Foundations have been around since the early seventeenth century, when they were largely associated with religious institutions. When we think of a foundation today, the picture that most likely comes to mind includes those set up by the great industrialists of the late nineteenth and early twentieth centuries, such as Andrew Carnegie, Henry Ford, and John D. Rockefeller. Each, in his way, saw philanthropy as a way to right society’s wrongs.

Andrew Carnegie, in particular, was the very picture of the American philanthropist. In his book The Gospel of Wealth (1889), Carnegie advocated that the rich have a moral obligation to give away their fortunes. His philanthropy during his lifetime was wide-ranging, resulting in New York City’s Carnegie Hall, The Carnegie (a group of museums, a concert hall, and a library in Pittsburgh), Carnegie Mellon University, more than 2,000 public libraries throughout the English-speaking world, and several foundations that still bear his name. In 2009, the Carnegie Corporation of New York (the only one of his philanthropies that’s a grantmaking organization) had assets of $2.4 billion and made around $101 million in grants. His other six U.S. foundations are concerned with ethics and international affairs, recognizing heroic individuals, and educational policies.

Toward the end of the twentieth century, history seemed to be repeating itself when the titans of the computer world set up foundations bearing their names that quickly took their places among the world’s largest. Think Gates, Allen, Hewlett, and Packard.

The 1913 law that established the income tax gave the creation of foundations a boost and at the same time exempted organizations that were formed solely for charitable purposes.

The super-rich industrialists weren’t the only ones starting foundations in the early twentieth century. Around the same time, the first community foundation was founded in Cleveland, Ohio. The community foundation drew on the wealth of a number of donors who pooled their funds for the support and betterment of their community.

Foundations are usually set up to exist forever. A surprising number of donors, however, establish their foundations with a “sunset clause” that requires their foundations to go out of business at a predetermined time, usually a set number of years after the founder dies. Donors include sunset clauses, at least in part, out of a desire to have their money given away only by people who knew them (or people who knew people who knew them). In this way, they believe their money will more likely be used for purposes they would have approved of.

In the philanthropy business, this is called “funding out” because the foundation gives away all its money, interest, and principle. This frequently results in a number of very large grants, which can be a boon to charities. If your organization is not already one of their grantees, however, don’t expect to be part of the going-out-of-business bonanza. When they’re getting ready to shut the doors, foundations usually won’t accept new causes or charities. They will, however, likely be making large grants to their current grantees to stabilize programs they had previously supported.