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The Legacy A family tradition of philanthropy finds a new voice in the next generation. As the eldest son of Fred Krehbiel and direct descendant of Molex founder Frederick Krehbiel, Liam Krehbiel might have been expected to take his place in the family firm, perhaps as heir apparent. But the Chicago native instead chose to devote his time and energies—and a considerable chunk of his wealth—to making the city better for everyone, establishing A Better Chicago in 2010 to focus on the educational needs of city residents. "We think of ourselves as a venture capital fund with a social mission, borrowing from private sector best practices and bringing an investor mentality to our work," says the 38-year-old, who considers himself part of the new generation of philanthropists. Grow- ing up, Krehbiel's parents drove home the message that giving back was a key part of being born into affluence. On the wall of his home, his father had carved into a plaque the words of his grandfather: "With every opportunity comes a responsibility." As a boy, Krehbiel would groan every time the phrase was uttered. "I'd say, 'It's OK. I get it; I know,'" he recalls, laughing. Now, he says, he appreciates the meaning behind the words. "We are one community." Chicago has long had a tradition requir- ing business and civic leaders to be engaged in some kind of good works. "Yet, the way we get engaged is what is changing," says Krehbiel, who has an MBA from Northwestern University's Kellogg School of Manage ment and spent time at Bain & Company before launching A Better Chicago. His path to philanthropy, like that of many "next gen- eration" donors, goes well beyond simply writing checks. "We want to follow our parents' lead and become engaged in the community, but we [believe that] focusing on the nonprofits most likely to succeed with the resources we can help steer their way is the way to carry that involvement through." 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 company stock, family members can deduct its cost; if they are donating to a donor- advised fund, they can deduct the often significantly higher fair market 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 founda- tions. 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 deduc- tions, 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 sib- lings were each allowed to determine the target(s) of $100,000 per year from their parents' new foundation. In 1999, each of the siblings received $26.5 million from their parents to start their 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 ven- ture 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 experi- ences that they'll be putting in their memory banks and drawing on in the decades to come." 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