Foundation World Debates Merits of Perpetuity
Foundation World Debates Whether to Spend Down or to Give in Perpetuity
Increasingly, new foundations are establishing timelines for spending out their endowments, the Wall Street Journal reports.
Some donors choose to establish a foundation with a predetermined lifespan because they have a specific mission they want to address over a set period of years and believe that a large infusion of money toward that goal is the most effective way of achieving it. James Allen Smith, a professor at Georgetown University's Public Policy Institute, points out that the idea isn't new: One of the country's first private foundations, the Rosenwald Fund, established by Sears Roebuck chairman Julius Rosenwald in 1917, closed in 1948 after spending its money, as planned, on social issues.
Still, only about 10 percent of private foundations are set up to spend their money within a set period, said Daniel M. Schley, CEO of Foundation Source, a company that provides support services for private foundations. Instead, most wealthy individuals choose to establish a foundation in perpetuity, and do so for a variety of reasons: the intractability of certain social problems; the difficulty of spending a large sum of money wisely over a short period of time; the potential of relatively small sums of money given consistently over years to produce continuous change; and for legacy purposes.
According to Schley, however, investor Warren Buffett's decision to donate the bulk of his fortune to the Bill & Melinda Gates Foundation — and to stipulate that at least one of the Gateses remain actively involved in the foundation for his annual disbursements to continue — has revived the debate about whether or not it's always a good idea for wealthy individuals to create their own foundations and whether those foundations should be established in perpetuity. In fact, according to the New York City-based Foundation Center, starting in the 1990s more foundations were established by younger donors, many of whom were more inclined to set a time limit for their giving.
It's an idea that makes a lot of sense to 87-year-old philanthropist Lewis Cullman, whose own foundation will close soon after he dies. "I have strong feelings about having foundations last in perpetuity," Cullman told the Journal. "That's when all the hanky-panky starts."
Huges, Robert.
“Why Some Foundations Fold.”
Wall Street Journal
8/04/06.
Primary Subject: Philanthropy and Voluntarism
Location(s): United States
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