Author Topic: Family "charity" project - should I get involved?  (Read 2165 times)

SotI

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Family "charity" project - should I get involved?
« on: April 14, 2019, 12:25:08 AM »
Dear Mustachians,
I would like to get your feedback on a situation that has come up with some relatives of mine who are looking for some financial involvement.

Situation:
Some close relatives have the opportunity to purchase additional land (farmland mostly plus a 1950s farmhouse) right next to their property. The asking price is quite reasonable. My relatives are very keen to buy, as it would enable them to implement a long-cherished dream of setting up a small community project for organic farming, animal welfare and social opportunities for “deprived” children, migrants, the elderly.
So, all very nice, altruistic, socially beneficial.
They have to buy now-ish – however, the land is still on lease for the next 5 years (for a nominal lease, so not much of an income stream), so actual implementation of “the plan” will take at least 5 more years.

Now my relatives are looking for people to financially (and later practically) contribute to this project.
They are planning to mortgage it based on their existing properties and income (one income is a good civil servant pension plus one less regular but high income from freelance work).

Still, they are looking for additional following support from “interested friends and family”:
  • Capital contribution to reduce the mortgage (mortgage to be repaid within 10 years, so the private contributions would be paid back only afterwards. No interest payments for the private lender, also no security other than the relatives promise; but the feel-good factor to make it happen) and/or
  • Monthly contributions to cover the mortgage payments for 10 years (currently, about 60% of the expected monthly rate are secured).

They asked me if I want to get involved (as sponsor, contributor).
What would you do or say?

Freedomin5

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Re: Family "charity" project - should I get involved?
« Reply #1 on: April 14, 2019, 12:42:49 AM »
I’d do it if I believed in the cause, but I’d treat it as a donation. If I get my money back, great! If I do not get the money back, oh well.

SotI

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Re: Family "charity" project - should I get involved?
« Reply #2 on: April 14, 2019, 01:57:35 AM »
Thanks for your comment. And yes, I guess it would be a donation.
Still, I can't help looking at the project in terms of venture capital (minus the returns) and am not quite convinced that they can or will pull it off.

I will probably probe a bit more about how they envision to run and fund "day-to-day operations" to see if it really stands a chance or is just a nice pipe-dream.

CoffeeR

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Re: Family "charity" project - should I get involved?
« Reply #3 on: April 14, 2019, 08:42:44 AM »
I would be hesitant. Very hesitant even if I believed in the goals of the project. As mentioned, if you do decide to contribute, treat it as a donation. The problem scenario occurs if you promise / commit / agree to a monthly or regular contribution or "investment" and you do not like what you see they are doing with the contribution or project. At this point, you will destroy the relationship if you end up disliking what you see them doing and decide to pull your support. This will likely cause a break down of the relationship and hard feelings. A one time up-front contribution (donation) is easier to walk away from and less likely to destroy relationship. Assuming, of course, this matters to you.

Second, if you do contribute with the knowledge that you only get you money back based on the promise of the relatives, make sure you get in writing the "understanding" you have. It in amazing how people interpret and/or reinterpret promises based on changing circumstances.

I would not do this.


former player

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Re: Family "charity" project - should I get involved?
« Reply #4 on: April 14, 2019, 09:31:22 AM »
I hope the purchase price of the land has been sufficiently reduced to take account of the 5 year nominal lease - the existence of that lease makes the property worth a lot less.

I don't see why a capital contribution could not be secured with a second mortgage on the land.  Given that the proposal is that the capital contribution is intended to be repaid, what would be the objection to that?  (If the total value of the land is less than the commercial mortgage plus the capital contribution that would probably prevent a second commercial mortgage but if you were prepared to take the risk of the possible shortfall that's no reason not to take it out on "family terms".)  A second mortgage would not affect the commercial rights of the first mortgagee so there would be no financial disadvantage. 

At the very least, a loan lasting over more than 10 years needs a formal document appropriately drawn up and signed by both parties.  In 10 years a lot can happen and something that makes the facts indisputable is essential.

The sort of social enterprise which is contemplated could work well - there is something similar near me, where the farmhouse and garden are used for occupational therapy/training.  But this will work only if the property is near a reasonably sizeable centre of population (half an hour by minibus would be a reasonable travel time for the likely clients of this enterprise) and there need to be social services or charities in the local area that provide financial and practical support to kinds of people and disadvantaged groups that are intended to be served.  I'd want to be assured that these practicalities have been thought through, and that the person setting up the enterprise has both relevant experience and a sound plan to make it sustainable in the medium to long term.

I probably wouldn't commit to revenue support but might well make a capital contribution of some spare cash provided I had proper documentation and probably a second mortgage.

