I’m a fifth-generation inheritor of wealth who was raised in a culture that valued both generosity and resource hoarding. Recognizing the flaws in that mindset — and believing that I don’t have the right to control assets meant to help others — I spent down my fund within the larger family foundation in 2023.
I’ve come to believe that family foundations obstruct the flow of money to people in need. The vast sums of cash they and other private foundations stockpile should embarrass anyone who claims to be a philanthropist or works in the sector. The 5 percent annual mandatory minimum payout is chiefly to blame. It allows foundations created by a single donor to grow over generations into mega-wealthy institutions.
While most family foundations, including mine, currently grant more than 5 percent annually, it isn’t enough. Consider that private foundations’ assets in the United States increased twice as fast as GDP from 1985 to 2020, reaching an all-time high in 2024. Such wealth stockpiling deprives the country of much-needed resources, particularly amid government funding cuts.
My own family’s history exemplifies the problem. In the 1960s, my grandparents created a charitable foundation that held stock in their business, Andersen Window Corporation. The stock’s proceeds were intended for charitable purposes. When my family sold its interest in the business in 1996, my grandparents’ foundation also sold its Andersen stock, changed its name to HRK Foundation, and expanded into separate funds for each living adult descendant.
The foundation’s assets were then invested in the stock market. Over time, the investment returns earned more than what we distributed as grants, and the endowment consistently grew — thanks to the 5 percent rule. Our assets nearly doubled in the 30 years following the sale of the company.
The mandated payout is meant to keep foundations in existence forever and not go broke spending all their money. But in practice, 5 percent is much too low to prevent asset growth. This is especially true for family foundations like mine in which donors annually add to the endowment from their personal income to claim a tax benefit.
Lessons Learned
I learned many things from my family’s foundation and by witnessing the larger culture of such institutions. But three stand out:
The 5 percent rule enables power hoarding. Since the foundation regularly gave more than the 5 percent minimum, there was a sense that we were especially generous. The mandate set a benchmark, and anything above that was seen as extra credit.
This thinking had damaging consequences. For example, the first generation’s funds were big enough to distribute more than 5 percent for the whole foundation and still grow. Because we were meeting the mandate, the younger generation was allowed and even encouraged to accumulate wealth without making distributions — a practice that enabled both wealth and power hoarding.
There was a general adherence to the patriarchal idea that the rich know best how to fix social problems. I once went along with this perspective, but no more. Those closest to the problems are clearly better equipped to solve them — they just need resources.
One way to halt hoarding at family foundations is to mandate a threshold for endowment size above which all income should be distributed. This approach would contain the growth of a foundation’s endowment and increase giving.
“Quiet giving” can become harmful silence. Quiet giving is rich people speak for “Don’t draw attention to yourself. It’s tacky!” My experience reflected this way of thinking. I was trained not to talk about our philanthropy outside of board meetings because it was considered distasteful.
As a result, I viewed philanthropy as a private burden. I felt if I didn’t keep my giving discreet, I’d get too many solicitations or be taken advantage of. Only later did I understand that this veil of secrecy props up an inequitable system designed to keep funds in the hands of the wealthy.
It took building relationships with fundraisers to come to this realization. They showed me how the secrecy built into family foundations like mine causes inefficiencies for nonprofits. Quiet and anonymous giving makes it hard for them to identify and communicate with private funders. Ultimately, it reinforces the hoarding of assets for the benefit of family members.
Financial incentives discourage substantive giving. My family foundation, like most other funders, prioritized the size of the endowment over how that endowment could be used to help more communities. When foundation asset managers are evaluated only on whether funds grow, they tend to focus on investments producing the largest financial returns — not on how well those investments help people in need.
It didn’t sink in when I was younger that instead of sitting on money, we could redistribute it to community foundations or land trusts that have the knowledge to properly manage it themselves. I now see that consistent giving is most helpful, even if that means depleting the endowment.
In the end, all of this culminated in what for me was the only possible decision — to leave my family foundation and spend down my portion of the endowment. Over two years, I distributed more than $4 million to First Peoples Fund, Healing Justice Foundation, Headwaters Foundation for Justice, Women’s Foundation of Minnesota, and many other community funds and nonprofits. My family’s reaction to my decision was mixed, ranging from defensiveness to acquiescence. But I’m confident I made the right choice.
As an inheritor of wealth, I’ve always had the security to take risks, fail, and try again. That privilege gives me perspective and opportunity. More people deserve that security, but recent cuts to federal funding and social services will make that harder. What better time than now for wealthy people like me to radically change our giving practices?
