Building a Legacy: Frequently Asked Questions About Philanthropic Structures

Q: Why should high-net-worth families consider philanthropic structures as part of their financial planning?

A: Philanthropic structures serve a dual purpose: They provide significant tax advantages while enabling families to make meaningful contributions to causes they care about. Without strategic philanthropic planning, families face higher tax exposure and miss opportunities to create lasting social impact. These structures transform wealth transfer from a purely financial transaction into a vehicle for generational values and legacy building.

Q: What is a Donor-Advised Fund (DAF)?

A: A Donor-Advised Fund is an investment account dedicated to charitable giving. When you contribute assets to a DAF, you receive an immediate tax deduction while retaining advisory privileges over how the funds are invested and distributed. This structure allows you to support charities you care about while maintaining flexibility in timing and directing your philanthropic contributions.

Q: How do Charitable Trusts work?

A: Charitable Trusts are irrevocable trusts that transfer assets to charitable organizations with sophisticated tax and income benefits. There are two primary types:

• Charitable Remainder Trusts provide income to donors during their lifetime, with the remaining assets ultimately going to charity.
• Charitable Lead Trusts channel income to charitable organizations first, with residual assets eventually returning to the family.

Q: What makes a Family Foundation different from other philanthropic structures?

A: A Family Foundation is the most comprehensive philanthropic structure — a private nonprofit organization controlled by the family that enables structured, multigenerational giving strategies. Beyond substantial tax advantages, foundations embed philanthropic values into family culture and create opportunities for multiple generations to collaborate on meaningful social impact initiatives.

Q: How should families begin the philanthropic planning process?

A: Start by assembling a specialized team that includes an estate planning attorney, tax professional, and wealth management advisor who can work together to align your philanthropic goals with your financial objectives. Equally important is engaging in deep family reflection: What causes resonate with your family’s values across generations? How can your wealth serve as a tool for broader societal impact? These personal considerations should guide the technical planning decisions.

Q: Is philanthropic planning just about tax efficiency?

A: No. While tax benefits are certainly valuable, successful philanthropic planning is fundamentally about creating a legacy that extends beyond financial wealth. It’s about making strategic choices that reflect your family’s core beliefs and values while maximizing your potential for multigenerational impact on the causes and communities you care about most.

Do you have an additional question not answered here? Reach out to Grant Hendricks or another member of LP’s Trusts & Estates Group.