Philanthropy has long been a legacy for many wealthy individuals, akin to a rite of passage from the industrialists of the Gilded Age to modern-day tech moguls. Notable figures such as Bill Gates and Jensen Huang are following in the footsteps of historical icons like John D. Rockefeller and Andrew Carnegie, establishing vast foundations to channel their wealth toward societal benefit. However, the perpetual nature of these foundations raises questions about their relevance over time as societal needs evolve.
In my studies on American philanthropy, it is evident that most foundations are designed to endure indefinitely, maintaining their grants and expenditures in alignment with asset growth. However, this longevity can conflict with the dynamic nature of societal needs, which are ever-changing and often outgrow the original mission of these foundations.
Milton Hershey
The Milton Hershey School Foundation is a prime illustration of this issue. Founded in 1909 by Milton S. Hershey and his wife, the foundation was initially intended to provide for orphans at a time when institutional care was prevalent. Hershey endowed it with significant resources, including stock from his chocolate company, which was worth $60 million in 1918, translating to over $1.3 billion today.
As societal views on childcare shifted, the foundation’s mission became outdated. The school evolved, expanding its admissions to include African American boys in 1968, girls in 1977, and later “social orphans.” Despite these changes, the foundation’s endowment has ballooned to $23 billion by 2024, the largest for any K-12 private school in the U.S., resulting in a surplus it cannot legally redirect due to the cy pres doctrine.
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La Verne Noyes
The La Verne Noyes Fund shares a similar dilemma. Established in 1919 by Chicago businessman La Verne Noyes, this fund was intended to provide scholarships to descendants of World War I soldiers, promoting inclusivity by disregarding race, gender, or religion in recipient selection.
Despite its progressive origins, the mission has become less inclusive over time. With over a quarter of Americans today lacking ancestors who lived in the U.S. before 1945, many potential recipients, particularly those whose families immigrated post-WWI, remain ineligible for these scholarships. Yet, the cy pres doctrine restricts altering the mission as it remains viable with sufficient qualifying students.
Julius Rosenwald
In contrast, philanthropist Julius Rosenwald advocated for a finite approach to charitable giving. His Julius Rosenwald Fund, established in 1917, was formed to support African American education in the segregated South. Rosenwald’s belief in temporary foundations led him to specify the fund’s dissolution 25 years after his death, which occurred as planned in 1948.
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Few Expiration Dates
While Rosenwald’s approach remains rare, it highlights a critical conversation on foundation lifespans. Most established foundations, like Rockefeller’s General Education Board and the Rockefeller Foundation, were designed to endure indefinitely. Exceptions like the General Education Board, which closed in 1964, remain few.
Recent legislative focuses, such as the 1969 tax reform requiring a minimum 5% annual disbursement, haven’t addressed foundation lifespans. A previous survey indicated that imposing a 40-year limit would deter the creation of new foundations.
However, new trends may emerge as philanthropists like Warren Buffett adopt time-limited giving strategies. Buffett’s substantial donations to the Gates Foundation and his family foundations are intended to be spent within a decade of his passing, signaling a shift towards finite philanthropy.
