The affluent like to give to
charities, but their level of involvement with the organizations they support
varies widely, ranging from long-term partnerships to spontaneous donations. At
one end of the spectrum, the process for planned giving requires a great degree
of due diligence, but the extra effort helps donors receive numerous benefits
from their generosity. It also provides a forum for a dialogue with selected
charities, creates opportunities to involve family members, and ensures that
appropriate tax codes are interpreted and leveraged. Still, many affluent givers
opt for the opposite end of the spectrum, making contributions with little or no
advance planning and, as a result, possibly sacrificing substantial
benefits.
The twin benefits of charitable giving—supporting a cause and
minimizing taxes—have long held great appeal for the wealthy. In an effort to
understand how actively they are involved in the stages of the giving process,
we surveyed 446 individuals with a net worth of $5 million or more and a history
of giving at least $50,000 a year to nonprofit organizations.
One of the first issues that surfaced in our study was the degree
to which affluent donors want to exercise authority and control in the selection
of the charities they support and in how their contributions are used. Almost
three-quarters (72.2 percent) of respondents characterized themselves as wanting
a high degree of both; we refer to them as high-influence givers. By contrast,
the remaining quarter—low-influence givers—were less interested in participating
in the process.
Typically, most charitable gifts, regardless of the total wealth
of the donor, fall under the category of checkbook philanthropy, meaning
monetary gifts made in response to specific fundraising requests or one-off
situations such as benefit events and auctions. While this form of giving is no
less important, it often occurs without much forethought, and may not afford the
philanthropist or the charitable organization some of the benefits that are
gained by planned giving.
Yet many wealthy individuals have initiated some kind of planned
giving to structure their philanthropic activities. Just over half of our survey
participants had already established a planned gift, but there was a greater
disparity when viewed by segment. About two-thirds, 62 percent, of the
high-influence individuals had established a planned gift, while just 39 percent
of low-influence givers had done so.
A Simple Plan
There is no question that a planned-giving process can yield
numerous benefits, but it can also be an emotionally taxing experience, because
it often forces givers to face issues surrounding estate planning and mortality.
It is also highly complex, requiring the expertise of financial and tax
professionals to navigate smoothly and successfully. In an effort to understand
motivations, we asked the 247 respondents who have planned gifts a series of
questions. The opportunity to proactively reduce taxes was of material
importance for 87 percent of high-influence givers, but far less significant for
low-influence givers. Just 35 percent of that group cited tax implications as
one of the major drivers in the decision to establish a planned gift.
A large portion of both segments, however, cited a broader
planning effort as playing a principal role in their decision to create a
planned gift. Of high-influence givers, 97 percent said the planned-giving
process was part of a wider effort that focused on financial planning, estate
planning or both, as did 90 percent of low-influence givers.
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