Why a written mission statement and granting rules matter

Families give for many reasons: to honor a legacy, respond to a community need, teach values to younger generations, or achieve tax-efficient impact. Without written guidance, decisions can become ad hoc, causing mission drift and family friction. A simple, durable mission statement plus a short set of granting rules creates a decision framework that makes giving predictable, defensible, and easier to evaluate over time.

Below I combine practical steps I’ve used with clients and authoritative guidance so you can build a durable philanthropic policy that fits your family’s size, liquidity, and legal vehicle.

Sources to keep on your desk: the IRS website for tax and reporting basics (irs.gov), the National Philanthropic Trust for DAF best practices (nptrust.org), and CFP Board guidance on planning (cfp.net).

Step-by-step: drafting a family philanthropy mission statement

A mission statement should be short (one to three sentences), clear about who you serve, the problem you tackle, and the approach you prefer. Use a working session with key family members to answer three questions: who, what, and how.

Example template to adapt:

  • Who: “We support low-income youth in [geography]”
  • What: “to improve high-school graduation and college-readiness”
  • How: “by funding direct-service programs, scholarships, and evaluation”

Full sample mission statement:

“The Smith Family Fund supports nonprofit programs that increase high school graduation rates for low-income youth in Montgomery County by funding direct-service education, mentoring, and evidence-based interventions.”

Practical drafting tips:

  • Keep language plain and measurable. Replace “support education” with a defined outcome (e.g., “increase graduation rates”).
  • Include geographic or population limits if the family wants focus.
  • Identify preferred strategies (capacity building, direct services, advocacy, research).
  • Note restrictions or exclusions if needed (e.g., “we will not fund religious proselytizing”).

Governance note: keep a short version for public use and an internal longer version that includes values, decision criteria, and reserved powers for trustees or the family council.

How to write granting rules that implement the mission

Granting rules translate mission into routine decisions. Limit them to a single page where possible; clarity beats complexity.

Core elements to include:

  • Eligibility: types of organizations (501(c)(3) status required?), geography, population served.
  • Grant purposes: operating support, program support, capital projects, scholarships, advocacy limits.
  • Grant size and frequency: minimum and maximum awards, multi-year grant policy, and renewals.
  • Selection process: who can recommend grants, how proposals are reviewed, required documentation.
  • Due diligence: financials required, proof of tax status, conflict checks, site visits.
  • Reporting and evaluation: expected metrics, narrative reports, timing (e.g., 12 months after grant).
  • Payment terms: payment method, grant agreement, use of donor-advised fund recommendations vs. foundation checks.
  • Conflicts-of-interest: family member employment, board service, or business relationships.
  • Amendment process: who may change rules and how (e.g., 2/3 family council vote).

Sample granting rule excerpt (short):

  • Eligible grantees: IRS-recognized 501(c)(3) organizations and public schools serving residents of [county].
  • Grant range: $5,000–$75,000; multi-year grants up to 3 years with annual reporting.
  • Reporting: grantee must submit a 1-page progress report and financial snapshot within 12 months.

Choosing the right philanthropic vehicle and compliance basics

The vehicle you use affects control, reporting, and tax benefits. Common options include a private foundation, a donor-advised fund (DAF), or informal family funds.

  • Donor-advised funds offer low administrative burden and ease of grantmaking. They are popular for family giving; see our practical guide to DAFs for operational tips and succession planning: Donor-Advised Funds: A Practical Guide.
  • Private foundations give more control and public presence but require annual reporting (Form 990-PF) and stricter compliance. Our private foundation overview explains costs and tradeoffs: Private Foundation.

Regardless of vehicle, follow these compliance basics:

  • Verify nonprofit status (IRS Tax Exempt Organization Search at irs.gov).
  • Keep clear grant documentation and a grant agreement when appropriate.
  • Track grants for annual reporting and family records.

Note: sponsoring organizations that host DAFs retain legal control over grants. Your family can recommend grants, but the sponsoring charity must approve them. See the National Philanthropic Trust for DAF best practices (nptrust.org).

Governance: who decides and how to involve family members

Create a simple governance chart: decision-makers (board, family council, committee), roles (chair, grants officer), and a cadence for meetings. Clarify who has recommendation rights versus approval votes.

Practical structures used successfully:

  • Family council with rotating seats for adult children to propose grants.
  • Grants committee of 3–5 members that conducts due diligence and recommends awards to a board.
  • Youth advisory panel that reviews proposals and runs micro-grant rounds to teach philanthropy.

Use written policies to reduce personal conflict: set conflict-of-interest rules, establish a succession plan for seats, and document decision rationales.

Due diligence and measuring impact

Don’t overcomplicate due diligence for small grants; scale requirements to grant size. For larger or multi-year grants, require:

  • Two years of financial statements (or most recent audited statements for large awards).
  • A brief logic model explaining how the grant advances mission goals.
  • Key performance indicators (KPIs) tied to the mission (e.g., graduation rate change, number of clients served, cost per outcome).

Evaluation approaches:

  • Output metrics (people served, dollars spent) for short-term tracking.
  • Outcome metrics (graduation rates, recidivism reduction) for multi-year impact.
  • Incorporate third-party evaluations for major investments.

Tracking and learning: host an annual review meeting where grantees present results and the family revisits strategy.

Sample grantmaking workflow (simple)

  1. Intake: prospective grantee submits a one-page request and budget.
  2. Triage: grants officer verifies eligibility and passes promising requests to the grants committee.
  3. Due diligence: committee reviews financials, speaks with leadership, and asks follow-up questions.
  4. Decision: committee recommends grant; board/family council approves per policy.
  5. Agreement & payment: issue grant agreement, then disburse funds.
  6. Monitoring: receive interim report, final report, and conduct site visit if needed.

Common pitfalls and how to avoid them

  • Mission drift: revisit the mission statement at least every 2–3 years or when giving priorities change.
  • Siloed decisions: include multiple family voices in a transparent way to build buy-in.
  • No exit strategy: include sunset or review clauses for long-term commitments.
  • Overly rigid rules: write rules that are clear but allow rare exceptions with documented approval.

Real-world examples (short)

  • A family foundation limited grants to nonprofits with a proven 3-year track record and required quarterly performance data; they increased multi-year support only after a pilot year showed measurable gains.
  • A family using a DAF required that each grant recommendation include a one-paragraph case for impact; this simple discipline reduced impulsive giving and improved alignment.

When to revisit and how often

Schedule a formal strategy review every 1–3 years. Trigger events for an out-of-cycle review include significant changes in family wealth, leadership transitions, shifts in community needs, or legal/regulatory changes.

Additional resources and further reading

For operational guidance on DAFs and when to use a DAF versus a private foundation, see our articles: Donor-Advised Funds: A Practical Guide and Private Foundation.

Professional disclaimer

This article provides general information based on professional experience and public guidance. It does not replace tax or legal advice. For tailored recommendations about tax consequences, entity choice, or grant agreements, consult a qualified attorney or tax advisor familiar with charitable law in your state and the IRS rules.

Quick checklist to finish a family philanthropy policy

  • Draft a 1–3 sentence public mission and a 1-page internal mission with values.
  • Write a short granting rules document covering eligibility, grant size, due diligence, reporting, and conflicts.
  • Decide on vehicle (DAF, private foundation, or informal fund) and confirm legal/tax implications.
  • Set governance, meeting cadence, and a succession plan.
  • Schedule annual review and a full strategy review every 1–3 years.

By turning values into a short mission and a clear set of granting rules, families make their giving more effective, teach younger generations how to give thoughtfully, and leave a coherent legacy for the future.