
The biggest challenge for a mission statement: writing something that will help successor decision makers make choices with the donor’s limited funds. That’s the point, after all. We’ve been to a number of foundation meetings where the trustees furiously squinted at the trust documentation to try to ascertain whether the donor would have made the gift to the art museum, hospital, church or his grade school, and found only “charitable, education, religious, and scientific research” staring right back, or perhaps some flowery language about developing the human spirit.
Donors also have to make the all-important decision – identifying who will make decisions when the donor is not around. The donor could nominate trustees/directors, but will these people be his family members and friends? Professionals (and non-family members)? A mix of both?
Donors have different goals for the foundation. Some donors see family involvement as the key issue, and want to see their children take the helm and make innovative philanthropy the family business. Others have a strong sense of donor intent – they want the foundation to follow the goals and mission they set down. If so, perhaps the governance should include some type of “checks and balances” to make sure that successor leadership focuses on donor intent (and there is a safety valve to fix any issues that come up).
From these questions come a number of other questions—compensation, expectations of involvement, getting later generations involved. And foundation leaders should plan for other events, such as family discord.
We’re looking forward to a discussion on these topics in September.
