Having spoken to leaders at close to a dozen spend-down foundations over the past six months, I’ve learned that stakeholders take different paths toward deciding to shutter the doors.
Some donors intentionally set up a time-limited foundation. Others launch the foundation only to decide on sunsetting many years later. I’ve also come across instances where the board successfully pitched the idea to a surviving spouse.
The Hellman Foundation took another trajectory, as the board that signed off on spending down several hundred million dollars consisted of the founding donors’ children. While this may sound like a trivial point, it adds credence to the potentially game-changing idea that heirs are increasingly defining the family legacy through the lens of spend-down rather than perpetuity.
The San Francisco-based foundation was established in 2011 after the passing of investment banker and philanthropist Warren Hellman. Since then, it has disbursed over $309 million, primarily to Bay Area organizations focusing on education, youth development, health and basic needs. The foundation received another infusion of assets when Warren’s widow, Chris, died in 2017.
As the late 2010s unfolded, the Hellmans’ four children and founding executive director Susan Hirsch discussed how the foundation could most effectively strengthen the Bay Area ecosystem. “We asked ourselves, ‘What do we care about?’” Hirsch said in a recent Zoom call. “And equally as important, ‘What does the community care about?’”
These conversations led to the foundation’s September 13, 2023, announcement to the public and its grantee partners that it would close by the end of 2034.
“The idea of legacy matters, and it can take many shapes and forms,” Hirsch said. “Family foundations care about having a lasting impact on the community, and the Hellman board believed they could achieve this by spending down.”
When spending down is an anomaly
Hirsch attributes the decision to spend down to the lived experience of the Hellman children — Frances, Judith, Mick and Tricia — and the input they received from grantee partners.
“We said, ‘Let’s look at what people are saying and think about how we can have lasting relationships built on trust and understanding,’” recalled Hirsch, whose advisory firm Hirsch Philanthropy Partners took on Warren and Chris Hellman as its first clients in 1999 and merged with social impact consultancy Third Plateau last year. The Hellman children’s due diligence also included speaking with leaders at other family foundations who were considering or had already decided to spend down. “It wasn’t as if we woke up one morning and flipped a switch,” Hirsch said.
In light of Hirsch’s recollections, it’s easy to think that the board’s decision to spend down the family foundation was a foregone conclusion. That would be a mistake.
In June, I asked National Center for Family Philanthropy President and Chief Executive Officer Nicholas Tedesco if he could recall situations where stakeholders engaged in an acrimonious debate around the perpetuity issue. He laughed and said, “A million of them!”
Heirs lobbying for a spend-down may not want to be saddled with the responsibility of running a foundation. Some may find the foundation’s unending wealth accumulation ethically dubious. Conversely, heirs who favor perpetuity may believe that beyond providing organizations with consistent support, a “forever foundation” strengthens the family legacy. Yet others — and I apologize in advance for the cynical take — may not be particularly keen on relinquishing a sizable salary or subsidized travel.
More often than not, perpetuity proponents tend to have the last word. According to the National Center for Family Philanthropy’s “Trends 2020” benchmarking survey, only 9% of participating family foundations were expressly envisioned as time limited.
As a philanthropic advisor, Hirsch works closely with donors who think deeply about whether the family foundation should exist forever. As for the Hellman family, she said they “are respectful of people who want to support the community for perpetuity. But that isn’t who they are.”
A collaborative spend-down process
After the Hellman Foundation publicly announced the spend-down last September, staff held follow-up conversations and Q&A sessions with grantees to ensure they received information specific to their organization.
“The focus of our conversations was and continues to be, ‘What do you need that would enable you to continue your work more effectively into the future?’” said Annie Ulevitch, who succeeded Hirsch as the foundation’s executive director last February and joined us on the Zoom call. Leaders at grantee organizations were (and are) also comforted by the fact that the spend-down would unfold over 10 long years.
As for a spend-down’s operational machinations, some foundation stakeholders choose to draw up detailed plans that include when the last check will be cut. In contrast, Hellman’s spend-down is unfolding in close collaboration with its partners, many of whom have worked with the foundation for more than a decade.
Consider how Ulevitch and the Hellman team crafted the foundation’s first major initiative after communicating its plans to sunset.
Last November, the foundation announced a $20 million commitment to improve nutrition equity for vulnerable communities in the Bay Area and advocate for statewide policy in Sacramento. “These are larger, more concentrated, ecosystem-level investments that will be made over a short period of time,” Ulevitch said. “We brought our partners together and they said, ‘Here’s what we think we can accomplish, so it [the complexion of the funding] is really coming from them.”
Meanwhile, other partners have told Ulevitch that unrestricted funding will enable them to have the greatest impact. “They want to build an endowment or have a capital campaign,” she said. “Everybody has their own priorities.”
Ulevitch acknowledged the limitations imposed by the spend-down. “That’s the hardest part — winding down support to our grantee partners, no matter how much we love them,” she said. Ulevitch noted her team is in contact with other Bay Area grantmakers to ensure that grantees can access other funding sources throughout and beyond the spend-down.
“The dollars aren’t going away”
Under the model of perpetuity, foundations provide relatively small annual grants to help organizations get over that next operational or programmatic hurdle.
In contrast — and this is arguably the most important theme I’ve come across in my conversations with spend-down leaders — a sunsetting foundation will make larger gifts that trusted nonprofits can use toward anything that helps its decision makers sleep a little bit easier at night, much like what we’ve seen with MacKenzie Scott’s support.
This idea frequently gets lost in the perpetuity debate because there’s the perception that money no longer accruing interest in the foundation’s endowment somehow vanishes into the ether. Ulevitch disagrees. “Spending down is about saying, ‘What happens if we put a larger amount of money into the community over a shorter time frame?’” she said. “The foundation may be spending down, but the dollars aren’t going away. They live somewhere else and get put to a different purpose.”
Ulevitch called this opportunity a resonant byproduct of a “mindset shift” that has permeated the foundation’s extended community after last year’s spend-down announcement.
All of which brings us back to another critical mindset shift — how heirs staring down a host of seemingly intractable problems are revisiting the way philanthropy shapes their family’s legacy.
Before the transformative events of 2020, donors often equated legacy with permanence — running a “forever foundation,” endowing a professorship at a university, or funding a building that bears the family name. While these are valuable and legitimate ways to go about giving, NCFP’s Tedesco told me that “the idea of legacy has shifted from names on buildings to the way funders approach relationships and ultimately, the way they listen and respond.”
Whether or not these conversations compel heirs to unlock a torrent of funding by winding down the family foundation is an open question with enormous charitable ramifications. In the case of the Hellman Foundation, the Bay Area community spoke and Warren and Chris’ children responded by deciding to liquidate its assets.
“The Hellman family has been involved in California for 150 years,” Hirsch said. “When the foundation’s doors close, it’s not going away, because the impact it has on communities will remain and be played forward. That will be the legacy.”
