In 1917, Julius Rosenwald, president of the Sears Roebuck Company, used $70 million of his personal wealth to form the Rosenwald Fund. Rosenwald chose not to endow this fund, but rather decided that all of the $70 million was to be used for charitable purposes so that by the year 1947, the Fund would be gone. Rosenwald explained that he wanted to avoid “the tendency to bureaucracy” and other shortcomings that he saw coming with permanent endowment funds.
Some people today agree with Mr. Rosenwald and donate substantial amounts of money to establish funds that are to be used up in a set period of time. This year’s Federal Budget changed rules governing foundations to make these types of gifts easier for foundations and charities to set up and manage. Perhaps this is why we see more articles recently in the media advocating for self-depleting funds like the Rosenwald Fund.
But not everyone agrees with Mr. Rosenwald’s theory that permanent endowment funds automatically bring bloated bureaucracy whose sole purpose is “to prolong their existence indefinitely.” As proof of the vibrancy of the custodians of permanently endowed funds, we can turn to foundations such as the Winnipeg Foundation, celebrating its 90th anniversary this year and continuing to support the Winnipeg community vigorously and with great positive effect.
So, should you endow your philanthropic gift in perpetuity as many Canadians have done? Examples of these permanent endowments would be: the J. W. McConnell Family Foundation, the Metcalf Foundation, and the W. Garfield Weston Foundation. Or should you set up a self-depleting fund as Mr. Rosenwald did?
My advice is this. Since you have the option of using either means to achieve your philanthropic goals, I suggest that you use the one that will work best. Is there a specific problem that you want solved? If so, then set up a fund that will be finished when the task is completed. If your cause is one that will continue in perpetuity, then set up the fund to match. You even have the option of using both types of funds if you have the financial resources to do so.
I have one more suggestion for you. Since community foundations have the expertise in establishing the types of funds that will best achieve your philanthropic goals and since they have the widest range of options to offer each donor, why not use them as the stewards of your funds? Remember, community foundations are great places to leave your philanthropic legacy.
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