Conference Sponsorship Highlight: To Spend Down or Remain in Perpetuity: Considerations of Family Fo

Conference Sponsorship Highlight: To Spend Down or Remain in Perpetuity: Considerations of Family Foundation Time Horizons


Thanks to our conference sponsor, Grant Philanthropic Advisors, for sharing their insights on family foundation time horizons online at our 2024 Annual Meeting and Conference.

To Spend Down or Remain in Perpetuity: Considerations of Family Foundation Time Horizons

We often hear philanthropists wrestle with strategy around their philanthropic purpose, their pace of giving and their budget. 

  • "I would like to give my money away while I am alive so I can see the impact."
  • "There is so much need in the world today, shouldn't give away my money as quickly and effectively as I can?"
  • "I view my philanthropy as long term societal risk capital. I should responsibly plan for today's needs as well as tomorrow's pression issues."
  • "Stewarding philanthropic resources in perpetuity will honor our family's legacy and values while keeping our family connected."

Giving While Living

The “Giving While Living” concept has gained more traction and notoriety in recent years with leaders like Yvon Chouinard (founder of Patagonia) and the Kendeda Fund leading the way. Philanthropists in this space are motivated by:

  • Funding urgent needs they see such as climate change, dire poverty and educational outcomes. They ask, “If not now, then when?”
  • Deploying a large amount of resources quickly to address needs 
  • A desire to see the impact of their philanthropy and govern philanthropic strategies while alive
  • A discomfort with accumulated wealth and wanting to share generously with those in need
A More Traditional Approach

Setting up a shared family philanthropy in perpetuity is a more traditional approach. Families seed a private foundation or donor advised fund from which they contribute a small percentage annually. Philanthropists choose a long term spending strategy to:

  • Make a “big bet” over time that cannot be easily solved in one generation
  • Preserve risk capital for future, unforeseen needs tied to a particular community or issue area
  • Sustain leadership, advocacy and collaboration on specific issues 
  • Keep a growing family connected to a place of origin, family legacy and values, and each other
What's the Right Answer: To Spend Down or Not?

There are compelling reasons for setting up a philanthropic strategy to spend down and equally compelling reasons for creating a philanthropic vehicle to remain in perpetuity. Regardless, the decision on a time horizon should be grounded in the family’s values and based on the strategic impact the Foundation hopes to create. Values and strategy should determine the structure and governing framework. There can be middle ground in answering the timing question. First, more pressing questions should be asked around the foundation’s “why” and “what” before focusing on the “when”.
Life limited philanthropic models can vary. Timelines can be as short as three years or stretch out to 50 years for instance. Perhaps the philanthropic mission exists for one generation beyond the founder or the annual payout rate is higher than the norm of 5% which puts an obvious time horizon on sunsetting the family's collective giving.
Trends in the Field

Thought leaders in the philanthropic field such as the National Center for Family Philanthropy and Rockefeller Philanthropy Advisors have been studying this trend. A vast majority of foundations are set up in perpetuity. This is the predominant model in traditional philanthropy. More foundations established since 2000 are opting into a time limited horizon and more foundations in perpetuity are reconsidering their time horizon. 
Rockefeller Philanthropy Advisors published a report in 2022 on strategic time horizons in philanthropy. Of the 150 philanthropies surveyed, philanthropic leaders cited a number of reasons why a time limited horizon is appealing:
  • Address an urgent need in a particular issue area
  • Make an impact while the Founder is living
  • Waning interest by Next Gen to carrying on someone else’s legacy
  • Events of 2020-2021 created more urgency for philanthropy
The Bottom Line

The decision making matrix in the arena of timeline often involves: 
  • How important is it to sustain a philanthropic vehicle to keep the family tied together?
  • How important is it to make an impact in the chosen issue areas?
  • Is it both?
  • Do they have equal weight?
Our advice is to ground these decisions in your mission, values and goals for your philanthropic impact. Be adaptable to changing circumstances within your family, community and issue area. For example, family philanthropies evolve as family branches grow and present new challenges and opportunities. Issue areas may command greater resources on a shorter time horizon. Either instance may accelerate decisions around a philanthropic timeline.
Of those philanthropic organizations surveyed in the Rockefeller Study, all were satisfied with their decision, regardless of time horizon choice. The good news is that this is a right vs. right decision.