A Passion for Giving E-Book

Peter Klein

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2011

Seitenzahl: 488

Beschreibung

Praise for A Passion for Giving "Klein and Berrie have produced a great book that manages to make complex issues simple. It blends with grace and craft the deep with the practical and the concrete with the philosophical. It is a precious tool for both the neophyte and the experienced philanthropist. It is both a useful manual and a profound exploration of the core values of giving. In a word, this book is a true gift." -Andres Spokoiny, President and CEO, Jewish Funders Network "Through the years, many people have asked us why we set up our family foundation and how we went about accomplishing this goal. The 'why' is easy to answer: we are fortunate enough to be able to give back and help others in need. The 'how' is perfectly explained in this compelling and very informative book by Peter Klein and Angelica Berrie." -Marilyn and Barry Rubenstein, The Marilyn and Barry Rubenstein Family Foundation "This book should be required reading for new donors and experienced philanthropists. Klein and Berrie have crafted a winning combination of practical guidelines and heartfelt personal accounts to create a moving call to action for anyone who wishes to give back. The stories remind us that when philanthropy, an intensely personal journey, is coupled with deep learning, transformation occurs for both the recipient and the donor." -Debra Mesch, PhD, Professor and Director, Women's Philanthropy Institute, IUPUI "I wish I could have had this book to guide me and refer to as my wife, Andrea, and I launched our Harbor Glow Foundation a decade ago. We would have been much more efficient in the process and more focused in our direction from the get-go. Peter and Angelica capture the spirit and nitty-gritty of a family foundation." -Michael Leeds, Co-Chair, Harbor Glow Foundation

Leseprobe

Contents

Preface

Acknowledgments

Part I: So You Want to Be a Philanthropist

Chapter 1: Estate Planning and Charitable Giving

Estate Planning 101

The Estate Planning Process

Case Study—Estate Planning 101

Summary

Chapter 2: Charitable Giving

What Is a Nonprofit Entity?

Due Diligence

Digging Deeper

Donor Advised Funds (DAFs)

Community Foundations

Summary

Chapter 3: Starting a Private Foundation

The History of Private Foundations

Leaving a Stated Mandate for Future Generations

Modern History of Private Foundations

Creating a Private Foundation

Form 1023

Guiding Documents

The Mission Statement

Code of Ethics

Be Proactive and Know Your Charities

Summary

Chapter 4: Managing a Private Foundation

Form 990-PF

The Foundation’s Board and Governance Issues

Summary

Chapter 5: Managing a Private Foundation—Grant Making and Operations

Type of Support: Periodic versus Endowments and General versus Program-Based

What Type of Foundation Will We Become?

Sourcing a Grant

The Acknowledgment Process

The Pre-Proposal Briefing Form (PPBF)

The Due Diligence Process

Progress Reporting and Evaluation

Summary

Chapter 6: Investment Management for Private Foundations

The Investment Management Process

“Why Is the Investment Management Process Important to Me?”

The Investment Committee

The Investment Policy Statement

Addendums to the Investment Policy Statement

Manager Search and Implementation Phase

Communication

Summary

Part II: A Passion for Giving: Lessons in Philanthropy

Chapter 7: The Gift: Philanthropy as the Gift of Who You Are

Giving Begins with the Self

What Are You Most Passionate About?

The Greatest Gift

Summary

Chapter 8: Purpose: Ken Behring’s Story

Introduction by Glen Macdonald, President of the Wealth and Giving Forum

“Somebody Told Me about the Word Purpose” by Ken Behring

Summary

Resources

Chapter 9: The Gifted Giver: Lessons from Peter Karoff (Chairman and Founder of The Philanthropic Initiative) with Insights from Joel Fleishman (Professor of Law and Public Policy at Duke University)

The Philanthropic Learning Curve

Ambitious Goals and Big Ideas

The Gifted Giver

The Transformational Gain of Giving

Summary

Resources

Chapter 10: The Power of One: Lessons from Lisa Nigro (the Inspiration Corporation) and Chip Paillex (America’s Grow-a-Row)

