Boston Common - Niche Media - A side of Boston that's anything but common.
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raise, along with his son, Howard Warren Buffett. At the same time, he adds, "I don't want that to stop me from doing the biggest things that I can today. I'm going to put all my time and resources into addressing these issues." Buffett said his son had visited 58 countries by the time he went to col- lege—and "our destinations weren't places like Paris and Cancún." Three of the children now sit on the board of Buffett's foundation, and trustees are designated $20,000 apiece every year to direct to projects of their own choice that fit within the broader mission of the foundation. T aking a f lexible strategy with the legal and financial compo- nents of philanthropic giving is as essential as when dealing with generational differences. For decades the family founda- tion has been the default vehicle for giving. While foundations allow a family unlimited, multigenerational control over grant making, the tax deductions for contributions are less generous than for other vehicles, such as donor-advised funds. (For instance, if donating com- pany stock, family members can deduct its cost; if they are donating to a donor-advised fund, they can deduct the often significantly higher fair mar- ket value of those securities.) By some estimates, 70 percent of all foundations have assets of less than $1 million, a level that most experts consider to be inefficient. Michael Cole, president of Ascent Private Capital Management, says that while a foundation—which requires its members to keep tabs of investments, governance, and taxes as well as evaluating and monitoring grants—can be "a great financial parenting and educational tool," unless a family has or plans to donate more than $10 million to the foundation, the administrative costs are too high to justify this option. The other most popular vehicle is the donor-advised fund, established under the umbrella of sponsoring organizations, such as community foundations. In recent years a range of nonprofits and special divisions of banks and investment companies like Fidelity have offered opportunities for families to establish their own DAFs. However, there are more constraints: Donors can only suggest or advise, rather than dictate, where they want grants to go; and children who serve as advisors cannot earn a salary for doing so. But for a growing number of families, the lower overhead costs, higher tax deductions, and the increasing ability to bring in children or grandchildren as "co-advisors" are outweighing some of the disadvantages. While families might want to ponder the tax considerations associated with various philanthropic vehicles, the decision about whether or not to be philan- thropic is almost never made for financial reasons. "The tax breaks you get for charitable giving are no greater than those you get for losing money in the stock market, and nobody invests in stocks with the intent of losing money," points out Ramsay Slugg, wealth strategies advisor at US Trust. For Howard Buffett, the biggest challenge for philanthropists isn't whether to set up a foundation or DAF. "The worst thing you can do is to live in your comfort zone," he says. In the late 1980s, Buffett and his siblings were each allowed to determine the targets of $100,000 per year for their parents' new foundation. In 1999, each of the children received $26.5 million from their parents to start individual foundations. "Hey, many of my ideas were stupid," he admits, recalling the notion of funding a camel dairy for Western Sahara refugees. "You learn fast to think hard about what to support, but at least the mistakes were small, while the lessons were big." Nonetheless he encourages his children to venture into new areas. "I can be a bit of a dictator, but I know that it's important for the next generation to challenge me, to have someone with a view that's a little less myopic ask me tough questions. These are the formative experiences that they'll be putting in their memory banks and drawing on in the decades to come." BC Life After Death Bequeathing a philanthropic legacy requires a precise language—and foresight. IsaBella stewart Gardner had a mInd of her own when it came to her art collection. She knew exactly what she wanted and how she wanted it displayed— and she made sure her death would not change that. The terms of her will, which funded what is today the Isabella Stewart Gardner Museum with a $1 million endow- ment, stipulated that the trustees could not alter "the general disposition or arrange- ment" at her Fenway mansion. Curators interpreted that rule so literally that they have left in place the empty frames of the iconic artworks famously stolen in 1990. The prospect of changing anything—and triggering a provision that would result in the sale of all the artworks with the proceeds going to Harvard University—has resulted in curators reluctant to move artworks in order to clean them, says Peter Karoff, founder of Boston's philanthropic consulting firm The Philanthropic Initiative. "It's a perfect and odd example of donor intent somewhat par- alyzing an organization." Donors who expect their foundations or other charitable endeavors to outlive them need to word their philanthropic legacy so that it doesn't leave heirs in a straitjacket, says Melissa Berman, president and CEO of Rockefeller Philanthropy Advisors. "It's opti- mal not to constrain future generations." A family that earned its wealth in Boston might not realize that in 50 years, its members may live far away. While it might seem reason- able for a foundation's creator to hand-pick "local" causes, it could become challenging for out-of-state heirs to effectively support Boston-specific organizations. "It's all about flexibility," says Karoff. bostoncommon-magazine.com 111 108-111_BC_F_Philanthropy_Spring14.indd 111 2/10/14 12:01 PM