Philanthropy is a meaningful way for families to create a lasting impact. It provides an avenue to give back to society, reflect on core values, and build a legacy rooted in care and responsibility. More than that, it offers a unique opportunity to involve family members, especially the next generation, in a shared effort that promotes learning and strengthens intergenerational bonds. Effective philanthropy, however, requires thoughtful planning and alignment between a family’s values, objectives, and chosen approaches to giving.

Setting Clear Objectives

The foundation of a successful philanthropic strategy lies in defining clear, actionable goals. For many families, one key decision is whether to adopt a finite giving model—distributing resources within a set timeframe—or a perpetual approach that sustains giving across generations and in perpetuity.

Finite giving emphasises liquidity and capital preservation, making it ideal for families addressing urgent or time-sensitive causes. For instance, when aiming to distribute all philanthropic resources within ten years, careful scheduling of outflows and alignment with portfolio performance becomes critical.

In contrast, perpetual giving centres on creating long-term structures, such as foundations or endowments, to generate ongoing income for charitable initiatives. This approach often prioritises growth-oriented investments, which support adaptability and ensure sustained impact beyond a single decade.

Both models have unique advantages and challenges, and the choice between them depends on a family’s goals, time horizon, and appetite for ongoing governance.

Finite Giving: Focused Impact Within a Set Timeframe

Finite giving offers families the opportunity to make a concentrated impact within a specific period. By distributing their capital stock over a defined timeline, such as ten years, families can direct their efforts towards pressing needs. This approach often provides a sense of fulfilment, as donors witness the tangible results of their contributions during their lifetimes.

While finite giving allows for focused and immediate impact, the risk of funding gaps arises once the resources are fully deployed. Organisations that have benefited from the donations may struggle to maintain their operations without alternative sources of funding. Moreover, the urgency of a limited timeline can sometimes lead to rushed decisions or missed opportunities for thorough planning and evaluation.

Finite giving works best for families addressing time-sensitive issues or those who wish to see the direct impact of their efforts within their lifetimes. For example, disaster relief initiatives or projects with clear and measurable short-term goals can benefit greatly from this approach.

Perpetual Giving: Sustained Impact Across Generations

Perpetual giving provides a way for families to ensure their philanthropic legacy endures over time. By establishing long-term structures, such as foundations or endowments, families can generate ongoing income to fund charitable initiatives. This approach offers stability to recipient organisations, reducing their reliance on unpredictable donations.

A significant advantage of perpetual giving lies in its potential to engage the next generation. When younger family members engage in philanthropic efforts, they deepen their ties to family values and contribute to the broader legacy (Breeze, 2009). This sense of belonging complements professional governance, ensuring a balance between emotional connection and impactful giving. Involving younger family members in philanthropic decision-making and governance also develops their understanding of financial and social responsibility. Over time, a family can also introduce maturity models into their philanthropic giving and continuously improve on the impact they have. These learnings can then also be translated into other areas of the family or the family business, for instance.

Research highlights (Astrachan and Jaskiewicz, 2008) that in family businesses, the total value of the business is not solely financial. Emotional components, such as pride, identity, and legacy, also play a significant role in valuation. Similarly, in philanthropy, the emotional returns (ER) derived from contributing to meaningful causes often outweigh the financial costs. For family members, these emotional returns can reinforce their connection to the family’s legacy and instill a sense of purpose across generations.

However, emotional returns must be balanced with emotional costs (EC), which can include tension around decision-making or misalignment in philanthropic goals. This balance is particularly critical for perpetual giving, as the family’s ability to align its emotional and strategic priorities will influence the long-term success of its philanthropic efforts.

Perpetual giving requires robust governance and management. Setting up and maintaining a foundation often involves complex administrative processes and higher operational costs. Furthermore, there is the risk of mission drift, where the original intent of the giving strategy may become diluted or misaligned with the priorities of future generations.

This approach is best suited for families committed to intergenerational engagement or those supporting causes requiring long-term funding, such as education, healthcare, or sustainability projects.

Perpetual giving is financed through the excess returns after a minimum return required to maintain the capital stock. Another variation of the theme would be to direct investments into social entities that create economic value by supporting the original goal of the foundation (impact investing).

Measuring Success

Philanthropic success isn’t just measured in financial terms; it’s about the impact created for the chosen causes. A robust measurement framework helps families assess their efforts and refine their strategies. This might include:

  1. Impact metrics: Evaluating social, environmental, or operational outcomes for recipient organisations.
  2. Transparency and accountability: Establishing reporting systems that track the use of funds and the results achieved.
  3. Adaptability: Regular reviews that ensure the giving strategy aligns with evolving goals and external conditions.

These measurements provide clarity and confidence, making it easier to sustain meaningful contributions. The aforementioned maturity model can provide a first assessment of a family or a foundation to measure their current status.

The Role of the Family Office

Family offices play a critical role in bridging philanthropy and wealth management. From ensuring liquidity to managing tax efficiency, their support enables families to focus on giving without losing sight of broader financial objectives. Key strategies include:

  1. Aligning asset allocation: Shifting investments toward liquid assets like government bonds or blue-chip equities to meet donation timelines.
  2. ESG integration: Prioritising sustainable and socially responsible investments to align with the family’s values.
  3. Tax considerations: Exploring jurisdiction-specific opportunities, such as tax deductions or credits, to enhance the financial impact of giving.

Practical Steps for Success

Drawing on insights from a recent client memorandum, here are practical actions families can take to align their giving with their values and goals:

  1. Create a pledge schedule: Develop a clear timeline for distributions to ensure sufficient liquidity for commitments.
  2. Rebalance portfolios regularly: Avoid risk drift by actively managing asset allocations, especially with a shorter time horizon.
  3. Engage in impact investing: Consider mission-related investments that align with philanthropic objectives while delivering financial returns.
  4. Develop a governance framework: Establish structures for decision-making and reporting to maintain accountability and transparency.

Conclusion

Philanthropy is more than financial generosity—it’s a way to reflect a family’s values, strengthen intergenerational bonds, and create meaningful societal impact. By setting clear objectives, engaging the next generation, and adopting structured approaches to giving, families can ensure their efforts are both impactful and enduring.

References:

Astrachan, J.H. and Jaskiewicz, P. (2008), Emotional Returns and Emotional Costs in Privately Held Family Businesses: Advancing Traditional Business Valuation. Family Business Review, 21: 139-149. https://doi.org/10.1111/j.1741-6248.2008.00115.x

Breeze, B. (2009). Natural Philanthropists: Findings of the Family Business Philanthropy and Social Responsibility Inquiry. Kent Academic Repository.