Introduction to philanthropy

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Though the terms are often used interchangeably, there’s a big difference between philanthropy and charity. 

Philanthropy carries the intention to strategically and sustainably address an issue over the longer term in order to bring about meaningful change. Charity, on the other hand, is typically a simple donation or generous act, usually in the moment and one-off. 

Philanthropy comes in many forms – from the giving of money and assets to the sacrificial contribution of time, talent, and expertise in volunteering, mentoring, and even serving on boards of philanthropic organizations.

 

Why philanthropy?

 

There can be any number of reasons behind philanthropic ambitions. But if you can understand why you want to give, that’ll help you define how best to go about it – including how personally engaged you want to be. 

You might, say, want to help other people, or you might find the potential of tax relief from giving attractive.1

You could be driven to create a family legacy: a way to be remembered by society, to unify your family through a shared sense of vision and purpose, and to develop future generations by helping them gain governance and management expertise while avoiding the disincentivization risk a large inheritance brings.

 

How to identify your family’s legacy and mission

 

Your first step should be to identify which issues lay close to your heart. These can be anything that’s important to you – from healthcare, education, religion, and the arts to environmental and social justice issues. 

You could start a discussion across multiple generations to pinpoint your family’s shared beliefs and values. Consider how you would like to distinguish yourselves and what you would like to accomplish. 

Karen Kardos, Head of Philanthropic Advisory at Citi Private Bank, recommends you consider these key questions:

  • What motivates your philanthropy?
  • What do you hope to achieve through your philanthropy?
  • How would you define success?
  • What causes are most important to you?
  • What are your family’s shared beliefs and values?
  • What distinguishes your family from other families?

Once you’ve got that figured out, your last step is to create a mission statement that articulates your philanthropic purpose and principles. This will help guide your family’s charitable work to create the legacy you want.

 

How and where to give

 

Mission statement in hand, you’ll next need to set your guidelines for giving. These will identify the focus of your philanthropic cause, and how you’ll provide funding.  

There are several different ways you can give. 

You could make a direct donation, give through donor-advised funds, or form a private foundation, limited liability company, partnership, or for-profit entity. 

How you choose to give can be influenced by a number of things: the degree of control you want, your need for tax relief, how engaged you’d like your family to be, your desire for privacy, the potential for legacy, and the level of flexibility you’re after. 

Social investing, which combines the aim of a financial gain with the ability to serve the greater good, is increasingly being used to complement philanthropic goals too. 

You might consider sustainable investing strategies (ESG integration, thematic investing, impact investing) in your investment policies to develop a portfolio that aligns with your family’s social and financial objectives.

How individuals engage in philanthropy is something that’s changing over time. 

“Many of us have heard the saying ‘time, treasure, and talent’ about philanthropy. In the past, this has taken place through grant-making and volunteerism. While the saying still holds true today, the attitude, definition, and practice of philanthropy for younger generations suggests it could use a tweak – perhaps to ‘time, treasure, talent, and lifestyle choices.’ Those choices concern how to live and behave according to a person’s value system. Employment, investing, and consumer choices are some of the tools the younger generation values to do good and make positive change.”

- Karen Kardos, Head of Philanthropic Advisory at Citi Private Bank.

KEY TAKEAWAYS:

 

Philanthropy is characterized by the intention to strategically and sustainably address an issue over the longer term in order to bring about meaningful change.

The first step to getting involved is figuring out why you want to give – that’ll help you define how best to go about it.

You can use philanthropy to create a family legacy, and there are different ways you can give to align your philanthropic work with your values and objectives.

 

  

1 Citi Private Bank and its affiliates are not tax or legal advisers. Clients are advised to obtain independent legal and/or tax advice before entering into any transactions.

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