Excerpted with permission from Waldemar Nielsen's Inside American Philanthropy: The Dramas of Donorship (Norman, OK: University of Oklahoma Press, 1996).

The very broad impulse of wealthy Americans to establish a family foundation is an understandable and admirable reflection of a national philanthropic spirit. Some 75 percent of all American foundations are of this type. Yet, it is a serious national problem that so many such foundations are torn apart by family tensions or fall into decay from neglect within two or three generations....

An alternative to the traditional family foundations...is the transfer of the assets to what is known as a "community foundation." [Editor's note: Community foundations are public grantmaking institutions serving a local geographic area, typically supported by a wide variety of donors and managed by trustees who are prominent community leaders.] In fact, this has now become a major national movement in philanthropy, one with vast positive potential....

Today there are about 350 community foundations. They exist in every part of the country, and their assets total some $9 billion dollars, derived from eighteen thousand individual and family gifts....

The forces powering the extraordinary growth in community foundations are only gradually coming to be understood. One is the simple convenience in the formation of a family philanthropy. All the legal, organizational, and financial arrangements necessary to set up a new independent foundation are simplified. In an attractive form of one-stop shopping, one buys into an existing, on-going institution, and at the same time one receives all the tax benefits given to an ordinary charitable contribution.

A second factor is the solidity and security of the institution to which the funds are being committed: the high standing of the members of the board, the typically good grantmaking record and reputation of the local community foundation over time, and assurance that the local foundation is part of a strong and respected national movement....

More recently, "donor advised funds" make it possible for donors or the family to play an advisory role in the distribution of grants from the funds they have provided. Thus families have a satisfying degree of participation in the grantmaking process... Somehow when the members of a family are in direct and total control of a family-type foundation, passions are often aroused, factions develop, old wounds in relationships are reopened, and the foundation becomes an arena not of healing collaboration but of bitter, even deadly, conflict. On the other hand, donor-advised funds administered by community foundations typically do not.

Whatever the operative forces may be, the evidence is compelling that family participation in the procedures of community-foundation grantmaking typically produces a more collaborative pattern of family behavior. Given the huge number of family foundations and their many problems, the growing number and the variety of community and affinity-group foundations have to be regarded as a major, heartening development.

--Waldemar Nielsen