Foundations are No Longer Wedded to the Long Game
by Teri Behrens
Since 2010, there has been a significant shift toward creating foundations that have a defined endpoint. According to one estimate (Boris, De Vita, & Gaddy, 2015), about 19 percent of family foundations established between 2010 and 2014 plan to spend out their endowments, compared to only 3 percent of those created before 1970. The United States’ biggest foundation is a limited-life foundation — the Gates Foundation is set to close 20 years after the death of its three trustees, Bill and Melinda Gates and Warren Buffett.
Even so, the Center for Effective Philanthropy reports that across different studies they have found that less than 15 percent of CEOs report that their foundation will be limiting its life. Another 19 percent seem to be open to the idea or to learning more information about it.
The reasons for setting up a limited-life foundation vary. For some, the founder wants decisions about funding to be made by people who knew them and understand what they were passionate about. The Ralph C. Wilson, Jr. Foundation is one example of this reasoning. Wilson set up his foundation with a twenty-year lifespan and appointed trustees who were family or long-time business partners. The Edna McConnel Clark Foundation, on the other hand, is choosing to spend down so that they can concentrate their resources and maximize impact.
Limited-life foundations have some things in common with perpetual foundations that are exiting a line of work. Beginning in the late 1990s with the rise of strategic philanthropy, many perpetual foundations began funding time-limited strategic initiatives. The Kresge Foundation, for example, funded the Climate Resilience and Urban Opportunities Initiative from 2014 to 2018 to build the capacity of organizations primarily focused on racial equity to also address concerns arising from climate change.
Boris, E. T., De Vita, C. J., & Gaddy, M. (2015). Trends in Family Philanthropy. Retrieved from https://www.ncfp.org/export/sites/ncfp/knowledge/reports/2015/downloads/Trends-in-Family-Philanthropy-Full-Report-NCFP-2015.pdfhttps://www.hhs.gov/ohrp/regulations-and-policy/regulations/45-cfr-46/index.html#46.102