The Dark Side of Sunsetting

Last week we published an essay titled “Scaling Up, Spending Down,” celebrating a movement that finally dares to ask a radical question: What if foundations stopped hoarding and started giving with true urgency? It included thoughts from the Chorus Foundation, which orchestrated its own end with elegance, and Lankelly Chase, which surprised the European philanthrosphere by choosing to redistribute its entire endowment. I argued that spend-down is an essential antidote to a sector built on managing scarcity rather than eliminating it. I stand by that.

But for every foundation that dissolves with grace and strategic precision, there are many more whose exit leaves a smoking crater where vital community infrastructure once stood. The sunset, wielded carelessly, doesn’t feel like liberation but abandonment. As the spend-down movement gains momentum, a shadow canon of failures accumulates, largely unexamined by the very advocates who most need to study it, like a hospital teaching only from living patients and never doing an autopsy. The dark side of sunsetting is not an argument against the practice; it’s a warning sign and instruction manual for doing it responsibly. Without confronting these pathologies, the spend-down movement risks replicating the very extractive dynamics it purports to dismantle, ripping away resources from communities with the same arbitrary unilateralism that characterised their initial grantmaking.

The Clock Runs Faster Than the Checkbook

The most obvious failure is the simplest: a poorly executed spend-down can leave dependent organisations crumbling. Ralph C. Wilson Jr. Foundation’s still unfolding situation offers a cautionary tale of staggering logistical difficulty. Tasked with disbursing $1.2 billion over 20 years, the foundation found itself, eighteen months in, catastrophically behind schedule earning $57million in a year while only managing to give away $56million, slipping $1million into the red on its own distribution targets. The foundation’s president acknowledged that reaching the required annual distribution of $75 to 100 million would demand “massive individual grants,” raising the spectre of capital absorption failures at the grantee level on an enormous scale. This is the paradox of accelerated spending: the very urgency that justifies the sunset can overwhelm an ecosystem’s capacity to absorb funds effectively, producing sloppy, oversized grants that distort local priorities and create dependency on a funding source that is, by design, about to vanish.

It is a case study in what anarchist anthropologist David Graeber might have called the bureaucratic violence of deadlines: the clock, not the community, begins to dictate who eats.

It’s not just the size of the cheques, but the chaos of a ticking clock that can override good judgment. Picture a foundation, years behind on its payout schedule, frantically searching for any nonprofit with the absorptive capacity to take a seven-figure bank transfer by Friday. Alignment with community needs becomes a secondary concern. The foundation’s legal obligation to spend becomes the grantee’s sudden, vertigo-inducing money drop, a structural recipe for misuse, no matter how well-intentioned both parties are.

When the Lifeline Snaps

The human cost registers most acutely at the organisational level. When Katya Fels Smyth faced the wind-down of her organisation, the Full Frame Initiative, she confronted four possible scenarios. The most terrifying was what she called “an implosion à la Benefits Data Trust.” That nonprofit, which helped people access public benefits, closed in the summer of 2024, leaving folks in a bind. The collapse provides a grim archetype: a well-funded organisation, it had received a huge gift from MacKenzie Scott, that nonetheless shuttered chaotically, abandoning the very people it existed to serve. The money was there, but the planning, the governance, and the care for a humane exit were not. For a sector that fetishizes “sustainability,” it is remarkable how rarely that logic is applied to the act of dissolution itself. We demand five-year strategic plans from grantees but applaud a foundation for shutting off the lights with six months’ warning and a press release.

Full Frame avoided this fate only through extraordinary measures. Fels Smyth raised over $1 million specifically for wind-down costs, negotiated generous severance packages, and spent months carefully transitioning its intellectual property to a network of volunteer “stewards.” But even this relatively conscientious closure required donors willing to fund the unsexy work of organisational death, a resource few foundations are prepared to provide. There is a perverse hierarchy at play: programmatic grants are attractive; paying for a final audit, severance, and the careful archiving of institutional knowledge is treated as an administrative afterthought. The fundamental asymmetry is stark: foundations control the timing and terms of their exit, while grantees and their clients bear the consequences.

