# kaal:claim:3981021-008

**Claim.** Although the five percent annual payout is only a legal minimum for foundations under 2021 law, many boards treat five percent as the default rule, which entrenches minimal disbursement.

**Type.** failure  **Support.** evidenced

**Holds when.**

- United States private foundations as of 2021

**Source quote.**

> As the law stands in 2021, foundations are only required to spend 5% of their assets a year.51 Although this is a minimum requirement for foundations, many boards view 5% as the default rule.

**From.** Wulf A. Kaal, *How Decentralized Autonomous Organizations Optimize Charitable Giving* (2021), Motivation, Tax Free Cash Hoarding, page 13

**Cite as.** Wulf A. Kaal, How Decentralized Autonomous Organizations Optimize Charitable Giving (2021). SSRN: https://ssrn.com/abstract=3981021

**Verify.** sha256 of source PDF `9d8bc78d119c780c96c89ce3e820f4ac8b037d39b3ade59feb4e40d46b048288` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202021%20-%20How%20Decentralized%20Autonomous%20Organizations%20Optimize%20Charitable%20Giving.pdf

**Failure mode.** Minimum payout becomes the default  (family: board-and-oversight-failure)

**Topics.** law-and-legal-systems, risk-and-incentives

**Keywords.** payout-rule, foundations, legal-incentives, endowment-hoarding

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