Cassie

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Re: Family "charity" project - should I get involved?
« Reply #5 on: April 14, 2019, 11:00:04 AM »
I definitely wouldn’t do it. Either they can afford it or they cannot.

BNgarden

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Re: Family "charity" project - should I get involved?
« Reply #6 on: April 14, 2019, 12:31:11 PM »
Could your first offer of support be helping them create a business plan for the (eventual) enterprise / social initiative?  If they don't have something already of course.  In the process of filling in all the details, you'll all have much better information and they can see for themselves whether it's worth it to keep the dream alive as it were.

wenchsenior

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Re: Family "charity" project - should I get involved?
« Reply #7 on: April 14, 2019, 12:32:34 PM »
I’d do it if I believed in the cause, but I’d treat it as a donation. If I get my money back, great! If I do not get the money back, oh well.

This.

GizmoTX

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Re: Family "charity" project - should I get involved?
« Reply #8 on: April 14, 2019, 12:48:16 PM »
This kind of project ought to be set up as a separate entity, such as a family partnership or non-profit organization. Appending it to their own property totally changes the ownership and intent -- I personally would not be a part of this for many reasons.

SotI

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Re: Family "charity" project - should I get involved?
« Reply #9 on: April 14, 2019, 02:54:39 PM »
Thanks, everyone.
Quite a few points that you are making have also crossed my mind.

The current setup would potentially cause friction in case of disagreements.
Capital contribution could be done by written agreement, I don't think this would be an issue.
 
Still, if there is a dispute, relationships would be strained regardless of legal documentation. Not sure if it is worth the risk (it will affect 3 generations of relatives, some closer than others, if things turn sour - that's quite a part of my extended family).

As for the question if they have the skill and experience set to pull it off (location-wise it seems feasible to me): tbh, I am not sure. They are outgoing people, good networkers. One of the key persons is a professional event manager, so I think organisational and marketing skills are there. Just not sure about the "business" skills nor the operational skills ... which is why I am wondering about how they envision the day-to-day operations. There is a tendency to over-extend and self-exploit themselves (other relative involved is someone with quite a helper syndrome and weak boundaries), but that's not unusual for charity workers.

I like the idea of offering support to write up a business plan. I am pretty sure they don't have one yet (seems the offer to buy the land is quite recent). And yes, if I were to set something like that up, I would run it as a separate, non-profit org .... Will raise this point, but I got the feeling they want to keep it as "family property".

This brings me back to Cassie: "Either they can afford it or not" - fair point, my gut feeling
is telling me this, too. However, maybe I am just being too critical.

Anyhoo, to summarize: I need to look into more details of "the plan" and how they intend to run it - and then make up my mind. I think what bothers me most is morphing both "venture" and personal/family structure into a convoluted set of stakeholders and interests. 

So, there are still valid points to investigate further. Thanks for the pointers.

Frankies Girl

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Re: Family "charity" project - should I get involved?
« Reply #10 on: April 14, 2019, 05:21:19 PM »
I would not give them any money with the current set of circumstances.


I would consider a donation if they were an actual, legitimate charity (they'd need to get the proper certification/legalities hammered out). Otherwise it's just giving money to family for a pipe dream that may or may not come into being like they planned, or possibly just giving them money, they buy the property and then decide it's too much trouble to get a true charity organized and never follow through on any of these things and just have this nice hobby farm that you subsidized for them.

If they want to be a real charity group, then they gotta do their homework and get it set up and THEN solicit donations/grants/private money. It also keeps them more honest about future plans, where the money is going, and all those little details. And you do get the benefit of a nice charitable donation to boot.


ender

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Re: Family "charity" project - should I get involved?
« Reply #11 on: April 14, 2019, 06:25:04 PM »
This strikes me as a very bad idea.

11ducks

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Re: Family "charity" project - should I get involved?
« Reply #12 on: April 14, 2019, 07:04:29 PM »
Would you consider involvement in a project organised in this way if you weren’t family? My gut feeling is no.
So, I would definitely consider it a gift if you plan to do it.

ShoulderThingThatGoesUp

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Re: Family "charity" project - should I get involved?
« Reply #13 on: April 14, 2019, 07:32:36 PM »
It sounds like the charity plan is totally incoherent at this stage, and plans to take on way too much. Dealing with at-risk children is especially grave, but none of what they’re talking about should be done on a whim.

AccidentialMustache

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Re: Family "charity" project - should I get involved?
« Reply #14 on: April 14, 2019, 08:56:28 PM »
Check your tax implications. Interest free loans can mean you owe taxes on the interest you should have received at market rates, depending on your jurisdiction.

chrisgermany

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Re: Family "charity" project - should I get involved?
« Reply #15 on: April 15, 2019, 06:04:31 AM »
You / they might purchase as family property, create a tax efficient charity operation and lease the property to the charity.
Then if the pro bono does not fly, the property might be protected.