A Foundation Exits, a Movement Trembles

Beyond individual failures lies a systemic danger: the disappearance of entire resource ecosystems without a succession plan. The Brainerd Foundation, a Seattle-based environmental funder that spent down its $18.2 million by 2020, exemplifies the thoughtful approach that many others fail to replicate. Co-director Ann Krumboltz spoke of a core ethical duty: “It’s important to respect the grantee community and think about what they require as we close, because many are dependent on—and understandably so—foundation dollars.” Brainerd invested its final phase in three “sunset initiatives” designed to build the next generation of donors, strengthen emerging leaders, and support a culture of innovation. They convened grantees for design labs, asking directly what investments would “be most valuable for strengthening the field.” They were trying to create improved future conditions as they were closing their doors, a gesture of institutional foresight too often missing from the philanthropic playbook.

But here’s the uncomfortable truth: a single foundation, no matter how conscientious, cannot singlehandedly replace the ecosystem infrastructure it removes. The broader sector faces an “aggregation problem.” Multiple foundations exit a field simultaneously or in overlapping sequence, without any coordination. Imagine four major funders in a single issue area, say, housing rights or reproductive justice, all deciding on a spend-down within the same three-year window. No single exit is fatal, but collectively, they yank the financial floor out from under the field. For grantees, it’s an unpredictable landscape where a decades-long partner can announce its departure with lavish support and long notice, or with a severance package and a ‘good luck in your future endeavours’ pat on the back.

The Will to Power, Encoded in the End

There’s a deeper, structural reason why poorly executed spend-downs should be expected, not treated as anomalies. Let us speak plainly: mainstream philanthropy does not solve the contradictions of racial capitalism – in fact it is often an instrument for managing them. Critical scholarship on the sector’s political economy shows how foundations often function under a logic of “double dispossession,” where the accountability relationship between donor and grantee reproduces the very hierarchies social justice organisations claim to dismantle. A foundation that has never genuinely ceded power to its grantees during its lifespan will be structurally incapable of doing so gracefully in its final months. The patterns of paternalism, opacity, and unilateral decision-making are simply compressed and accelerated. The sunset becomes not a rupture with business-as-usual philanthropy, but its most concentrated and chemically pure expression: a final, irrevocable assertion of donor power. The foundation decides who gets what, when the taps are turned off forever, with very little accountability to those left behind. The donor gets the first word and the last, and the community’s role is simply to be grateful for whatever happened in between.

You can spot a power-blind spend-down a mile off. It’s the one where the foundation’s board crafts a multi-year “legacy plan” in a cherrywood-paneled room, hires a branding agency to name its final initiative something like “The Big Give”, announces it as an impact accelerator move, and then offers grantees a “resilience toolkit” and a ‘capacity building’ seminar. This type of move is meant to clean the conscience of an institution that cannot bear to admit its own powerplay right up to the moment it disappears.

What a Responsible Goodbye Looks Like

So, what distinguishes a destructive sunset from a responsible one? The case studies of both failure and near-miss point to a few critical markers.

1. Clear, early, and honest communication with grantees is foundational. The Brainerd Foundation gave every grantee a minimum of one year’s notice before their final grant and engaged in individual conversations about how to structure that support for maximum resilience. If we normalise long-term funding relationships, we could say a 3-5 year minimum could be the most responsible norm.
2. Dedicated resources for sunset costs, as Full Frame secured from the Claneil Foundation and the Gund family, enable the careful archival of intellectual property, the orderly transition of programs, and the provision of meaningful severance to staff.
3. Investment in field-building, not merely grantee-support, ensures that the foundation’s exit leaves the ecosystem stronger.
4. And the active participation of grantees and communities in designing the exit strategy transforms the spend-down from a unilateral act of donor prerogative into a genuinely collaborative process of transition.

Thus, the spend-down, done well, is less an ending and more of an investment in a successor landscape the foundation will not be around to see but will have seeded.

