New foundations can be set up in perpetuity or with a time limit to “sunset” within a set period of time. Here are three reasons to sunset before too long.
1. You can handpick your people
For donors committed to protecting their intent, time-limited foundations have a distinct advantage over philanthropic entities that exist in perpetuity. As a living donor, you have already established a pattern of grantmaking, and you have chosen board members who work with you in that process. Although not a foolproof way to ensure donor intent, having a board comprised of those who know you well makes it much more likely that your foundation will honor your principles after you pass from the scene. Begin your charitable giving in your lifetime, William E. Simon Foundation President Jim Piereson advises, and you will leave your imprint behind—“a record that puts donor intent on a practical basis and that can be cited in the future when questions arise.”
For example, the Searle Freedom Trust in Washington, D.C., is steadily spending down toward closure by the year 2025. “Our sunset makes me confident that we’re going to do what Dan Searle wanted to do—we will stick to his mission through the end,” says president Kim Dennis. “I would not be confident of that if we were going beyond that end date. Right now, everyone involved with the foundation knew Dan, and as that changed, people just wouldn’t have the same feeling of responsibility to the donor.”
Similarly, the Detroit-based Ralph C. Wilson Jr. Foundation is also benefiting from a board of trustees who knew the original wealth creator well. Before he passed away in 2014, Ralph Wilson selected four trustees (including his wife, Mary Wilson) and charted a 20-year sunset timetable. “Ralph had seen how the Ford Foundation left Detroit [for New York City in 1953] and that really bothered him,” Mary Wilson told The Chronicle of Philanthropy in July 2018. “He wanted to make sure that the people who knew him best, and the ones that he had total confidence in, were part of this.”
Created in 2015, Wilson’s foundation is now busily spending itself out of existence—a big chore given the over $1 billion infusion of cash it received after the sale of Wilson’s Buffalo Bills NFL football team. The foundation is the largest philanthropic engine in western New York and among the largest in southeast Michigan (each of which is a target area). Although Wilson left no specific instructions for how to spend his money beyond the general welfare of those communities, he put trusted people in place to carry out his legacy in alignment with his values, within a limited timeframe.
2. You can have an outsized impact
A second advantage of sunsetting is the outsized philanthropic impact you can have through aggressive spending while heading toward a closing date. That’s the path being taken by the Lovett and Ruth Peters Foundation, which plans to spend out its corpus no later than 10 years after the death of its current president, Dan Peters, son of the foundation’s original wealth creator. Peters has found the process “liberating” since the foundation has the leeway to extend its giving far behind the mandated 5 percent distribution rule for private non-operating foundations. “That rule tends to be how much a lot of foundations think they have to spend each year. And I happen to disagree with that precisely because the need is now—why wait?” Peters says.
The Pascale Sykes Foundation in New Jersey plans to spend itself out of existence by 2023 at the latest. Donor Frances Sykes founded the philanthropy in 1992 to help low-income families in some of the poorest New Jersey counties. Initially established in perpetuity, Sykes and her trustees voted just four years later to time-limit, specifically for reasons of donor intent. In 2012, Sykes took the bold step of fully funding her foundation while convening an ad hoc group of New Jersey nonprofits, faith-based organizations, researchers, and government officials to create a 10-year spend-down plan.
Over time, Sykes has seen other benefits to sunsetting, like the focus and urgency it gives her grantmaking. “Sunsetting is hard work—it’s not for sissies,” she admits. “It’s much easier to chug along and spend 5 percent each year. But when you’re sunsetting, you have to think entrepreneurially. You have to see the need, the demand. You have to see if your giving does the job. You go with what works, it’s not carved in stone, and you go from day to day.”
The Roy Lichtenstein Foundation chose the unusual spend-down path of liquidating a significant portion of its art collection by donating it to the Whitney Museum and the Smithsonian. Roy Lichtenstein was one of the twentieth century’s most famous pop artists, known for his comic-book-style work.
“I like the idea of handing it off,” his widow, Dorothy Lichtenstein, told The New York Times. “Every 10 years I say, ‘How about winding it up in the next 10 years?’ I don’t want to leave things up in the air.” The foundation is continuing to allocate its remaining artwork to museums in America and Europe. “We have always intended that the foundation, now almost 20 years old, would not operate in perpetuity, and are delighted we can create a new way forward with our first set of chosen successor institutions, well before we ‘sunset,’” she added in a 2018 press release.
3. You get to experience the joy of giving with the assurance that your intent is safeguarded later on
Jeff and Tricia Raikes provide another example of giving while living. Jeff Raikes served as CEO of the Gates Foundation between 2008 and 2014, and worked 27 years at Microsoft Corporation as a member of the senior leadership team. Tricia Raikes served as the company’s director of creative services and marketing communications.
They created their own foundation in 2002 and have given away over $100 million since then. They focus on youth-serving institutions, including those working in education and homelessness. The couple initially created their foundation without a firm timeframe, but later decided to sunset by 2038. They’ve identified several reasons for doing so: the sense of urgency that it creates, an increased willingness to take risks, the ripple effect their philanthropy can have to inspire and motivate other donors, a foolproof way for the donors’ voices to be heard, and eliminating the risk of mission drift in future generations.
But one of their most compelling reasons is the personal satisfaction they derive from giving while living. “We’re anxious to see positive social changes that stem from our philanthropic investments during our lifetime,” Jeff says. “The more we identify and see the joy in the impact our philanthropy can have, the more we’re focused, committed, and dedicated. And the more we’re focused, committed, and dedicated, the better our philanthropy can be. That center point—the joy of giving, the joy of philanthropic impact—is central to successful philanthropy.”
“We certainly do view this as our life work,” Tricia adds, “and it certainly is a reflection of us. We try to bring our whole game to work every day. There’s just a tremendous sense of satisfaction when work comes to fruition and you can really see how the results are impacting people.”
This article was originally published at The Philanthropy Roundtable and is re-published with permission. Read the original here.