Shifting the Paradigm: From Ownership to Stewardship in Family Philanthropy

At Grant Philanthropic Advisors, we have the privilege of helping philanthropic families set up their charitable giving vehicles and define their values and mission. We also help families pass the torch of leadership from one generation to the next as it relates to family philanthropy. Often, this is from the founding generation to the next. 

We’ve observed a subtle, yet powerful, paradigm shift in these transitions focused on the mindset of Ownership versus Stewardship of the charitable assets. In setting up a charitable vehicle – whether it is a donor advised fund or a private foundation – a philanthropist is legally shifting assets into the public trust. While they may control grantmaking and how assets are invested, the nature of the legal structure ensures the assets are used for the public’s good. Yet, the founder may still have an owner’s mindset when it comes to managing and granting the assets. Their legacy, personality and life’s story are closely intertwined with the charitable assets; hence, an ownership mentality can prevail.

On the other hand, the rising generations in a philanthropic family are future stewards of the family’s philanthropic legacy which includes governance, donor intent, grantmaking, and of course, the financial assets.This shift is a powerful and an important one that does not happen by accident. Careful planning and education are needed to translate the importance of governance and the founder’s intent around a grantmaking strategy. When this shift fails to take place, governance can go awry and tensions rise at the family table.

A Public Trust

When a family decides to set up a charitable giving vehicle, a critical transformation occurs. When the assets are irrevocably dedicated to a charitable purpose, such as by establishing a setting up a donor advised fund or a private foundation in the United States, the assets become a public trust and cease to be the personal property of the philanthropist.

• Legal Reality: A charitable vehicle is created to serve the public good and is legally bound to that purpose. This is why private foundations and public charities receive tax-exempt status—it is the government’s recognition that these funds are now serving a public, not private, interest.
• Tax Advantage: Upon transferring assets into a charitable vehicle, the philanthropist receives an immediate tax deduction in recognition of placing these assets in the public’s trust. There is a trade-off; the philanthropist no longer owns these assets. While they may be able to control how the assets are managed and granted for instance, the ownership has technically been transferred. 
• Fiduciary Duty: The board members, even if they are family members, transition from owners to fiduciaries.Their legal duty is not to the family’s financial interest but to the mission and the public good. They are legally accountable for ensuring the funds are used solely for the charitable purpose for which the entity was established.

Rob Reich, a political scientist and philosopher at Stanford University, is a prominent voice arguing for the scrutiny of private foundations, largely because charitable assets are effectively a public trust subsidized by the state. In essence, he sees charitable assets as a conditional public trust—the condition being that in exchange for significant tax benefits and the right to exist in perpetuity, the foundation must operate in a way that truly serves the public good and, ideally, supports democratic institutions.

Ownership Mindset

An ownership mindset in philanthropy is characterized by treating the charitable assets and the charitable giving vehicle itself as an extension of the donor’s or family’s private domain rather than a dedicated public trust. This perspective often prioritizes the preferences and control of a philanthropist over the fiduciary duty to the public mission. Characteristics of an ownership mindset include:

1. Control Over Mission and Strategy

• Rigid Donor Intent: The belief that the founder’s original methods, focus areas, and even specific grantees must be maintained indefinitely, regardless of changing social needs or evidence of effectiveness. This sees donor intent as a permanent, literal blueprint rather than a set of core values to be stewarded.
• Resistance to External Expertise: A reluctance to bring in outside board members, professional staff, or independent evaluators who might challenge the family’s traditions or priorities. Decisions are often made internally by family consensus, prioritizing comfort over best practices.

2. Lack of Transparency and Accountability

• Privacy Over Public Disclosure: While legal requirements for tax filings (like the Form 990-PF) are met, there is little proactive effort to communicate impact, strategy, or financial details to the wider public or to potential beneficiaries.
• “Our Money” Mentality: The family may speak of the funds as “our money” that they are “choosing” to give away, minimizing the legal reality that the assets are a public trust receiving substantial tax benefits. This can lead to a sense of entitlement regarding how the funds are deployed.

3. Focus on Personal/Family Benefit

• “Branding” and Legacy: Grantmaking choices are sometimes heavily influenced by a desire to publicly brand the family name or honor the founder in ways that may not align with the highest-impact charitable use. The reputation of the family can take precedence over the needs of the beneficiaries.
• Perks and Privileges: In the case of a private foundation, it may be used to provide employment, travel opportunities, or consulting contracts for family members, raising concerns about self-dealing even if legally permissible. There’s a blurring of lines between foundation expenses and personal family expenses.

