Foundations, A Key to Bridging the Personal-Professional Chasm - More Benefits of Charitable Giving

Financial or business planning is at its most powerful when it is well integrated with one's personal goals. And the ideal way to accomplish such an integration, at least for people with some degree of wealth, is starting a private foundation. Read on about why that is so, and how to go about it correctly.

Foundations can be the perfect solution to one of the vexing problems that wealthy families have -- how to handle philanthropy the right way.

First, philanthropy can take many forms and once defined can still change from generation to generation. Most wealthy families tend to be giving. It's part of the whole ethic involved in generating wealth -- the idea of giving back. However, there's usually a problem when this is done without proper planning: Giving back to one's community becomes a misguided and vague self-imposed duty and not something that is done with joy.

Rather than give to those areas of need that are of a real interest to them, wealthy individuals tend to get hit up with an endless list of requests from charities. The unfortunate result is gifting with no sense of purpose. Even if they find areas of interest in philantropy, they're rarely able to truly integrate them into their lives in a meaningful way.

This is unfortunate, because in philanthropy lies a tremendous opportunity for integrating the personal with the professional. From a tax perspective, wealthy people benefit greatly from making charitable gifts. So if their giving is coordinated with their personal interests and activities, the result can have a cascading positive effect on the lives the givers as well as the recipients. Bringing one's charitable mission together in a coordinated way as to completely absorb one's personal life is the ultimate leverage in planning and can bring order from chaos.

In order to reap the benefits from this process, a plan is essential. And starting a foundation forces the founder to come up with a plan, which starts with a mission statement. Just like the business plan, its for-profit cousin, the mission statement results in clarity as to how time, energy and money will be directed towards causes the founder or family wish to support.

When first meeting with clients in an effort to create that mission statement, I've always found it very helpful to start by asking the following question, "If you had all the wealth you needed and found you only had 2 years to live what would you do with the remainder of your life?"

The answers to that question will get them off to a great start with their mission statements. It helps them pinpoint their interests and forces them to come up with a plan on how to integrate them with their lives as well as their foundation.