Someone once jokingly referred to foundations as a pile of money surrounded by people seeking to spend it. There is a grain of truth in this comment, but philanthropists and foundation officers know that giving away money is no laughing matter. It may look easy, but it’s difficult to do well.

That difficulty is compounded if you are required to spend large amounts of money in a short period of time. This is what is so challenging about spending down a foundation’s assets. The great temptation is to focus simply on spending the money rather than on spending it well.

A few years ago, the John M. Olin Foundation began the process of spending down its assets in preparation for closing its doors. We are now well along this path, and we have learned a few lessons along the way.

Once a foundation decides to take itself out of business, there are different ways to make it happen. Some simply dissolve their boards, notify the IRS, and turn their assets over to a community foundation. Others make a few large donations to charitable institutions, such as universities or hospitals. Some foundations give their assets to another private foundation, in effect merging the two institutions. Others adopt a more gradual approach, setting spending schedules so that assets are depleted in a planned and orderly way over a period of years.

By the time we close, the John M. Olin Foundation will have used a combination of all these methods. We have been spending down in a gradual way for several years, but we also plan to make larger gifts to a few particularly effective institutions.

Read the full article about spending down in foundations by James Piereson at The Philanthropy Roundtable.