Charity on “Spend-Down” Mode in Virginia

Charity spendingMore philanthropists are choosing to donate all of their foundations' assets within their lifetimes.

Sometimes good things are built to last, and sometimes you decide it has run its course. This seems to be the growing attitude amongst philanthropists tending to the family foundation. In fact, today's charitable foundations seem to be shifting from maintenance for longevity to spending down and winding up. This may give you pause to consider your own charitable giving, whether you are a donor to various foundations or, should you run one, to the future of the foundation itself.

This trend was identified in a recent article in The Wall Street Journal titled “The Rise of Spend-Down Philanthropy.” The hard numbers in the article come from an analysis by the Bridgespan Group which found a marked jump in spend-downs. As reported there, “About 50 years ago, only 5% of the total assets of America's largest 50 foundations were held by spend-downs. In 2010, that number had risen to 24%, according to Bridgespan Group in Boston.”

Why spend down? Well it varies from foundation to foundation, but then it also relates to the purpose and nature of the foundation in the first place. The foundation typically has a philanthropic goal set up at its creation, but that goal may not carry forward past the original creator. This is especially true in a family foundation and, eventually, mission drift becomes a sustainability issue. The family may even not grow around the goal in the way originally hoped – they have lives, after all, and may not have the ability to keep up the foundation – and so the longevity may be in question due to logistics rather than the goal.

A spend-down mode should be meaningful to the donor, too. It means funds are going out the door and into the world, potentially having real effects today. Then again, and without a careful hand guiding the course, that doesn’t mean the cause is getting the biggest bang for its buck. These charities may tend to be less inquisitive and less thoughtful out of necessity of quick decision-making, and may not adopt long-term goals.

It is, if nothing else, an interesting trend to see the rise of the spend-down foundation, and maybe a meaningful one to think about when you think about your own goals in philanthropy.

You can learn more about this topic as well as other strategies on our website under the tab entitled: charitable planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.

Reference: The Wall Street Journal (April 13, 2014) “The Rise of Spend-Down Philanthropy

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