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was rephrased to reflect estate taxes specifically, 54% said their giving would stay the same if the estate tax were repealed, and over 35% noted that their giving would increase if the “death tax” were gone.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.
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.”