A Q&A with Pat Willis
Giving back to our hometown of Jackson, Michigan, has always been important to us. Without the support of the families, individuals and business owners, we wouldn’t be where we are today. So, we are intentional about contributing time and funds to continue making our community a great place to live–a practice that began with my mother, Pat Willis, founder of Willis & Machnik.
As wealth advisors, we understand that philanthropic endeavors can be financially complicated. When clients ask me how they can leave a legacy and make a difference in their community, I evaluate a number of financial planning tools to find the right fit for them—from donor-advised funds to private family foundations. Whereas donor-advised funds are charitable accounts that allow you to contribute to a charitable organization, a private family foundation is a type of philanthropic organization that provides funding and resources for charitable causes that are important to the founder and their family.
Because my mother and her husband, Phil, created a foundation—the Phil & Pat Willis Foundation—to allow our family to give back to the city of Jackson, I spoke to her about the impact of private family foundations, including her own.
What are the advantages of starting a private family foundation?
Pat: The are several advantages to consider, from family involvement to financial benefits. If you want to instill a sense of gratitude and philanthropy in your children and grandchildren, I think foundations offer a structured way to accomplish that. Because foundations require defined policies, ideally a mission and grantmaking guidelines, generations can come together and collaborate successfully toward common goals.
Some of our clients have chosen to create private family foundations because they want to have control of their legacy. A foundation lets you to manage specifically how your wealth is distributed after you’re gone in a way that allows a legacy of giving to continue indefinitely.
As a financial advisor, it’s also important to point out the tax benefits of starting a family foundation. Funders can deduct their charitable contributions from their taxable income, which can lower their tax bill and increase the amount of money available for philanthropic efforts. You can also avoid capital gains tax on appreciated assets by contributing them to the foundation instead of selling them.
Tell me about the Phil & Pat Willis Foundation. Why did you start it, and what does it mean to you?
Pat: Philanthropy has always been important to me, and when I started out in this business 40 years ago, I knew I wanted to find a way to leave a legacy. From a financial perspective, of course, I felt a private family foundation was a wise way to structure funding. But personally, Phil and I just wanted to give back to Jackson. This is our home. It’s where I’ve built a business and found a community of friends that feel like family. It’s important to support that.
The Phil & Pat Willis Foundation focuses on quality-of-life initiatives by supporting local organizations. We hope to be a catalyst for change in Jackson County and honor the community’s heritage, doing our part to support things like education, the arts and those in need.
As the founder of a private family foundation, what advice would you give someone who is considering that strategy for their estate plan?
Pat: First, I would say to consider what the foundation will stand for. It’s critical to define a mission, grantmaking policies and decide who is going to manage it. Without that focus, a foundation can’t reach its generational potential. You also have to determine how it will be structured financially. Will it live on in perpetuity or be a spend-down fund with a limited life?
Most importantly, you have to understand the tax implications and IRS requirements. Private family foundations are big commitments, and they must adhere to certain operational restraints. My most important piece of advice is always to start with contacting your financial advisor.
Contact us to learn more about how Willis & Machnik can help you develop an estate plan or create a private family foundation.