The Inspiration Corporation

America’s Grow-a-Row

Summary

Resources

Chapter 11: The Feminine Principle—Women Leading through Philanthropy: Lessons from Peggy Dulany (Founder of Synergos Institute), Ellen Remmer (President and CEO of the Philanthropic Initiative), and Monica Winsor (Vice Chair, Women Moving Millions)

Women as Change Agents

Peggy Dulany’s Story

Ellen Remmer: How Women Are Transforming Philanthropy

Monica Winsor’s Story

Summary

Resources

Chapter 12: Empowering the Next Generation: Lessons from Sharna Goldseker (Vice President, Andrea and Charles Bronfman Philanthropies, and Director of 21/64), Ruth Cummings (Chair, the Nathan Cummings Foundation), and Lance Lindblom (President and Chief Executive Officer, the Nathan Cummings Foundation)

Sharna Goldseker’s Story

Four Generations of Giving: Lessons from the Nathan Cummings Foundation

Summary

Chapter 13: Philanthropists as Explorers: Lessons from Scott McVay (Founding Executive Director of the Geraldine R. Dodge Foundation, and 16th President of Chautauqua Institution), Aimee Morgana (Founder of the N’kisi Institute), and Paul Winter (Founder of Music of the Earth, Inc.)

Scott McVay’s Story

The Journey of Discovery: Aimee Morgana’s Story

The Grand Symphony of Life: Paul Winter’s Story

Summary

Resources

Chapter 14: The Journey from Doing Good to Making Change: Lessons from Christine DeVita (President, the Wallace Foundation)

A Passion for Learning and the Arts

Learning from Mistakes

Strategy and Listening to Feedback

Summary

Resources

Chapter 15: Heart and Soul: Lessons from Amy Goldman (Chair and Executive Director of the GHR Foundation), and Lynn Schusterman (Chair of the Charles and Lynn Schusterman Family Foundation)

Amy Goldman’s Story: Interfaith in Action

Lynn Schusterman’s Story: Three Thousand Years of Jewish Giving

Summary

Chapter 16: The Philanthropic Journey

A Vision for Change

Summary

Resources

About the Authors

About the Participants

Index

Additional Praise For A Passion for Giving

“This comprehensive guide contains everything you need to know about starting your own charitable foundation. Peter Klein has made such a positive impact on his community, as well as the Claire Friedlander Family Foundation, and it’s great to see him translate the best practices in the nonprofit world to a wider audience.”

—Mark Fasciano, Managing Director, Canrock Ventures, LLC

“Peter Klein and Angelica Berrie give us a fresh look at an important concept. Their insight is meaningful regarding the changing landscape in the world of philanthropy. A great work.”

—Adam J. Gottlieb, Trusts & Estates Counsel, Ruskin Moscou Faltischek, P.C.

“I can think of no comparable book that presents a ‘how to, to do good’ with your success. There is no higher calling than helping your fellow human and the blueprint of how to accomplish this lies within these pages.”

—Eli Wilner, CEO and Founder of Eli Wilner & Company

Copyright © 2012 by Peter J. Klein, Angelica Berrie. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data

Klein, Peter J.

A passion for giving : tools and inspiration for creating a charitable foundation/Peter Klein and Angelica Berrie.

p. cm.

Includes index.

ISBN 978-1-118-02387-7 (cloth); ISBN 978-1-118-22195-2 (ebk);

ISBN 978-1-118-23204-0 (ebk); ISBN 978-1-118-23577-5 (ebk)

1. Charitable uses, trusts, and foundations—United States—Popular works. 2. Endowments—United States. I. Berrie, Angelica. II. Title.

KF740.K57 2012

3361.7’632068—dc23 2011039268

To Claire: Your lessons will not be forgotten and your legacy will continue on—this honor, with its weighty responsibility, I accept and embrace with an open mind and a full heart. You are missed but will always be in our hearts and minds. Rest well my friend.

—-P.J.K.

For my husband Russ, whose generous spirit transformed the lives of so many and changed mine forever.

—-A.B.

