Conside­ring the next gene­ra­tion when estab­li­shing foundations

Cultu­ral history teaches us to start things with the end in mind. ‘Ever­y­thing that is, ends,’ sings Erda in Wagner’s ‘Rhein­gold’. Even before this, Mephisto in Goethe’s ‘Faust’ stated, ‘Ever­y­thing that exists deser­ves to perish.’ This also holds true for foun­da­ti­ons. When phil­an­thro­pists estab­lish a foun­da­tion, they should also think about its even­tual end. While you cannot bequeath foun­da­ti­ons them­sel­ves, control over them can be passed on by plan­ning for the child­ren to join the board of trus­tees when their parents step down. Alter­na­tively, you can bequeath assets that were deli­bera­tely kept outside the foun­da­tion, so that the next gene­ra­tion can use them to fund their own foundations.

A sense of loss

It’s not uncom­mon for descen­dants to expe­ri­ence a linge­ring sense of loss in rela­tion to foun­da­ti­ons set up by their parents. They might believe the foundation’s assets have been taken from them, drawing the legally incor­rect but psycho­lo­gi­cally under­stan­da­ble conclu­sion that this is essen­ti­ally their own wealth. This can lead them to believe that they have more right than anyone else to decide how this wealth is used.

This sense of loss can be signi­fi­cantly alle­via­ted by not handing down the exis­ting foun­da­tion but, rather, crea­ting a new one with a purpose that the child­ren can define them­sel­ves. Rarely do child­ren believe in exactly the same causes as their parents. Further­more, from an objec­tive stand­point, socie­tal needs evolve over time. Foun­da­tion law tradi­tio­nally demands that the purpose be firmly defi­ned in the foundation’s char­ter. Wise foun­ders should ther­e­fore contem­p­late the even­tual fulfilm­ent of the foundation’s purpose – or even the end of the foun­da­tion itself – from the outset, so that their succes­sors can make a neces­sary or desi­red fresh start with their own phil­an­thro­pic ventures. This can be done in seve­ral ways:

Dissol­ving the foun­da­tion: The foundation’s exis­tence is limi­ted to its own life­time or a speci­fied dura­tion, either as a tempo­rary foun­da­tion, a spend-down foun­da­tion, or a foun­da­tion that needs to be dissol­ved due to a lack of assets and no ongo­ing finan­cial support. The next gene­ra­tion can then estab­lish new foun­da­ti­ons with purpo­ses that they define themselves.

Chan­ging the purpose: The foun­der has the right to change the foundation’s purpose in accordance with Article 86a of the Swiss Civil Code (ZGB). Howe­ver, such a change can only be initia­ted by the foun­der them­sel­ves, not their descen­dants. Any change of purpose should ther­e­fore be discus­sed and agreed with them.

Setting a broad purpose: The foun­der may set up a foun­da­tion with a broad purpose and pursue prio­ri­ties of their choo­sing within this purpose. Their succes­sors can then define their own prio­ri­ties.
Having a sepa­rate foun­da­tion for each child
The foun­der might also consider setting up a sepa­rate foun­da­tion for each child during their life­time or allow each child to create their own foun­da­tion with a purpose of their choo­sing. This can also be done by means of a will, with the next gene­ra­tion inhe­ri­ting assets on the condi­tion that they are used to estab­lish a foundation.

Estab­li­shing subor­di­nate foun­da­ti­ons: For subor­di­nate foun­da­ti­ons opera­ting under an umbrella foun­da­tion, chan­ging the purpose can be more straight­for­ward than for inde­pen­dent foun­da­ti­ons. The foun­der may donate assets to an umbrella foun­da­tion on the condi­tion that they are used for a future spin-off. After the founder’s death or, if desi­red, during their life­time, these assets can be used to estab­lish an inde­pen­dent foun­da­tion, which doesn’t neces­s­a­rily have to pursue the same purpose as the origi­nal one. Or, instead of crea­ting an inde­pen­dent foun­da­tion, a new one could be estab­lished with a diffe­rent purpose.

Conclu­sion

Tail­oring foun­da­ti­ons not only to the needs of future gene­ra­ti­ons of bene­fi­ci­a­ries but also to the desi­res, ideas and ideals of the foun­ders’ descen­dants is a unique aspect of succes­sion plan­ning that should be conside­red at the outset when estab­li­shing a foun­da­tion. Here, too, the best solu­ti­ons are found through dialo­gue between the diffe­rent gene­ra­ti­ons. And though the terms ‘child­ren’ and ‘descen­dants’ have been used throug­hout, these should not be unders­tood solely in a family context but within a broa­der socie­tal frame­work as well. Every foun­der should think beyond them­sel­ves and consider future gene­ra­ti­ons, regard­less of whether this includes their own child­ren. This is espe­ci­ally true for young and open-minded foun­ders, as they might turn out to be the next gene­ra­tion themselves.