A lot to think about. Take your time and be careful.

BlueHouse

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Re: Family "charity" project - should I get involved?
« Reply #16 on: April 15, 2019, 07:38:10 AM »
I wouldn't, because I really just don't like to mix money and family.  It always always always ends with someone feeling like they got the short end of the stick.  My family gets along extremely well, but add money to the mix and all of a sudden, there are hurt feelings, grudges, and really nasty words used. 

I feel like it's so much easier to just say no up front and avoid all of that. 

The only financial venture I would ever get into with family is buying a lottery ticket together -- because I wouldn't expect to ever see any of that money again. 

SwordGuy

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Re: Family "charity" project - should I get involved?
« Reply #17 on: April 15, 2019, 11:03:51 AM »
I don't give to charities because that charity does something that someone else values.

I give to those charities that do what **we** value.

And because there are many charities that do what **we** value, we have to prioritize those what do what **we** value **most**.

If the family charity project doesn't pass this test, it's a big nope.

iris lily

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Re: Family "charity" project - should I get involved?
« Reply #18 on: April 15, 2019, 02:04:32 PM »
It sounds like the charity plan is totally incoherent at this stage, and plans to take on way too much. Dealing with at-risk children is especially grave, but none of what they’re talking about should be done on a whim.

This.

 It is impossible to donate to a worthy cause if you don’t know what the worthy cause is.All of the good intentions in the world do not  make for an effective nonprofit organization.

SotI

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Re: Family "charity" project - should I get involved?
« Reply #19 on: April 17, 2019, 02:06:58 PM »
Thank you for your comments, it confirms my concerns are justified.
Anyway, next week there is a meeting with the bank, and some more specifics will be discussed by a few interested parties.
I will currently take a stance of mild interest and keep asking questions (and see if I like the answers).

sol

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Re: Family "charity" project - should I get involved?
« Reply #20 on: April 17, 2019, 02:17:58 PM »
Do you have a charitable donations budget, for both short and long term time horizons?  If it fits within that budget and you support the cause, I see no problem here.  You just have to treat it like a charitable donation, and not expect any (financial) return on your money other than potential social benefits.

My personal rule of thumb is that no one charitable recipient ever gets more than 50% of my cash donations in any given time period, or within any given category.  So if I decide to give $500 to an organization, I have to give at least $500 to another organization before I would give to the same people again.  When I "bought" a lifetime membership in an alumni association, I decided to put all further donations to the same school on hold until I had funded other schools with an equal number of dollars.  This is all very seat-of-the-pants for us, so it's not like I'm keeping an exact tally.  But it does keep me from making too-large donations to individual causes and getting ahead of my charitable giving schedule.  My DAF has to be managed just like the rest of my investments have to be managed.  It's supposed to last for a few years, and there are always other worthy recipients out there.


LadyMuMu

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Re: Family "charity" project - should I get involved?
« Reply #21 on: April 24, 2019, 10:37:10 AM »
I've been involved with a few charitable start-ups. The successful ones actually set up a non-profit charity, have a board, have by-laws, etc. even if they're a small operations with an annual budget of about $8,000 per year (neighborhood free concert series). Just having that done doesn't ensure a successful charity, but not having it sure creates a problem. Corporate or foundation donors will NOT want to give to an endeavor like this and those tend to be the greatest source of major start up funds. Even small stuff, like free donuts from a grocery store for a special event, wouldn't be forthcoming without it.

It sounds like this plan is being driven by the "opportunity" to buy the adjacent land and not a well thought out plan. I'd steer clear if it wasn't something I was passionate about. If it was something I was interested in supporting, I'd make financial support contingent on becoming a registered charity and a seat on the board.

obstinate

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Re: Family "charity" project - should I get involved?
« Reply #22 on: April 24, 2019, 11:26:25 AM »
Have they done anything more than talk about wanting to do this? E.g. do they have a history of running successful charitable efforts before this? If no, I'd be inclined to pass. If yes, well, I'd still be inclined to pass because this doesn't sound like a useful charity, but that's more of a personal opinion.

TVRodriguez

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Re: Family "charity" project - should I get involved?
« Reply #23 on: April 24, 2019, 12:25:25 PM »
If you're asking "should I get involved?" on the internet, the answer is no.

SotI

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Re: Family "charity" project - should I get involved?
« Reply #24 on: April 24, 2019, 12:49:05 PM »
And it turns even more so into "no".
I do have a charity budget, and I asked myself if I was prepared to switch donation rather than adding funds. And the answer is actually "no", I would not stop any of my existing charity projects, but I also don't want increase charity donations.

