Different approaches to philanthropy

June 22, 2009

There are (at least) two different approaches to philanthropy, one of the ways to establish one’s legacy and leaving something behind to future generations.

This Wall Street Journal article, “Philanthropists Set Spending Deadlines,” describes that some are spending a foundation’s assets with a deadline in mind, rather than a traditional foundation’s approach to establish assets for perpetuity, or to last forever, in order to make lasting impact over many generations:

A growing number of philanthropists are adopting spending deadlines and sunset provisions to ensure urgent global needs are addressed in a timely way.

By granting the entirety of funds within a certain period of time, these charitable efforts are looking to have a bigger immediate impact than traditional foundations, which are typically set up to last forever and pay out roughly 5% of assets a year.

The economic meltdown, an increased awareness of pressing environmental issues and a political climate ripe for policy change are all feeding the sense of urgency.

Jennifer and Peter Buffett, the son and daughter-in-law of billionaire investor Warren Buffett; Charles Feeney, co-founder of Duty Free Shoppers Group; and Microsoft Corp. co-founder Bill Gates are among prominent philanthropists who have implemented so-called spend-down or sunset provisions in recent years.

… According to Ms. Berman, those who choose to spend down are saying, “Let the next generation create new philanthropic capital for their own priorities and mission.”

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