Most foundations are set up to have a perpetual lifespan, spending out only the interests from their investments while keeping the initial endowment intact. Other foundations choose to have a limited lifespan. Regardless of the reason for the dissolution, foundations dissolve by "spending down" their assets in compliance with both state and federal law.

To begin with, foundations need to notify the state in which they incorporated (typically the Attorney General's office) about the organization's impending change in status. Each state will have varying regulations in terms of filing procedures which may depend upon what type of entity the foundation is (a trust, a fund, etc.). Find your state government's website

The IRS will require additional documentation, including a final Form 990-PF. The method of distributing ("spending down") the foundation's remaining assets will be an important consideration.

Learn more about IRS rules on dissolving a private foundation.

Beyond IRS compliance around dissolving your foundation, you may also be wondering about how to spend down effectively. Candid Learning for Funders (formerly GrantCraft), published “Doing Spend Down Right,” a blog series chronicling lessons from the Andrea and Charles Bronfman Philanthropies. Candid Learning for Funders has a robust section of articles, blogs, and guides that address the idea of spending down.

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