Over 76% of high net worth households plan to continue to give the same amount or donate more over the next five years, and they’re doing so in more structured and strategic ways, according to a biennial Bank of America Study done in conjunction with Indiana University’s Center on Philanthropy.
“The idea is that [Philanthropy]’s growing in the role that it’s playing as part of the overall wealth experience,” Claire Costello, national philanthropic practice executive at U.S. Trust, Bank of America Private Wealth Management, said in a phone interview with On Wall Street. “It’s certainly increasingly more integrated to the wealth structure and process.”
In the survey, which took into account 701 responses from high net worth households with a net worth of greater than $1,000,000, 71% said that they have an annual strategy in place for achieving their philanthropic goals. Moreover, 19% reported that they were using some kind of structured giving vehicle such as a donor advised fund or foundation. That’s up 3% from the 2009 survey, and 2009 had jumped a “whopping” 21% from 2007, according to Costello.
“The structure and strategy go hand in hand with commitment level,” Costello said.
An increasing reliance on structured giving often reflects that higher level of commitment to giving as many of those vehicles require donors pledge an amount up front that they will meet over the coming years.
“Once those dollars are given, you can’t take them back so that will inform those steady flows of money for charitable beneficiaries for years to come,” Costello said.
Deciding among those options can be complicated, however. There is a wide swath of offerings for high net worth households to consider, each with their own tax or practical considerations.
For example, donations to donor advised funds, unlike those to private foundations, are not discoverable through tax disclosures, so they were a good fit for one of Costello’s clients who was a politician and was seeking that level of anonymity.
Many clients are leaning more heavily on advisors to help incorporate philanthropy into their overall financial planning goals. Forty percent of wealthy donors consulted with at least one type of outside advisor, an increase from 2009.
“We do see this emphasis on reliance on more traditional types of advisors,” Costello said. “Wealthy donors understand that there are a lot of structural components that underlie and support their charitable aspirations.”
Taxes and the looming fiscal cliff did not seem to be affecting wealthy households' commitment to philanthropy, Costello said. In fact, less than one third cited tax incentives as a motivation for giving, according to the study.
“With tax policy being heavily debated in Washington and elsewhere, if there’s ever a reason for them to sort of recoil if you will at these questions, they have not as of yet,” she said. “So that’s also informing these long-term forecasts even in there are potential changes to the tax code.”
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