9 T The philanthropic community has a perpetuity obsession. Critics of perpe- tuity believe that preserving capital, restricting payout, and existing forever is the pernicious norm. Admittedly, for some foundations, perpetuity a sacred ideal, an aspiration that is sometimes unquestioned. Foundations that “spend-down” are valorized as rare entities that value community impact over capital. But the reality is more complex. There is a long history of foundations that aren’t perpetual, and in Canada they are now, arguably, in the majority. Perpetuity – A Legal Default Perpetuity is a compelling legal con- cept. In the past the term was routinely used in gift agreements and charity founding documents without being properly thought through. How long, exactly, is perpetuity? Really, can prop- erty last forever without degrading? For many years perpetual was a word that was used as a legal default in charitable trusts. It is an aspiration, but also rou- tinely used precedent language. A legal habit. And “habit”, as Samuel Beckett said, “is the ballast that chains a dog to its vomit”. (Just try to get that image out of your mind.) The concept of perpetuity is medieval in origins and was encoded in trust law. Capital was land. It was held to produce income to pay for good works. While traditionally trusts for private benefit were time limited, charitable trusts could be perpetual to provide long-term, future benefit. Perpetuity, or permanence, reflects an aristocratic world view. Politically, there is an encoded message of stability and conti- nuity. Which may partly explain the reaction to the idea of perpetuity today by some critics. Is perpetuity the norm? I believe that perpetuity is not the norm among Canadian foundations, at least in practice. A high percentage of private foundations are annual, flow- through entities. Others became “per- petual” because the pre-2010 10-year gift language in the Income Tax Act but aren’t being managed for perpetuity. Some are time limited, or spend- downs. Still others never get going or run out of steam. They either get revoked by CRA or apply for voluntary revocation. The CRA charities database tells a story of foundation mortality, not perpetuity. Private foundations often have a limit- ed life. As of July 2024, there have been 10,312 private foundations regis- tered since 1967, and 3,476 or one- third are revoked and no longer exist. There are 6,836 are still registered, and 3,357 or 49% are less than 15 years old. Headline Examples Foundations with public, limited dura- tions are, however, getting headlines. One example is the 70-year-old Ivey Foundation, which announced it was spending down its $100 million endowment in five years “to enhance its efforts to advance Canada’s net-zero economy and increase the capabilities of the Foundation’s core partners on the front lines of Canada’s climate and energy transition.” This is bold and responsive, but it is not by any means the only example of Canadian spend- down foundation. A new and large private foundation in Canada is The Waltons Trust, which is a self-described “limited life grant-mak- ing foundation”. It was founded by David Graham, the former owner of the cable company, Cablecasting that was sold to be bigger rival 20 years ago. Mr. Graham died in 2017 with no children. The foundation now has over $100 million and is run by trusted friends and associates. Quiet examples But not all Canadian examples are as public, and some are even larger. Aqueduct Foundation has a $180 mil- lion spend-down fund that is quietly granting to zero. The R. Samuel McLaughlin Foundation, established by the founder of General Motors in Canada, granted out $100 million dol- lars in the early 2000s. Its founder had placed a 50-year sunset deadline on the entity. It quietly granted all its capital and closed shop. The Foundation Perpetuity Myth OPINION Malcolm Burrows Head of Philanthropic Advisory Services at Scotia Wealth Management CONTINUED ON PAGE 20
