Family foundations consider lifespan

Increasingly, family foundations are considering whether they should operate in perpetuity or plan to spend down their assets, a new report says.

Almost two in three plan to operate indefinitely, while 12 percent say they will limit their lifespans and a fourth remain undecided, says the report from the Foundation Center.

Smaller, younger foundations without paid staff and whose founders are still living are most likely to say they’ll spend down, says the survey of almost 1,100 family foundations.

Larger funders whose founders have died and that employ staff are the most likely to say they plan to exist in perpetuity.

Those whose founders are alive are three times more likely to spend down than their counterparts whose founders have died.

More than half of family foundations have charters that do not stipulate whether or not they will spend down, while about one in four includes such directions in its foundation documents.

Most foundations that plan to spend down came to that decision after their creation, with only one in five including a sunset clause in its charter.

The primary reasons for including a sunset clause in foundation charters were a desire by the founders to have an impact during their lifetime and to be involved in how the funds are spent.

Of those that plan to spend down, more than four in 10 have set no timeframes to wrap up their operations.

Among those that have, three in four say they plan to spend down over 20 years or more, with only 16 percent planning to spend down within the next decade.

The primary reasons to exist in perpetuity are the desire to have a long-term impact and wanting future generations to be involved in philanthropy, the report says.

Because the survey was conducted before the full onset of the economic downturn, some foundations that had contemplated existence in perpetuity now may consider spending down or converting their assets to donor-advised funds, the report says.

The survey was conducted in collaboration with the Council on Foundations and the Association of Small Foundations.

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