Living Wills and Other Nonprofit Considerations in 2025: Notes on Retrenchment and Reconstruction

By John McIntosh

Editor’s note: This article, the fifth in NFC’s series of phased action steps, is an excerpt from a longer upcoming article written by John McIntosh, the Managing Partner of SeaChange Capital Partners. SeaChange provides grants, loans, analysis, and advice to help nonprofits in the New York City area work through complex financial and organizational challenges. Most of us by now understand that the usual approaches to reorganizing our nonprofits may be slightly miscast for the times. McIntosh acknowledges this in this article, which contains valuable insights we have not seen addressed elsewhere.

Over the last four months, SeaChange has had numerous conversations with nonprofits, funders, and other stakeholders as they grapple with how to retrench and restructure in the face of the unpredictable, multifaceted threat posed by the Trump administration. Many leaders privately acknowledge that we are on the brink of a wholesale nonprofit “crash” that will be characterized by widespread contraction, consolidation, and closure — and, potentially, wholesale reinvention of this sector, which tends to be very resilient. Despite this historical resilience, this period will be a profound and disorienting shock for a sector where, despite the daily challenges, the overall environment has long been stable and quite benign.

The best-managed nonprofits are combining elements of risk management with a variation of the “hunker down” strategy employed at the beginning of the COVID crisis. 

Understand Exposures

Most nonprofits see themselves on a five-level hierarchy of exposure. The first two are existential; the other three are matters of degree.

1. Institutional: We are potentially a named target under specific attack because of a combination of our program, our size, or our prominence (e.g., Harvard, the Ford Foundation, the ACLU, and the like). We anticipate a full range of potential threats, including from funding, DOJ, IRS, ICE, and Executive Orders.
2. Programmatic: We operate programs likely to come under multiple existential threats — funding, legal, political — in areas like immigration, LGBTQ rights, education, environmental protection, etc.
3. Direct Financial: We are directly reliant on federal funding, a portion of which may flow through the city or state. 
4. Indirect Finance: While we do not receive any federal money, our state and city funding (and perhaps even our philanthropy) could be at risk, given that these budgets will be revisited in the face of federal funding cuts.
5. Collateral: Although we have no financial exposure, we rely on inputs — pro-bono legal support, volunteers, access to facilities, a deep and public commitment to DEI — that may be at risk.

1. Commit to mission-based retrenchment

Boards and executive directors should remember that all their decision-making must be grounded in obedience to mission, not the organization. In normal times, mission-driven leadership asks, “What best advances our mission and grows our impact?” Today, it asks, “How can we best mitigate the harm to our mission?”

2. Plan for Uncertainty

Nonprofits recognize that they are operating in an environment of profound uncertainty. They should not be asking, “How likely is X, Y, or Z?” but rather, “What will we do if X, Y, or Z happens?” The list of “what if?” scenarios being considered is daunting: funding cuts, funding freezes, program cancelations, ICE visits, DOJ/IRS letters, arrests, concerted cyberattacks, lawsuits, doxxing, etc. They are planning at all levels — financial, legal, human resources — and going through tabletop exercises to test their readiness to respond.

3. Stockpile Flexibility

During COVID, organizations hoarded cash to “hibernate” until they could resume “normal” operations. This strategy does not work today. There can be no guarantee that things will ever return to normal or, even if they do, will do so quickly enough for hoard-and-hibernate to be a viable strategy. Instead of hoarding cash, nonprofits are stockpiling flexibility to be better able to make sudden changes. They are asking philanthropic funders to remove restrictions on existing grants and allow for greater overhead recovery, putting in place lines of credit (sometimes from board members and other funders), adding “subject to appropriation” clauses in new leases, and proactively exploring mergers and partnerships that might make them more flexible and resilient.

4. Prepare for the Worst

Having understood the nature of their exposure and done their best to stockpile flexibility, organizations are developing retrenchment plans for how to save, shrink, or close programs. Some are even making “living wills” to be activated if it becomes clear that they cannot continue as an organization. A living will pre-identifies partners for important programs and a home for any transferrable charitable assets (probably real estate, restricted assets, or an endowment), sets aside reserves for the staff and for expenses to responsible close the legal entity, and secures the outside help they will need to do it. A living will should specify timelines for action since, given the limited financial resources of most organizations, delays reduce the ability to preserve programs.

5. Consider the Personal and the Professional

Organizational decisions — about programs, litigation, capitulation — can also be deeply personal. In extreme situations like the current environment, mission-driven leadership may even put leaders in personal jeopardy. Leaders will need to define their own personal “no-go” zones and bright lines. They should communicate these clearly to the board and develop an ethical practice to explicitly handle situations where organizational and personal values may conflict.