Why structure, not generosity, is the binding constraint
The families we advise do not lack the will to give. What they lack, more often, is a method that allows giving to be deliberate, to compound across decades, and to survive the death of the person who began it. A cheque written each December satisfies the immediate impulse and little else: it leaves no record of intent, no mechanism for the next generation to continue the work, and no discipline against the drift by which a family's charitable energy disperses once its founder is gone. The recurring failure of family philanthropy is not meanness but the absence of an architecture equal to the ambition.
The shift we describe as the new philanthropy is partly generational and partly practical. Younger principals expect their giving to be measured, to have stated aims and observable results, much as they expect their investments to be reported, and they prefer funding a narrow purpose consistently to anonymous transfers to large institutions. That instinct requires a vehicle that can hold capital, invest it, distribute on a considered schedule, and pass the responsibility for those decisions on intact. This note compares the two structures a private-bank client is most likely to consider, the donor-advised fund and the private foundation, before turning to the matter that determines whether either endures: governance.
The donor-advised fund: simplicity, immediacy and a ceiling
A donor-advised fund is, in essence, a charitable account held within a sponsoring institution. The donor contributes capital, takes whatever fiscal relief the contribution attracts in the year it is made, and thereafter recommends grants to qualifying charities over time, while the sponsor handles administration, compliance and due diligence. For a family that wishes to separate the timing of the gift from that of the giving, to commit capital now but decide its destination later, it is an efficient instrument.
Its merits follow from that simplicity. Set-up takes weeks rather than months, the running cost is modest, typically a fee of half to one per cent of assets, and the donor is spared the apparatus of a separate legal entity: no council, no audit, no registered seat. Capital within the fund can be invested and grow free of tax. For giving in the hundreds of thousands rather than the tens of millions, it is often the proportionate answer.
Its limits follow from the same source. The donor advises; the sponsor, in law, decides, and ultimate control does not rest with the family. The fund cannot easily employ staff, run its own programmes, or undertake operational philanthropy. It also offers a thinner platform for involving heirs: successor advisers can be named, but the fund confers no governing body in which a next generation learns to steward capital. It is a means of giving well, not of building an institution.
The private foundation: control, permanence and the cost of both
The private foundation is a legal person in its own right, endowed by the family, governed by a council, and directed by a charter that states its purposes. Where the donor-advised fund borrows its structure, the foundation owns one: it can hold and invest an endowment, employ staff, run its own initiatives, make grants on its own authority and persist indefinitely under governance the founder has designed. Malta's framework gives families an EU-domiciled, MFSA-regulated home for such a vehicle, seated within a recognised European jurisdiction rather than offshore.
What the foundation buys, above all, is control and continuity. The family sets the purposes and may bind them, appoints the council and decides how succession to it works, and determines the spending policy and investment mandate of the endowment. It suits the family that thinks in decades and intends its giving to become an institution with a life beyond any single principal, while giving the next generation something concrete to govern.
The cost is commensurate. A foundation carries fixed expenses, council fees, audit, a registered office, professional administration, that do not scale down gracefully, and it is less nimble, since amending entrenched purposes can be cumbersome by design. As a working rule, the apparatus becomes proportionate above roughly five million euro of dedicated capital, below which the overhead consumes a share of giving that a donor-advised fund would not; these are not defects but the price of permanence.
The counter-argument: do families need a vehicle at all
The case against structure deserves an honest hearing, because it is not without force. A substantial share of charitable good is done by direct gifts to established institutions, universities, hospitals, relief agencies, that already possess the scale, expertise and accountability a family foundation must build from nothing. A family that gives generously and directly incurs no fiduciary burden and may deploy its capital better than a small in-house operation could. For many donors this is not a failure of ambition but a rational division of labour.
There is also a real risk that the vehicle becomes the point. Foundations can ossify into self-perpetuating bureaucracies whose costs and politics consume energy that ought to reach beneficiaries, and endowments preserved in perpetuity can outlive the relevance of their founding purpose; the structure built to ensure continuity can, mishandled, ensure only the continuity of itself. The answer is not to forgo structure but to size it honestly to purpose and scale. For a family giving a few hundred thousand a year with no wish to run programmes, a donor-advised fund is very likely the right choice and a foundation would be vanity; for one committing eight figures and intending to operate its own initiatives, the foundation earns its overhead. The error to avoid is the one in the middle: building the institution because peers have, then watching its costs erode the giving it was built to enlarge.
Governance: the part that actually determines continuity
Whichever vehicle a family chooses, its longevity is decided by governance rather than the instrument itself. We have seen well-funded foundations drift within a decade of the founder's death because no one had defined the purpose with enough precision to guide a successor, and modest structures endure for two generations because the founding documents answered the difficult questions before they were asked. The deed of gift is the beginning of the work, not the end of it.
Three elements do most of the work. The first is a charter specific enough to constrain drift but broad enough to remain useful as the world changes: a purpose that names the field and the values without freezing the tactics. The second is a spending rule adopted deliberately, whether to give in perpetuity from investment returns, commonly four to five per cent of assets a year, or to spend the endowment down over a defined horizon, which more families now favour to avoid the perpetuity trap. The third is a succession mechanism for the governing body itself: who joins the council, on what criteria, and how the founder's voice is preserved or relinquished over time.
The most underrated element is the early inclusion of the next generation. Bringing children onto a grants committee in their twenties, with a real budget and real consequences, does more to secure aligned giving across generations than any clause in a charter; it is where heirs learn judgement about capital and the family's values in practice rather than in homily. Continuity is taught, not merely drafted.
What this means for clients
First, match the vehicle to the scale and intent of your giving, not to what your peers have established. Below roughly five million euro of dedicated capital, or where you have no wish to run your own programmes, a donor-advised fund will very likely give you more philanthropy per euro than a foundation, because none of it is lost to standing overhead. Reserve the foundation for the case it was built for: substantial capital, an intention to operate as well as to grant, and a genuine desire for institutional permanence.
Second, decide the spending rule before you fund the vehicle, not after. Whether you give in perpetuity or spend down over a defined horizon is a values decision with consequences for every later choice, and families increasingly conclude that a deliberate spend-down serves both their purposes and their heirs better than perpetuity.
Third, treat governance as the substance of the exercise. Draft a charter precise enough to prevent drift, define how the governing body renews itself, and bring the next generation into real decisions early, with a genuine budget and genuine accountability. The continuity you seek is secured not by the size of the gift but by the quality of the structure that carries it, and that structure is best built while you are still present to teach it.
This note is house research and reflects the views of the Family Office desk at the time of writing. It is not investment advice or an offer.
