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 longtime 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.

Whether spending down or shifting the line of work, these foundations face challenges in both how they engage with partners and how they organize themselves internally. Articles in The Foundation Review Vol. 9, Issue 1 on Foundation Exits explored some of the issues they confront related to how to leave grantees, communities, and fields of work stronger, rather than creating a hole when they cease operations. Certain grantmaking strategies may be more important as a foundation nears the end; capacity building and general operating support grants and endowment funds may be more frequent. Internal issues related to how to invest the foundation’s corpus, how to retain staff until the end, and how and what to archive are important considerations.

The Johnson Center recently conducted a survey in collaboration with Independent Sector and discovered considerable differences between foundations and grantees on the clarity and timing of communications about the end of a foundation’s funding, as well as different perspectives on what type of closing grant is most useful. We will be doing further research on this topic that we look forward to sharing with the field.

By Teri Behrens, Executive Director, Dorothy A. Johnson Center for Philanthropy.