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Bank of America and the Center
on Philanthropy at Indiana
University recently released
The 2008 Bank of America Study of
High Net Worth Philanthropy. The
study, similar to one published in
2006 by the same sources, was based
on survey responses from 700 affluent
households that either earned
$200,000 or more annually or had
assets of $1 million or more, excluding
the value of their home.
The survey, conducted in July and
August of 2008, focuses on gifts made
in 2007. Although the report examines
the giving behavior of the wealthy
before the current recession was
widely acknowledged, many of the
findings are likely relevant regardless
of economic factors.
A profile of the rich and generous
It can be helpful for those
involved with gift development to
learn as much as possible about top
wealth holders because, as a group,
they contribute significantly to charity.
For example, of the respondents to
this survey, 98.2% give to charitable
organizations and institutions. In
comparison, some 70% of all Americans
contribute to charitable causes.
High net worth individuals volunteer
for and serve on the boards
of charitable groups in significant
numbers—three-fourths volunteer
and roughly half are board members.
The more hours the wealthy spent
volunteering and serving on boards,
the more they donated on average to
charity.
Multiple motivations for giving
You might assume that charitable
giving among the very wealthy
would occur because of the motivation
to give due to tax savings and
public recognition. According to the
findings, however, that is not the case.
Over 80% of affluent donors said
they gave to charity in order to better
their communities, and approximately
70% felt that their loyalty to
a cause led to their gifts. In contrast,
only 5% claimed that being publicly
recognized was a motivating factor in
their giving.
When asked how their donations
would change if tax deductions were
no longer available, more than half of
the top wealth holders claimed this
would have no effect on their giving whatsoever. Significantly, however,
47% said they would decrease their
giving somewhat or dramatically if
there was no tax deduction and they
had to pay income tax on the amount
they gave to charity.
When the question was
rephrased to reflect estate taxes specifically,
54% said their giving would
stay the same if the estate tax were
repealed, and over 35% noted that
their giving would increase if the
“death tax” were gone. Only 15% said
they would somewhat or dramatically
decrease giving through their
estates. This may reflect the fact that,
unlike the income tax, if there was no
estate tax, no tax would be due on the
amounts left to charity, whether or
not there was a deduction.
Are you in the will?
Perhaps of most interest to gift
planners is that about 56% of top
wealth holders reported that they
have named a charitable organization
in their will. In addition, 37% of the
respondents said they would consider
including a charitable provision in
their will in the next three years. This
news about bequest provisions bodes
well for those in gift planning for a
number of reasons.
The fact that more than half
of high net worth individuals have
already included bequests to charity
indicates that they have confidence
in the direction and mission of the
organizations that will receive their
ultimate gifts. Bequests are often
touted as “ultimate” gifts, as they
result in elevating a charitable organization
to the level of a close friend
or family member in the donor’s
eyes. Development professionals, as
a group, should feel proud of their
efforts over the decades to educate all
donors about the benefits of giving
through their estate plans.
There is, however, a disconnect
between the survey results and actual
behavior reported by the IRS based
on estate tax returns. Over the years,
about 20% of taxable estates have
reported bequests for charitable purposes.
This may indicate that many of
the donors are changing their minds
later in life or that their bequest may
be contingent on some event that
does not occur, rendering the bequest
void.
Fundraisers should see a great
opportunity presenting itself when
37% of the wealthy acknowledge
their willingness to consider making
bequests to nonprofits. Now may be
the time for nonprofits to redouble
their efforts of communicating the
benefits of bequests to the appropriate
persons at the most opportune
time.
Final thoughts
Unfortunately, 38% also said
that they discontinued their support
to one or more charitable causes in
2007. The number one reason why?
Some 58% said they no longer felt
connected to the organization. Only
15% said they discontinued their gifts
because of less financial resources.
The results of the survey are
very encouraging. The data indicates
that wealthy Americans are generous
and thoughtful when it comes to
their charitable giving. It is important
to emphasize your mission in
your fund raising, and may be a mistake
to overemphasize recognition
and other less important motivators.
It can also be a misstep to overemphasize
tax savings that come
as a result of giving, but ignoring
this issue altogether is not recommended,
either, as nearly half of the
wealthy indicate this is a significant
factor in their planning.
Finally, it is important to stay
with donors throughout their life
cycle. Other studies of data from
Sharpe clients indicate that many of
the donors who stop giving because
they no longer feel connected may
be older persons who are no longer
giving at top levels that attract
attention from fundraisers. They
are, however, also at the point in life
when they are making their final
estate plans. Remember, out of sight,
out of mind may also mean “out of
will.”
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