Sunday, August 8, 2010

Are You Going to Make the Pledge?

Some 40 billionaires apparently have acquiesced to the suggestion from Warren Buffett and Bill Gates to give half of their wealth away to charity upon their death. Similar thoughts have been expressed by people who can be identified as ultra high net worth or high net worth individuals or families. Some of the same principles can be applied by those of more modest wealth.

According to newspaper accounts, a number of other billionaires have also pledged to put at least half of their wealth into their personal/family foundations, or to make substantial grants to other non-profit organizations. Roughly half of my time these days is spent on helping with the financial and investment activities for others, including managing the investments for our own relatively tiny family foundation.


One should be asking lots of questions before setting up one’s own foundation or making meaningful contributions to others. The following is a preliminary list of topics to be considered; there are no right or wrong answers.

1. Purpose

  • single
  • multiple
  • investment vehicle
  • training for family members in terms of grants/investing
  • control of assets
  • promote family cohesion

2. Longevity of foundation

  • time limited
  • dollar limited
  • tax constraint limited
  • dynastic
  • eternal

3. Governance

  • singular
  • internal
  • external
  • mixed
  • evolution

4. Compensation

  • family
  • external members
  • professional service providers

5. Mechanisms for review and flexibility

6. Grants/contributions

  • specific programs
  • endowments

    • present management-operational and/or investment
    • succession process

      • singular
      • committee
      • continuance
      • improvement
      • opportunity to step up


The above labels are cryptic and each could be answered in a book- length treatise. For this exercise to be truly useful however, one needs to enter into a dialogue. The reason that a dialogue is necessary is to identify investment structure with underlying principles. I would be pleased to be part of the dialogue, or to help explain this methodology to any members of our blog community.

Each branch of the decision tree outlined above is likely to cause an impact to the investment program, and all of this will change under the chemistry of the personalities involved.

Please share with me your thoughts on this or past blogs.
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