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Knowledge Base

Q:
How do I learn about dissolving a private foundation?
A:

Most foundations are set up to have a perpetual life-span, spending out only the interests from their investments while keeping the initial endowment intact. Other foundations choose to have a limited life-span. Regardless of the reason for the termination, 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 web site >>

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. According to a wealth management article by the Community Foundation for the Fox Valley Region, Inc., there are three options:

  • Distribute private foundation assets to existing public charities, including community foundations
  • Convert private foundation to a public charity
  • Transfer private foundation assets to another private foundation

Learn more about IRS rules on dissolving a private foundation >>

See also our related Knowledge Base articles:

- What is a foundation?
- How do I start a grantmaking foundation?
- A foundation I’m researching has reported giving amounts greater than its assets. How is this possible?
- What is a "payout requirement" for a private foundation?

Selected resources below may also be helpful.

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