This is not an argument for perpetual endowment. The permanent foundation, hoarding resources extracted from the commons while meting out a meagre 5% annually, remains an institution structurally designed to manage scarcity rather than eliminate it. The point is not to abandon the sunset but to insist that it be conducted with the same rigour, accountability, and strategic intentionality that the spend-down movement demands of perpetual institutions. A bad sunset reinforces every critique of philanthropy; while a good one enacts their resolution. The contradiction between philanthropy’s progressive self-image and its extractive foundations does not vanish with a sunset clause, it must be actively dismantled through a process that surrenders power, not just money.

The choice is not between perpetuity and sunset, but between a philanthropy that exits responsibly and one that simply flees. Foundations contemplating their own dissolution must learn from the ghosts of their predecessors that faded out without a sound, leaving communities to quietly absorb the loss. The sunset remains one of the most potent tools in philanthropy’s arsenal, a mechanism for converting stored wealth into transformative capacity. But like any powerful tool, it maims the careless wielder. The only thing worse than a perpetual foundation pretending to solve problems it was built to manage is a foundation that, in its final act, abandons the communities it claimed to serve.

A Responsible-Sunsetting Checklist

aka How to Conduct an Exit Interview with the Future

For a foundation, the final redistribution of money might as well be your last testament. Before you lock the doors, ask yourselves these questions, not in a board book, but out loud, with the pe

ople whose lives your decisions will reshape.

1. The Co-Creation Test

• Did we design our spend-down plan with our grantees and community partners, not just for them?
• Is there a formal feedback loop where their critique of our plan can actually change our plan?
• Have we moved beyond an “announce and defend” posture?

2. The Timeline Honesty Check

• Did we give every grantee a clear, personalised heads-up at least a year (or whatever a generous time period means) in advance, laying out the exact terms of our exit?
• Have we mapped out the field-level timing? Do we know who else in the funder ecosystem is sunsetting or considering it? Are we inadvertently exiting alongside other key funders, and can we coordinate our timelines to cushion the blow?

3. The Admin Fund(s)

• Have we set aside a dedicated, generous fund for our own dissolution, covering staff severance, IP transition, and the boring administrative work of closing well?
• Are we compensating the people (staff, consultants, community leaders) doing the emotional and logistical labour of our shutdown?
• Is our final financial audit structured for transparency, not just compliance, so grantees can hold us accountable?

4. The Final Redistribution Architecture

• Are our final grants structured as flexible, multi-year commitments to prevent sudden fiscal cliffs for grantees?
• Have we stress-tested grant sizes to ensure they don’t exceed a grantee’s absorptive capacity and distort their mission?
• Are we explicitly funding the survival of our grantees, or just the completion of our pet projects?

5. The Knowledge Harvest

• Do we have a plan to archive and share our lessons, failures, and intellectual property and open source them, or have them gather dust in a defunct Dropbox account?
• Have we funded the transfer of critical relationships and institutional knowledge to a designated successor or community steward?

6. The Power Check

• In our final phase, are we actively ceding power? Are grantees on our distribution committee? Are they making the final allocation decisions?
• Have we commissioned an independent evaluation of our impact and our exit, with results published for the field, not buried?
• Can we say with certainty that we are leaving the ecosystem healthier, more connected, and more powerful than we found it? If not, then we are not done.

References

1. McCambridge, R. (2017, June 19). Detroit-based spend-down foundation is having trouble spending down. Nonprofit Quarterly.
2. Hengevoss, A., & von Schnurbein, G. (2025, September). Sunset foundation – how foundations spend down affects the impact on staff and grantees. European Research Network on Philanthropy Research Note.
3. Gose, B. (2025, October 2). Why one charity chose to wind down while still flush with cash. The Chronicle of Philanthropy.
4. McCoy, E. (2017, May 25). Lessons from limited life: the Brainerd Foundation. The Center for Effective Philanthropy Blog.
5. The Law Firm for Non-Profits Blog. (2025, September 3). Sunsetting private foundations: legal considerations and strategic steps.
6. Fels Smyth, K. (2025). Closing Well: The Full Frame Initiative’s Approach to a Responsible Wind-Down. Full Frame Initiative. [McGoey, L., Thiel, D., & West, R. (2018). Philanthropy and the politics of knowledge. Economy and Society, 47(1), 1-24.
7. Guilhot, N. (2006). The Democracy Makers: Human Rights and the Politics of Global Order. Columbia University Press.