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Cassidy Burns, a Minneapolis financial adviser, recently told the Wall Street Journal how a wealthy family she works with has struggled to find a successor for their family foundation. What to do when the heirs apparent are unwilling to rise to the occasion? Spend the foundation’s money, and do it fast.

Highlighting this trend, the Journal article shares that fifty years ago only 5% of the total assets of America’s largest 50 foundations were “held by spend-downs.” In 2010, however, that number has risen to 24%, according to Bridgespan Group in Boston. Like in the case of Cassidy Burns’s client, the phenomenon of spending down one’s foundation has become more and more frequent.

This idea is certainly not new. One need only turn to Andrew Carnegie’s famed Gospel of Wealth (1889) arguing that the wealthy should give, particularly within their lifetimes: “The man who dies thus rich dies disgraced.”

Over a century later, the “spending-down” phenomenon reemerged when select U.S. billionaires signed The Giving Pledge, which is a “commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to philanthropy.” (The pledge reached out to international billionaires in early 2013).

However, turning back to Cassidy Burns’s clients, there are clearly other reasons other than “disinterest [sic] among heirs” that motivate one to give during one’s lifetime. The Journal article mentions a number of reasons – for example, a “desire” of philanthropists to bring about change within their lifetimes as well as more control over how funds are distributed.

Elliot Berger, managing director at Arabella Advisors in New York City, continues:

 Another primary reason for giving while living is the donor's ability to control how funds are distributed, Mr. Berger says. "Many storied foundations have seen a mission drift as a result of what could be described as an inevitable distance between the vision and values of the founders and their heirs," he says.

It should be no surprise that I believe the decision of how one spends his or her money should be left up to the philanthropist (see my musings defending philanthropists’ individual agency here and here); however, I think philanthropists should consider longer term implications before letting the well run dry.

While this may be an idealistic position to take, “spending-down” necessarily looks at safe, immediate change (e.g. the Journal article remarked, “Foundations with limited durations may be more risk averse”); instead, philanthropy should be guided towards long-term (perhaps sometimes risky) change. Foundations should institute difficult missions, spending years (nay, generations) to facilitate such change. Since the foundation’s objective may not be realized within the core philanthropist’s lifetime, this approach necessarily highlights the selflessness of philanthropy.

Additionally, foundations that think in the long term can perfect processes, giving strategies, and ultimately ascend to be vehicles of major change as an effect of this patience (see the institutionalized foundations like the Ford Foundation, J. Paul Getty Trust, Carnegie Corporation of New York, etc).

Why is this patience important? Patience allows these organizations to foster better relationships within their respective communities. Patience allows these organizations to comprehensively learn their philanthropic craft. And patience allows these organizations to grow and to serve to the best of their abilities.

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