Preface

If philanthropy is the cure then private foundations are the actual inoculation or pill that one takes to achieve this cure. Philanthropy, as broken down from the ancient language derivation, means “the love for mankind, the love of people.” Although a private foundation is by no means the only method by which to illustrate or execute one’s love for people, it is certainly a primary choice of many individuals and families when considering a philanthropic gifting program; a program that can incorporate the entire family—for generations to come. A private foundation is much like a family orchard or vineyard; the seedlings are planted and cared for and then passed down to the next generation to continue this care and harvesting.

In this book we have attempted to take the reader on a journey; a journey that starts in the world of concrete science and information and ends up in the world of passion and heartwarming stories of philanthropic successes.

In Part I this journey starts with a hypothetical couple who serve as the vessel through which the reader learns about the basics of estate planning, charitable giving, and private foundations. Once the reader becomes aware that this hypothetical couple chooses the private foundation as their favored “vessel” for their philanthropic giving, the journey is moved along to gain an understanding of the in’s and out’s of a private foundation.

Starting, maintaining, and investing for a private foundation is a broad, well-researched topic. There are scores of excellent books and journals that interested parties can busy themselves with for years to come. In this book, however, it is our goal to provide an overview and a template to get the potential foundation thinking about the issues involved in managing a private foundation. This is by no means an exhaustive journey into the inner workings of a private foundation but it does serve as a primer for any potential philanthropist considering such a vessel.

At the conclusion of this first part, the reader is invited to continue this journey into Part II—the private foundation world; namely the “why.” Although the reader has received much information and a defined template on how to manage and invest a foundation’s assets, he or she has not learned the “why” yet. “Why should one embark on a mission of philanthropy?” “Why should a private foundation be used to make a difference?” “Why even consider this—what difference can it make?”

These and other why’s are answered through the anecdotal accounts of several leading philanthropists. Through many years of “toiling in the private foundation world” we have been able to provide the reader with a continuation of the journey and to warm their hearts along the way. To learn about such visionary philanthropists as Ken Behring, Peter Karoff, and Peggy Dulany is in itself a lesson to be cherished. There are a myriad of additional lessons that can be gleaned from these pages—the importance of being inspired and challenged like those stories from Lisa Nigro and Ken Behring—whose names may not be household fodder but who have certainly moved mountains and dreams along their journey.

It is our hope that this book provides the reader—whether a budding philanthropist or a family member with new found philanthropic responsibilities—with a good understanding of how to invest a foundation’s assets and manage its operations effectively while understanding why it needs to be done: for the common good.

Peter Klein and Angelica Berrie

October 2011

Acknowledgments

Peter Klein

My first thank-you goes to my co-author on this project—Angelica Berrie. Angelica, without your inspiration and passion for giving, this book would have never come to fruition.

There are many fantastic people who assisted in the writing of this book—professional colleagues such as Jon Abbondanza, Lawrence Davidow, Lawrence Doyle, Adam Gottlieb, Michael Fontanello, Brian Iammartino, Robert Larocca, John Murcott, David Okorn, Christopher Petermann, David Sterling, and Steven Stern. A special thanks to my team for their indefatigable support and guidance: Robert Limmer, Trisha Flanagan, and Jane Voorhees.

There were also several private foundation experts who were instrumental in guiding this work: Christine DeVita, Dr. Nancy Rauch Douzinas, Dr. Mark Fasciano, Ann Gambling, Val Green, Amy Hagedorn, Richard Kandell, Ilan Kaufthal, Daniel Komansky, Celeste Land, Linda Landsman, Thomas Lawrence, Karen Outlaw, José Rivero, Long Island Community Foundation, Greg Siegrist, Roy Tanzman, Mitch Tobol, and Michele Cohn Tocci. A special thanks to The Association for Small Foundations and Foundation Source for their indefatigable efforts in advocating for, and fostering, stronger, more efficient private foundations.

A special thanks also to those clients who devoted their time to assist and provide feedback for this work—these individuals (and their families) understand the meaning of giving back and building a sense of philanthropy into their daily lives. They include Gene Bernstein, Don Hill, Isaac Mekel, Ronald J. Morey, Nancy Payne, David Rosen and Bill Schoolman.

