Radical Choices That Raise Questions

A few months ago, two leading figures in North American philanthropy made headline-grabbing announcements. Bill Gates announced that he would donate the majority of his fortune to his foundation, which will close its doors permanently at the end of 2045. Warren Buffett, for his part, has given his heirs ten years to distribute his $160 billion fortune to charitable causes. In Canada, the Ivey Foundation has also chosen to invest heavily over a short period in response to the climate emergency. In Switzerland, a similar approach was taken by the Swiss Mava Foundation, which ceased its activities in 2022 after 28 years, in accordance with its founder’s wish to pass the baton to the next generation.

Non-Disbursable Endowments: Sometimes Supported by Tax Incentives

These examples raise a fundamental question: is it preferable to spend down a foundation’s capital until it is exhausted, or to preserve it by investing so that only the income is used to fund charitable projects?

In some countries, tax policy can influence this choice. In France, philanthropic vehicles with non-disbursable capital are favored, as the income generated to fund projects is tax-exempt. Conversely, if the endowment can be spent, then the same income becomes taxable, although some may benefit from reduced rates. In contrast, in Belgium, Luxembourg, or Switzerland, there is no tax distinction between spendable and non-spendable capital.

The Pitfalls of Relying Solely on Investment Returns

Relying exclusively on investment income can sometimes limit a foundation’s activities: it may be difficult to launch operations quickly, commit to medium- or long-term partnerships, or invest in major projects if returns are insufficient. This lack of flexibility can sometimes hinder innovation and long-term collaboration.

An Attractive but Demanding Model

The Anyama Endowment Fund, created in 2020 by a EuroMillions winner, clearly illustrates the challenges of non-disbursable endowments. Its founder, a generous anonymous philanthropist, decided to dedicate the majority of his €200 million winnings to environmental protection, health initiatives, and support for caregivers.

To realize this ambition, he created a non-disbursable endowment fund to which he allocated most of the resources for his philanthropic project. At the same time, and with sound advice, he also established a sheltered foundation with spendable funds, enabling the philanthropic project to begin its activities quickly while the endowment fund’s capital accumulated the reserves needed for effective operation. Today, the sheltered foundation continues to play an adjustment role, providing necessary flexibility, especially when certain projects require more funding than the endowment’s income can provide.

This case highlights a key recommendation from the French 2025 Practical Guide on Endowment Funds by the Legal Affairs Department: from inception, plan for a working capital reserve in addition to the initial endowment to secure the start-up phase.

Flexibility as the Key to Philanthropic Effectiveness

In a context marked by profound changes and rapidly evolving benchmarks, the future seems governed by new, often unpredictable dynamics. Moreover, the need for funding among public-interest organizations is more pressing than ever, given the crisis in public funding. While philanthropy does not replace public funds, it remains a buffer in times of crisis. This underscores the importance for foundations to maintain real flexibility: setting aside special reserves to act swiftly outside regular programs, establishing a “disbursement quota” to support organizations even when investment returns fall short, and demonstrating agility in decision-making to ensure impact where it is most needed.

Preparing for What Comes Next: Building and Transmitting for Lasting Impact

Limited-life foundations raise further questions, particularly regarding the impact of the disappearance of major funders from the philanthropic landscape. How can these lost sources of funding be replaced? How can the knowledge and expertise developed over the years be passed on? In this regard, the Mava Foundation’s work in capitalizing on and sharing its experience at the time of its closure is noteworthy. By transparently sharing its lessons with the sector, it organized a transition that enabled supported organizations to prepare for this milestone and allowed the entire philanthropic ecosystem to benefit from its insights.

Whether temporary or designed to last, foundations play a fundamental role in a rapidly changing world. Depending on the challenges they wish to address, each foundation must strike a balance between rapid intervention and sustainable impact. In short, the challenge is to find the right equilibrium between acting today and preparing for tomorrow.

Would you like to adapt your philanthropic strategy? Please do not hesitate to ask your usual relationship manager to connect you with our philanthropy experts or Wealth Structurers for further discussion.