Most Family Foundations Plan to Operate Forever, Study Finds

Few family foundations have plans to shut down after a certain period of time, preferring instead to exist in perpetuity, according to a survey released last week by the Foundation Center.

But the recession could prompt more donors to limit the life span of their institutions. Just 12 percent of 1,074 foundation leaders who participated in the survey last June said they had plans to close their organizations within a certain time. Another 25 percent were undecided about their institutions’ future, while the rest expected their family foundations to survive indefinitely.

But Loren Renz, senior researcher for special projects at the Foundation Center and the report’s author, said falling endowments “will inevitably speed up the decision-making process and may push more family foundations, especially the small ones, to spend down.”

The survey found that few donors consider their foundation’s long-term future when they create their institutions. Most family foundations do not incorporate decisions about their life spans in their founding documents, and people who come to the conclusion that they want to limit the future of their organizations generally do so years afterward.

“Many foundations have been established within the last 20 years and are not mature enough to know whether there will be children and grandchildren who will be committed to continuing the foundation, or whether it will become a burden,” said Ms. Renz. “There’s a lot more fluidity than we might expect.”

People who wanted their foundations to stay open were driven by concerns about the long-term nature of the causes they serve, and by a wish to unite family members around the grant-making institution. Those who planned to close their foundations said they were concerned about honoring donor intent and making a big difference during their lifetimes.

The survey also found that many family foundations with plans to close were not yet taking steps to do so. Seventy percent of foundations that had established a set time for shutting down did not plan to do so for at least 10 years, while 43 percent had yet to specify such a date. Roughly half the foundations in the study had assets of less than $10-million, were led by living donors, and had been formed since 1990. The majority (55 percent) did not employ staff members.