Many people I have come across while conducting research for this book embody the essence of philanthropy—these are givers, thinking long term and setting in motion legacies that will far out live them: Steven Acunto, Anthony Bonomo, Bert Brodsky, Stephen and Beth Dannhauser, Charlie Hammerman, Doug Hammond, Anita Kaufman, Gary Krupp, Michael Leeds, Howard Maier, Barry and Marilyn Rubenstein, Stanley and Phyllis Sanders, Roger Tilles, Paul Tonna, Paul and Gail Watson, Andy Whitehead, and Eli Wilner.

Finally, I would like to express my love and gratitude for my family and friends. My wife of 20 years and my three children light the fire that is my fortitude each and every day—it is with them by my side that I remain resolute and confident that any mountain can be climbed and every river crossed.

Angelica Berrie

Often writers don’t see the whole clearly until the book is finished. Listening to experienced voices with a “beginner’s mind” helped me reflect on my own practice, to realize what I still have to work on to get out of my comfort zone.

My heartfelt thanks to everyone who contributed not just to this book but to my learning curve.

To Peter Klein, whose idea it was to provide a narrative companion piece, and for his practical advice on starting a foundation—thank you for risking your reputation with a neophyte writer.

To my philanthropy guru, Peter Karoff, who came into my life when Russ and I were seeking advice on becoming strategic givers, shaped my education in philanthropy, coached me through the growth period of the Russell Berrie Foundation and continues to influence me in so many ways. Looking back at a decade’s worth of copious notes from my sessions with him provided the inspiration to curate a conversation about philanthropy and extract clear messages that readers could apply in their own practice.

To my fellow philanthropists, practitioners, and innovators in the art of giving who, as mentors, coaches, and role models, contributed to my own transformation.

To my sister, Issa, my exacting editor and midwife to my writing labor pains. Her patience and encouragement helped me get through writer’s block, to stop trying to perfect every sentence and just let go!

To the trustees and staff of the Russell Berrie Foundation, my partners in learning and fellow travelers on this journey toward wisdom.

PART I

SO YOU WANT TO BE A PHILANTHROPIST

To me, money is a means to do good. I reached a point in my life where I enjoyed tremendous business success that afforded my family everything we could possibly want. My wife and I then decided that we could use our wealth to make a difference. So we created the Broad Foundations to do four things: to improve urban public education, to support innovative scientific and medical research, to foster art appreciation for audiences worldwide, and to support civic initiatives in Los Angeles.

—Eli Broad, philanthropist and businessman

Setting: An office of a wealth management firm in suburban USA.

Financial adviser, Mr. Emmett (“Em” for short) Pathy, is sitting down to a meeting with one of his longstanding clients—Mr. Phil Anthony. Phil requested the meeting to discuss with his trusted advisor of many years his changing estate planning objectives.

“Hi Phil, good to see you again. How’s the family—is young Charlie finished up at college yet?”

“One more year in his six-year MBA/JD program,” Phil replied. “Everything else is fine, I am glad we were able to meet on such short notice—there is something on my mind that I wanted to speak with you about.”

“I figured it was important when you called,” said Mr. Pathy, an industry veteran. “You are never around here during the summer; usually you are at the beach house.”

“Well yes, but this has been something that has been pestering me and I wanted to get your advice,” said Phil.

Phil, a wealthy businessman who sold his self-made business a few years ago to a large corporation whose shares (some of which Phil received in the buyout) have appreciated substantially in the past two years (to that end, Phil has been involved in a liquidation strategy, most recently thinking the shares have peaked), goes onto discuss his interest in charitable giving. He tells his financial advisor that he is concerned about making sure that his family does not get “lazy” with their inheritance and continue to work hard to build something—just like Phil did. He says he is worried about his grandkids, too—will they become spoiled rich kids—“trust fund babies” like the ones who used to turn their noses up at Phil while he was working his way through college? These are not the values Phil wants to leave his kids and grandchildren.