It also seems there are others who are interested to get involved (incl. funding), but I am still missing a clear operational plan. It's more like "we'll just get it and work out the rest later".

So I am taking a seat in the sideline for the time being ....

If you're asking "should I get involved?" on the internet, the answer is no.

Absolutely. Though the good thing on the internet is that ppl don't usually mince words - which can be quite helpful.

Car Jack

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Re: Family "charity" project - should I get involved?
« Reply #25 on: April 24, 2019, 12:58:23 PM »
It sounds like their heart is in the right place and if they were the Gates Foundation, they could make it work.  But they're not the Gates Foundation.

lhamo

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Re: Family "charity" project - should I get involved?
« Reply #26 on: April 24, 2019, 04:11:45 PM »
Who/what entity is selling the property?  If it is an estate that needs to be settled, or elderly people who need to free up the money for assisted living or nursing home care, then maybe I could understand the urgency.  Otherwise I don't understand the rush/pressure to buy given the existing lease on the property.  Personally I wouldn't be sinking any money into something like this, even as a donation, without a LOT of due diligence and hard bargaining.  Successful charitable organizations need to start out on solid foundations and this doesn't sound like the necessary work has been done either conceptually or practically.

calimom

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Re: Family "charity" project - should I get involved?
« Reply #27 on: April 24, 2019, 07:49:23 PM »
It sounds like their heart is in the right place and if they were the Gates Foundation, they could make it work.  But they're not the Gates Foundation.

I agree with this. There are lots of ways to be helpful and do good in the world. Most of them don't involve hitting up relatives for cash for a neighboring property to provide a physical space to live out their dreams. Are the people involved already volunteering for organizations to assist at-risk kids? Is the only way to help on their terms, not helping in existing, established non-profits? Is it possible they're looking for a vanity project that makes them look good, however well intended?

SotI

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Re: Family "charity" project - should I get involved?
« Reply #28 on: April 26, 2019, 11:00:27 AM »
They have been running some small local support groups for migrants and experience with difficult kids (one relative has been a "problem school" teacher), but their experience is more small scale.
So I don't doubt their sincerity or good intention. I am just not convinced that it will scale properly w/o good management and operations setup.

As for the urge: yes, it's an estate sale. And the heirs are going to put it on the market if my relkatives will not buy...

partgypsy

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Re: Family "charity" project - should I get involved?
« Reply #29 on: April 26, 2019, 11:50:18 AM »
I ditto what other people are saying, they basically want to buy some property that appends their property, and have other people pay a portion of the mortgage downpayment (plus 40% of mortgage payments!) for a charity endeavor that only exists in their mind. The bottom line, they could do this, solicit donations, and then try to do the charity and quit after a year, or never even get around to it. And the result is that they get a bunch more property in their name, but nothing legally preventing them from just keeping the land for their own enjoyment, or even selling some of it, or even paying people back. 

If they were serious, they would work on the charity part first, as in create a charity, work on the aims of the charity (helping immigrants, at risk kids) in already existing locations including their own property, to show proof of concept), have a board, create a business plan. then at that time they can actually solicit donations for an actual charity, from the public, other businesses, etc.
Right now if you do help, you are simply giving money to a family member to buy some land next to their house. That's it. In that case their approach should be, we really want to buy this land but we are cash strapped, we want to take out private loans to bridge the gap.
In that case I would also say no. As they state, they need help both in reducing the initial capital amount of the mortgage by asking for interest-free loans from people. No interest payments. AND no guarantee of being paid other than the relatives promise.
AND even with reducing the mortgage amount, they still have a shortfall of 40% to pay the monthly mortgage payments. that is NOT a small gap. The charity part makes it even more iffy truth be told. Charities, especially new charities, are not known for being money-makers. They don't even know what the operational costs to run such a kind of charity. That's in adiition to known mortgage payments, needed investment in property, repairs, insurance etc.

 
« Last Edit: April 26, 2019, 12:00:23 PM by partgypsy »

TVRodriguez

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Re: Family "charity" project - should I get involved?
« Reply #30 on: April 26, 2019, 08:02:51 PM »
And it turns even more so into "no".
I do have a charity budget, and I asked myself if I was prepared to switch donation rather than adding funds. And the answer is actually "no", I would not stop any of my existing charity projects, but I also don't want increase charity donations.

It also seems there are others who are interested to get involved (incl. funding), but I am still missing a clear operational plan. It's more like "we'll just get it and work out the rest later".

So I am taking a seat in the sideline for the time being ....

If you're asking "should I get involved?" on the internet, the answer is no.

Absolutely. Though the good thing on the internet is that ppl don't usually mince words - which can be quite helpful.

Good for you.  It's hard to say no to family sometimes. Glad you took my comment well, too. I wasn't aiming for snark, just had no time to be more eloquent.