Charitable giving bouncing back with market, says BNY Mellon Wealth Management

Charitable giving followed stocks higher in 2021, strongly rebounding from the pandemic-plagued prior year, according to a new report.

The number of gifts rose 10% and the total dollar amount of gifts jumped 27% last year, while the average gift size increased by 15%, according to the 2022 Annual Charitable Gift Report that BNY Mellon Wealth Management released Wednesday.

“The financial markets held strong in 2021, and the planned giving activity demonstrated how sustainable the giving increase in 2020 was — and even with the present market uncertainty, people don’t stop giving," said Crystal Thompkins, head of philanthropic solutions at BNY Mellon Wealth Management.

“With the majority of planned gifts still being funded with cash, it’s important to focus on conversations about appreciated assets and ownership," Thompkins added. "There are significant opportunities for nonprofits to optimize giving by working with donors to consider noncash gifts and craft unique gift solutions.”

A breakdown of the giving shows donations of more than $100,000 represented 29% of the total contracts in 2021 but accounted for 85% of the total amount given. Meanwhile, donations between $10,000 and $50,000 represented the most contracts at 54%, the same as in 2020, according to the survey.

"We have found that because of incredible growth in asset values and available cash flow over the last several years, our clients have not reduced their charitable activity and continue to look for ways to enhance these objectives," said Kenneth Sanchez, managing partner of KWM Wealth Advisory at Stifel Independent Advisors. "Specifically, clients have increased charitable distributions of cash from retirement accounts to philanthropic organizations. During the first half of 2022, an increasing number of clients have asked us to plan for larger long-term charitable planning."

Cash gifts are still by far the most popular (83%), with noncash gifts making up 17% of donations, nearly identical to year-over-year comparisons. There also was a 33% increase in new trust activity year over the year, though the study showed total donations declined and the dollar amount of additions to trusts decreased by 50%.

“Although there was a slight uptick in the number of new trusts in 2021, trust activity continues its relatively flat-to-downward trend since the 2008-09 recession, driven by lower charitable deductions due to the low applicable fed rate and donors looking to make a more immediate impact with their giving,” Thompkins said.

The report also showed that new donors (51%) outnumbered repeat donors (49%) and made larger gifts on average, with an 18.5% increase in average gift size.

“The strong markets coming out of the pandemic led a significant number of our clients to gift appreciated stock to charities last year, thereby avoiding capital gains and leaving their cash to be reinvested in their portfolio. The number of cash gifts compared to stock or non-cash gifts in the study suggests there is still a lot of opportunity for investors to further maximize the benefits of their gifts during periods of market appreciation,” said Heather Kessler, wealth manager with Coldstream Wealth Management.

Finally, donor-advised funds continued to be an important part of the philanthropic landscape. According to the report, grants distributed through the BNY Mellon Charitable Gift Fund experienced a record-level activity in 2021, with an increase in the number of donations of 93%, along with a rise in the amount of gifts of 55%.

“During times of economic uncertainty when capacity for charitable giving may be limited, donors with DAFs are well positioned to provide critical funding to nonprofits when it’s needed the most,” Thompkins said.