Also Phil, now retired for a couple of years and never much of a golfer or sailor, has become restless himself. He wants to try to do some new things—get involved with projects—and use his contacts and his resources to help others.

Phil and his wife Mary were never much for charitable giving—it just seemed like a waste to simply write a check—and they always wondered where the money went. How did they know it did some good? Being a control-oriented person, Phil was bothered that he lacked control when giving in this manner. Sure, it was fine for the one-off minor checks—but now that they have amassed serious wealth they are more interested in being active in their giving.

A friend at the club had started a private foundation for his philanthropic interests—he maintains a portfolio of investments for the foundation and has his family involved in deciding which nonprofit organizations to provide grants to each year. But he always seems to be complaining about this form or report, the requirements of the Internal Revenue Service (IRS) and other legal entities. Phil wondered if this might be the right vehicle for his and Mary’s interests; he liked the idea of maintaining control of the portfolio but the minutia of the administration worried him. But maybe there are systems that he could put in place to make the administrative tasks easier to deal with—perhaps with careful planning and execution he could make a private foundation work?

What is actually involved with starting a private foundation? How does one initiate a foundation? What paperwork is involved? How about the continued compliance that is involved—taxes, conflicts of interest, and other related requirements? These are the questions that Phil and Mary have been mulling around in their heads recently. In addition to the legal and tax requirements there are also the soft issues that need to be addressed—which nonprofits would we focus on? How would we state our mission statement? Would the foundation have a spend-down policy over some number of years or a perpetual, legacy format? These questions were also front-of-mind for Phil and Mary.

So Phil came to the office of his financial advisor, someone who he has worked with for more than three decades and has always respected his counsel and friendship—he liked that Em really cared—he “got” Phil—he understood what made him tick.

“Charitable giving is a big area and a big step—one that we need to not take lightly,” said Em.

“I realize this and you know me well enough to know that I am not interested in doing something halfway; the more I read about this philanthropy stuff the more excited I get. Think about the legacy opportunities here—my children are all fairly well off—Mary and I made sacrifices along the way to ensure that they received a good education and understood the value of a dollar. But we worry that they will inherit a substantial amount of money—more than we ever conceived, and that worries us—and that they can get off track. And how about the grandkids? We want to make sure that they receive these same values despite being part of a world that moves so fast and is so focused on the here and now—it is very easy to lose one’s way.”

Emmett suggested that he, Phil, and Mary embark on a journey through the maze that is philanthropy—from the basics of nonprofit research and “packaged products” to more specialized planning and private foundation management. Em said that he would provide a report on each stage along the way so Phil and Mary can be fully aware and comfortable about their decision.

Emmett explained to the Anthonys that his report would take them through the basics of estate planning with a focus on charitable vehicles to better understand the differences between private foundations and other platforms for charitable interests. Em also expects to discuss the importance of understanding how nonprofits work and what to look for in the due diligence process—the key signposts as well as the caution flags. Private foundations are a science onto itself and Em’s report will go into how to start and manage a private foundation—the issues with respect to developing a mission statement as well as an approach toward philanthropy. Of course, there is more to running a private foundation than that—there are possible staffing issues, investment management functions, and the circumstances surrounding legacy and sustainability. Em was confident that his analysis of the field would provide his clients with a working model to effectively make their decision and implement their plans.

“Eyes wide open,” Phil said, “I like it—let’s get started.”

“Great,” said Em, “but first we will need to update some of your financials and talk—broad strokes—about yours and Mary’s interests with respect to charitable giving.”

The three of them sat in Em’s conference room—yellow pad and pen in hand—and started to update the Anthonys’ net worth statement—much of which Em already knew. But there were some new nuances that came to light. For instance, Phil and Mary were always major advocates of education for their children—Em can recall how, early on, they sacrificed on some extravagances to instill in their children the importance of gaining an exceptional education. Vacations were limited—school always came first. There were high expectations and the Anthony children responded nicely. Phil and Mary now wanted to use some of their wealth to establish an “educational legacy” for their grandkids and great-grandchildren. In this way, the burdens of a strong, well-thought-out educational plan that has increased substantially in the past several years would become more manageable for the next generation of Anthonys. Not to say that shared sacrifice is not an important virtue—clearly it is—but Phil and Mary did not want education to become something that had to be thought about but rather something that was built-in, “hard-wired” as Phil would say, into their plans from the get-go.

