Family Foundations

Creating The Family Legacy
For Future Generations

By Don Schwerzler

Family foundations have a valuable use in succession planning.

When working on succession strategies with our family business clients we share a very important lesson we have learned: Unless a family business owner has something to move to, he or she is not likely to move from the family business. It is not just a matter of a title, but a place where they can be involved in what they have created. The family business is their "theater," it is how they are defined, it is where they go for validation. For many family business entrepreneurs, the idea of not being part of the family business is a concept that provokes many emotions.

One strategy we recommend is to have the family business entrepreneur consider creating a family foundation. This is not something that goes into play after the person dies, but something that can capture their creative energy while they are still alive.

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One client example: Bob founded a distribution business 35 years ago. For the past 5 years, his son has been running the business with much success. Bob and his wife Judy are in their early 70s, in good health and leading very vibrant lives. Bob got tired of fishing and golfing, traveling and puttering around the house. Judy thought that it would be a good idea for him to go back to the family business to keep from being bored to tears and moping around the house. Bob thought that might be a good idea, but his son was not as enthusiastic. That's when we got the call for help!

After we had talked to the family it was clear that Bob and Judy needed something that would engage their creative energy and something that they could engage in passionately. We talked about creating a family foundation - an organization that would be created to help families in their community dealing with leukemia (Bob and Judy had lost their other child to the disease when she was in her late teens). They knew what they went through at the time, and they thought they could help others facing that same kind of circumstance. The more they thought about the idea, the more they liked it. Not only would it be doing some good for others in difficult situations, but it would also provide Bob and Judy a chance to work together in building an organization - helping to recreate the sense of excitement, visioning and togetherness they had when Bob was starting the family business.

Their accountants and attorneys liked the idea of a family foundation as well since it provided some interesting tax savings and was seen as a catalyst to re-start and finish the "stalled" estate planning process they had been working on.

As they were doing their research on creating a family foundation, they were concerned that they did not have enough money to develop a foundation and were concerned that the red tape necessary when dealing with the IRS and other governmental agencies would be too daunting, if not now, certainly in the future when they would have less ability to cope with that kind of stress.

I could hear the disappointment in his voice when Bob called to tell me that they had decided to drop the idea of the family foundation.

That's when I asked Bob if he had considered using a community foundation as a way to make his family foundation a reality. Bob said he was not familiar with community foundations...

Family Business Experts Understands
Family Values andBusiness Systems

Like with Bob and Judy, we can help you explore family foundations and see if one is right for you.