Family Foundations Consider Their Options
More Than a Third of Family Foundations Are Either Uncertain About Lifespan or Expect to Spend Down
While existing in perpetuity continues to be the norm for the majority of family foundations, a quarter say they are currently undecided about their life-span options and a small segment (12 percent) plan to limit their life-span, according to the first large-scale study of family foundation life-span plans, jointly released yesterday by the Foundation Center and the Council on Foundations. The report, “Perpetuity or Limited Lifespan: How Do Family Foundations Decide?,” benchmarks the intentions, practices, and attitudes of nearly 1,100 active family foundations and sheds light on future behavior as this very large and predominantly young segment of philanthropy matures. Nine out of 10 of the roughly 40,000 family foundations currently tracked by the Foundation Center were created since 1980.
“As these young foundations face transitions in leadership from the first to the second generation, questions about sustainability, family capacity or commitment, donor intent, and foundation impact may lead them to consider their options. This study provides a first look at what drives the behavior of these foundations, which are at the epicenter of one of the largest waves of generational wealth transfer in U.S. history,” said Bradford K. Smith, president of the Foundation Center.
The survey was conducted in June 2008, prior to the year-end financial crisis. Key findings include:
- Foundations most likely to opt for a limited life-span are small foundations established since 1980 that do not employ staff and whose founder is still living, though the percentage who expect to spend down is still modest.
- Foundations with a living founder are three times more likely to expect to spend down than those whose founder is deceased, and they are almost twice as likely to be undecided.
- When the decision to spend down is made at the foundation’s inception, the leading factors are the desire of the founder(s) to have a greater impact during their lifetimes and to be involved in how the money is spent.
- When the decision is made later, the most frequently cited reasons are a shift in the founder(s)’ attitude, family issues, and a belief that subsequent generations will create their own philanthropies.
- The two leading reasons for deciding to exist in perpetuity are a desire both to have a long-term impact on the community and for family engagement across generations.
The study was conducted by the Foundation Center in collaboration with the Council on Foundations. With assistance from the Association of Small Foundations, the Center surveyed more than 5,800 active family foundations and received responses from 1,074, representing a broad cross-section of family philanthropies by size, location, age, staffing, and other characteristics.
The complete report can be downloaded at no charge from the Center’s Website.