Balancing Philanthropy and Family Legacy: Helping Donors Achieve Both

For college and university foundations, the most consequential donor conversations are about legacy, not generosity.

A donor may care deeply about scholarships, faculty, athletics, research, or the campus that shaped their life. The same donor is often thinking just as carefully about a spouse, children, grandchildren, a family business, or the financial independence of future generations.

The question is rarely, “Should I give?” More often, it’s, “How can I do this well for my family at the same time?”

Private support of higher education remains substantial. CASE reported giving to U.S. higher education institutions exceeded $78 billion for the fiscal year ended June 30, 2025, a 4% increase over the prior year. Giving USA estimated total U.S. charitable giving at $592.50 billion in calendar year 2024, up 6.3% in current dollars and 3.3% after inflation.

Donors with the capacity to make transformational gifts often need help seeing charitable planning and family planning as complementary, — not competing — priorities.

Why donors pause

When a donor pauses during a major gift discussion, the hesitation is easy to misread. It rarely reflects a lack of commitment. More often, it reflects typical planning questions:

• How much wealth should be preserved for family?
• Which assets should pass to descendants, and which are better suited for charitable giving?
• Should the gift be made during life, at death or some combination?
• How can descendants remain connected to the donor’s philanthropic vision?
• What happens if the institution’s needs change over time?

These questions are especially common among donors with concentrated stock, real estate, closely held businesses, retirement assets or large taxable estates. The desire to give is real. So is the need for a plan that accounts for tax, cash flow, family dynamics and the institution’s gift acceptance policies.

Start with the legacy objective, not the gift vehicle

It helps to separate the donor’s objectives into three questions.

First, what does the donor want to accomplish for the institution? Scholarships, a named school or department, an endowed chair, expanded student access or a program reflecting the donor’s personal history are common answers.

Second, what does the donor want to accomplish for family? Outright inheritance is one answer. Support for education, home ownership, entrepreneurship or long-term financial security is another. So is involving children or grandchildren in the family’s philanthropy as a shared identity.

Third, what role does timing play? Some donors want to see the impact during their lives. Others prefer a testamentary commitment. Many do best with a blend: a current gift, a multi-year pledge and an estate component.

Only after these answers are clear should the conversation move to structure.

Approaches that align both goals

1. Outright gifts and multi-year pledges

For donors with ample liquidity who want immediate impact, the simplest structure often works: an outright gift or multi-year pledge, with enough retained for family needs. The pledge gives the institution a substantial commitment while letting the donor spread cash flow over several years; that flexibility is often the entire reason a donor agrees to a higher number.

2. Bequests and beneficiary designations

A bequest lets the donor provide for family first, with the institution receiving a stated amount, a percentage of the estate or the remainder. Beneficiary designations are especially powerful with traditional, pre-tax retirement accounts. Distributions from a traditional IRA or 401(k) are taxed as ordinary income to heirs but received tax free by a charity, often making these accounts the most efficient asset to direct to charity while preserving other assets for family. Roth accounts and after-tax basis follow different rules and should be reviewed separately.

3. Charitable remainder trusts

A charitable remainder trust (CRT) lets a donor benefit a charity while preserving an income stream. A CRT is an irrevocable split-interest trust that pays one or more noncharitable beneficiaries either a fixed annuity amount (CRAT) or a unitrust amount (CRUT) for life or for a term up to 20 years, with the remainder passing to a qualified charity. The payout must be between 5% and 50%, and the actuarial value of the charitable remainder must equal at least 10% of the initial net fair market value contributed.

For higher education donors, a CRT can fund an endowed scholarship eventually while providing retirement income. It is also useful for a donor with concentrated, appreciated assets. Because the CRT is generally exempt from federal income tax, it can sell appreciated property without immediate capital gains tax (with gain recognized as distributions flow to the income beneficiary).

4. Charitable lead trusts

A charitable lead trust (CLT) is the mirror image. The charity receives payments for a period of years; the remaining assets pass to family or other noncharitable beneficiaries at the end of the term. This appeals to donors who want the institution to benefit now while transferring wealth to the next generation later.

Like CRTs, CLTs are split-interest trusts generally subject to rules similar to private foundation rules on self-dealing, excess business holdings, jeopardizing investments, and taxable expenditures. They come in grantor and non-grantor forms with materially different tax outcomes; the non-grantor charitable lead annuity trust is most often used for wealth transfer to family. CLTs require experienced estate planning and tax advisors.

5. Donor-advised funds

Some donors want their descendants involved in charitable decision-making. A donor-advised fund (DAF) can support that, particularly when children or grandchildren are named as successor advisors. But the donor’s role is advisory. Once a donor contributes to a DAF, the sponsoring organization has legal control over the assets — making a DAF a family philanthropy tool rather than a private family account.

The source of a gift also carries practical consequences. Under CASE Reporting Standards, gifts recommended from a DAF are not hard-credited to the individual donor, who may be soft-credited for stewardship. Whether a DAF grant can be applied against a donor’s personal pledge depends on the sponsor’s policy and the conditions outlined in IRS Notice 2017-73. Institutions should coordinate with the DAF sponsor and the donor’s advisors before relying on that treatment.

6. Family stewardship and governance

Not every legacy plan is taxdriven. A donor may simply want descendants to understand why the institution mattered. Foundations can support that through impact reports, scholarship recipient stories, campus visits and family recognition events, while ensuring that families don’t control recipient selection in ways that create private benefit.

The 2026 planning environment

The federal transfer-tax environment also shapes donor conversations. For 2026, the federal basic exclusion amount is $15,000,000 and the annual gift tax exclusion is $19,000 per donee for present-interest gifts. The One Big Beautiful Bill Act made the elevated exemption permanent, with inflation indexing beginning in 2027. These amounts give some high-net-worth donors meaningful planning flexibility, though state estate taxes, asset basis, family circumstances and possible future law changes still warrant evaluation.

Tax rules should not drive a donor’s mission. But they affect timing, asset selection and structure.

What higher education foundations can do

Foundations are not the donor’s estate planner. But they can make the planning process easier. A few practices help:

• Listen for family objectives early. Interest in providing for descendants isn’t an obstacle; it’s often central to the donor’s legacy.
• Discuss current, deferred and blended options. A donor not ready for an outright gift may be open to a pledge, bequest, charitable trust, beneficiary designation or combination.
• Be clear about restrictions and flexibility. Gift agreements should reflect donor intent while leaving the institution room to apply funds effectively if needs change.
• Coordinate with advisors early. Tax, legal and estate planning advisors should be at the table before documents are finalized, especially with trusts, closely held assets, real estate or complex family arrangements.
• Steward the family, not only the donor. Where appropriate, bring descendants into the story of the gift’s purpose and impact. That is how donor relationships outlive donors.

A broader view of legacy

For many donors, philanthropy and family aren’t separate priorities. They are connected. A gift to a college or university expresses values the donor wants to pass on: opportunity, service, gratitude, education, community.

The strongest gifts in our higher education practice are not the ones where the donor chose between charity and family. They are the ones where the donor refused to. With careful planning (and help from your higher education CPA), both can be served, and the gift is more durable for it.

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