Phil took some notes and already had some ideas with regard to this “segmented educational legacy portfolio” that would serve the family for generations to come. There was also the issue of the beach house that they would need to address. This purchase, on Long Island’s East End, was Phil and Mary’s first “big ticket” splurge. Years ago, realizing how important it was to them to have their kids together and how each of them enjoyed the splendor that is Long Island’s East End, Phil and Mary, to the total surprise of their friends and neighbors, purchased a lovely home that has become their “family home.” It was important to the Anthonys that “Sandy Haven” was kept in the family—a home for generations to come to gather and maintain the bonds between them. Call it a “family compound” or “beach house”—it didn’t matter to Phil or Mary. It was important to them that it stayed in the family—equally owned by all immediate family members and maintained in part through a trust of some sort so that it would not become a major financial burden to keep up. “I have heard of these types of arrangements so I am sure they exist,” said Mary. “Of course, there are trusts and methods by which this can be accomplished,” replied Em, adding that there are potential tax savings along the way as well.

Emmett, a proactively minded financial advisor, continued in this vein, discussing and updating his files on the Anthonys’ current situation—both financially as well as emotionally, for Em knew that much of his work is clearly “science-based” (finance and economic science) as he calls it, but the soft or emotional side of his practice—“the art”—is as critical if not more so in many cases. Em confirmed that Phil and Mary, who also worked for the company for many years, receive a sufficient income from their accumulated pension benefits to maintain their lifestyle (which included a robust travel/vacation schedule) and that their balance sheet was free of debts of any kind. Their health was excellent and Phil and Mary were quite proactive in maintaining their healthy lifestyle—walking, cycling, and even taking a few yoga classes each week. That said, Em updated his files on their insurance portfolio—both own fully paid up life insurance held in trusts as well as long-term care policies to ensure that they were cared for in case they were to become incapacitated.

It seems apparent that Phil and Mary were very attentive to their family’s educational needs as well as their own financial ones. “The new thing on our list, as a consequence I guess from the sale of the business, is this interest in doing something in the charitable world—something where we can maintain some control and be active in the process,” said Phil. “As we mentioned, a friend has set up a private foundation but he seems to have some issues with management and administration so we were not sure that would be the way for us to go,” said Mary.

Emmett assured Phil and Mary that there were methods one could incorporate into their private foundation management that would ease the administrative burdens, but agreed that running a private foundation is no small matter—it requires time, energy, and a strong interest in the charitable work underpinning its mission.

Em sat back and listened (something he does more than speaking in these meetings where his goal is to gain an understanding of his clients) as the Anthonys described their interests in this next phase of their lives.

Em knew the next steps started with an examination of the basics of estate planning and charitable giving. As he began to lay out his report, Em focused on the glide-path that would be the journey that he and his clients would take over the next several weeks—from estate planning and charitable giving to the basics and operations of a private foundation to investing protocols for private foundations.

CHAPTER 1

Estate Planning and Charitable Giving

I will continue to distribute blankets, sleeping bags, warm clothing, and food on a regular basis, in the hope that my modest efforts will give some comfort to those people we are able to help.

—Mohamed Al-Fayed, philanthropist, businessman

Em was nodding his head—he knew his client and understood exactly where this was going and he liked the big picture very much. To start things off, Em developed a detailed report including the reasons—why, from an estate planning perspective, someone would look at charitable giving as an instrumental part of their estate plan.

Starting from the beginning—estate planning is the process by which an individual sets up his or her (or in case of a married couple, their) estate (what remains after they are deceased). In the United States, taxpayers may be subject to an “estate tax” on the value of their assets upon their death—it is the minimization of these taxes that is often the initial reason why someone embarks upon charitable giving (of course, the person also has to have an interest—a “calling”—to give back to society).