Call it what you will, but once again the idea of non-perpetual foundations is back in the news. Recently, The Wall Street Journal rejoined this conversation with an article called “Philanthropists Discover the Value of “Sunsetting.” This piece might be better titled “WSJ Discovers the Value of Sunsetting,” as the issue has been a popular one in the philanthropy world for decades. Indeed, we have written on this issue frequently. (See here.)
Sunset dates have many benefits, and these have been well described elsewhere. Yet the media tends to focus on the potential for a foundation’s focus to evolve over time, and this discussion is often draped in liberal vs. conservative terms. In our work with family foundations, we see a somewhat different issue. Founders often want their foundation to go on forever and provide a common philanthropic enterprise for the family. That is, the founders want to give the family purpose and to keep the bonds among family members strong — especially if the family business has been sold. This plan works great when the children and, later, the grandkids join the board. But add two more generations, and the second-, third-, and fourth-cousins have much less in common; did not personally know the founder; and typically don’t share the interests of the founder. As such, we advise that you think about having a sunset date when your grandchildren are of an age when they will no longer be able to manage the foundation.