The Next Generations and the Nuance of Stewardship

A stewardship mentality in philanthropy is the antithesis of an ownership mindset. It means approaching charitable assets and the work of the donor advised fund or private foundation as a temporary, sacred trust managed on behalf of the public and future generations, rather than as a private possession.

This mindset is crucial for family philanthropists as they transition from a founding generation’s personal vision to a multi-generational, enduring mission. Thoughtful education of the rising generation focused on governance, family values and legacy, community needs and case studies undergird a sound stewardship mentality. Characteristics of effective stewardship include:

1. Honoring the “Spirit” of Donor Intent

• Adaptive Fidelity: Stewards interpret donor intent not as a rigid historical mandate, but as a commitment to the core values and ultimate purpose of the founder. They constantly ask: “If the founder were here today with their original commitment to, for example, ‘fostering health in high need communities,’ how would they apply those values given current medical technology and socio-economic realities?” This allows the mission to evolve without betraying its roots.
• Mission-First Governance: Decisions are guided primarily by the mission statement and the documented needs of the community, not by the personal preferences of family board members.

2. Prioritizing Public Accountability and Transparency

• Voluntary Disclosure: Going beyond minimum legal requirements, a steward typically embraces transparency. This can include maintaining a clear public presence (website, annual reports), proactively sharing grantmaking strategy, and communicating impact—even when experiments fail. This practice acknowledges that the governing board is operating on the public’s behalf.
• Open Feedback Loops: Actively seeking and respecting feedback from grantees, experts, and the communities served. A steward views the philanthropic entity not as the sole source of wisdom, but as a responsible partner in the ecosystem of social good.

3. Fiduciary Responsibility and Longevity

• Maximizing Mission Capital: Investment strategies are focused on maximizing the long-term charitable resources to ensure the charitable giving vehicle can fulfill its mission well into the future, if that was the intention of the founder. A steward treats the assets as capital dedicated to a purpose that extends beyond their own lifetime.
• Risk-Taking for Discovery: Stewards understand that their unique position, often having permanent, flexible capital, allows them to be the “risk capital for democracy” as stated by Rob Reich. They are willing to fund high-risk, experimental, or long-horizon policy work and research that neither government nor the private markets can easily support.

4. Inclusive and Professional Governance

• Diversified Expertise: Stewards recognize that stewardship is a professional undertaking that requires more than just good intentions. They actively recruit non-family board members, staff, and advisors who bring expertise in the mission area, finance, and ethics.
• Temporary Custodians: The next generation leaders operate with humility, viewing their time at the helm as a temporary custodianship.¹ They focus on building strong processes and institutional capacity to make the philanthropic entity resilient enough to thrive under future stewards, rather than cementing their own personal influence.

Ownership vs. Stewardship Mindset

The transition from an ownership mindset to a stewardship mindset is a pivotal shift in family philanthropy. This fundamental difference in perspective is crucial for ensuring a philanthropic legacy that is both impactful and enduring. An ownership mindset risks making the charitable giving vehicle a tool to publicly influence public issues without accountability. A stewardship mindset, in contrast, seeks to use that power responsibly and transparently to serve the common good.

Sound Stewardship is Effective Philanthropy

Ultimately, the goal of Grant Philanthropic Advisors is to help families make this transition smoothly and powerfully. By embracing the role of stewards of their charitable resources, families ensure their philanthropic legacy is not a historical monument, but a living, breathing, and impactful force for generations to come. Sound stewardship, characterized by honoring the spirit of donor intent, prioritizing public accountability, and fostering inclusive governance, is the cornerstone of effective philanthropy, ensuring that charitable assets truly serve the common good for years to come.

About Grant Philanthropic Advisors:
We’re an independent, Charleston-based firm helping clients to focus and maximize their philanthropy—in turn, strengthening the fabric of our communities. Founded in 2019, we help donors move from responsive patterns of giving by assisting clients to identify values and become more strategic in their philanthropy. Our goal is to help donors to become more effective as change-makers.

We work with foundations (large and small staff teams), donor advised fund holders, multi generational families, individuals, philanthropy supporting organizations and corporations to design philanthropic strategies. We work with philanthropies that grant $1 million to $40 million annually.