Let’s face it: No one likes to think about our own mortality.
Still, if you have a foundation or are an active philanthropist, it helps to think now about what you want to happen to your philanthropy after your lifetime.
According to a 2009 Foundation Center report, 63 percent of foundations plan to give in perpetuity—meaning forever, or at least the near-future version of forever. Other foundations (12 percent) plan to spend-down their assets in their lifetime. 25 percent are undecided.
Those that do decide to spend down are much more likely to make the decision later in the foundation’s life cycle than at its inception. Commonly, a specific event happens that inspires the spend-down decision. Perhaps a business is sold, or a founder passes away. Or board members realize they will age out (or lose interest), and don’t have a succession plan in place.
There are benefits to perpetuity, just as there are benefits to spending down. Use the following list to see where on the spectrum you fall.
Why exist in perpetuity?
- To create a lasting legacy where the founder will be remembered by his family and community
- Desire to have a sustained, long-term impact on the local community
- Desire for family engagement and philanthropic values across generations
- Belief that chosen fields of giving will continue to need investment
- Desire to ensure funding will continue to be available for grantees
- Yields even more support for grantees over time, as endowment grows
- Keeps funds available in times of economic downturn
- A feeling of obligation to preserve the foundation
- Belief that new social needs will emerge that will need foundation funding
Why spend down?
- You’re passionate about problems you want to solve in your lifetime
- Lack of family interest—you worry there might not be people interested in carrying the torch, or who will preserve your donor intent down through the generations
- You don’t want to bind future generations to an enterprise that requires a big commitment, or that may potentially cause differences or conflict
- You want to make sure the funds stick to the donor’s intent (and nothing else over time – in other words, no mission drift)
- You see a greater urgency to address social problems now or have a greater impact in the short term
- Avoids administrative costs and labor of running a foundation over time
- Precludes the foundation from becoming fragmented, ineffective or irrelevant over time
There is no “one right answer” when it comes to the perpetuity question. Whatever you and your board members decide, it’s good to get the conversation started sooner rather than later.
Over the coming months, we’ll dig deeper into the sunset/perpetuity ‘debate’ and highlight case studies. In conjunction with this blog, consider re-reading The Great Perpetuity Debate post. What would like to learn around the issue? Use the comment section below and share your experience. Or drop me a line at Suzanne@suzannehammer.com and let’s talk.