More clients are interested in charitable donations while they are still alive to oversee how the money is being spent.
More clients are interested in charitable donations while they are still alive to oversee how the money is being spent.
Americans left a record $295 billion to charities last year, according to the Giving USA Foundation's annual look at philanthropy. But the amount of charitable bequests in 2006 totaled $22.9 billion, down 2.1% from a total of $23.4 billion in 2005, according to Giving USA 2007, a yearbook published by the Glenview, Ill.-based foundation.
Several factors are behind the decline, including the fact that many large estates were settled in 2005, boosting that year's total, according to the foundation's chairman, Richard Jolly. Additionally, people are living longer, he noted.
Many advisers said, however, that they have seen an increase in their clients' wanting to bestow gifts to charities while they are still around to see their money at work.
“More and more, people are getting used to lifetime gifting solutions,” said Yale Levey, an adviser with Next Generation Wealth Planning LLC in Manalapan, N.J., which has about $100 million in assets under management.
Wealthy clients are more aware than they were in the past that they have an opportunity to take care of organizations about which they are passionate, and improve their lifestyle by using tax-saving strategies for gifting, he said.
Mr. Levey is a board member of The International Association of Advisors in Philanthropy in Rocky Hill, Conn.
One way that clients are funding charities while they are alive is through foundations, he said. In fact, foundation grant making rose 12.6% to $36.5 billion last year, from the amount in 2005, in part because of growth in the number of foundations, according to the Giving USA 2007 report, which was published in June.
There are nearly 80,000 private foundations in the United States, about double the number a decade ago, said Doug Mellinger, founder of Fairfield, Conn.-based Foundation Source Philanthropic Services Inc., which offers support services for private foundations. Foundation assets, meanwhile have more than doubled to about $600 billion, from $240 billion, he said.
Foundation growth has accelerated over the past decade and has been driven by the large amount of wealth created from initial public offerings, hedge funds, private-equity funds and other market successes, Mr. Mellinger said.
One impetus behind the increase in foundation creation and funding was the 1997 request by media mogul Ted Turner that other “superrich” individuals give more to charity, Mr. Mellinger said. Mr. Turner pledged $1 billion to the United Nations.
Many accomplished entrepreneurs are embracing their philanthropic goals, but they are looking for a social return on their donations, Mr. Mellinger said. They want to know that the money they gave helped solve whatever underlying problem the contributor wanted to fix.
As a result, many larger foundations have evaluation committees to help judge whether social goals are being met and whether more donations are worthwhile.
“These givers want to see the outcomes while they are still alive,” said Mr. Mellinger, whose firm works with financial advisers to set up foundations and help administer established ones.
Many people see foundations as a good way to be more involved with the causes to which they have a strong connection, Mr. Jolly said.
In fact, the biggest benefit of setting up a private foundation is that the person funding the foundation has a lot more control over the disposition of grants than they would using a public foundation such as a donor-advised fund, Mr. Levey said.
However, there are more tax benefits associated with public foundations than with private ones, he said. The administrative tasks of setting up and managing a foundation are typically more cumbersome, too, Mr. Levey said.
Regardless, clients are giving away more assets and are more open to conversations about giving than they used to be, said Chad Coe, president of Coe Financial Group in Deerfield, Ill., which has about $70 million in assets under management.
“People give money to the groups they feel connected to,” he said, “and they are doing it while they are alive.”
