The economic downturn took a toll on how much money wealthy families donated to charity in 2009, with average gift amounts tumbling by 35% from 2007, according to a Bank of America study released on Tuesday.
And giving as a percentage of income also fell, with high net worth households contributing just over 9% of their income to charities in 2009, down from 11% in 2007.
One area where giving continued to increase was in private foundations, donor-advised funds and charitable trusts, with over 16% of wealthy households giving to these vehicles in 2009, and the average giving amount increasing by 21% from $62,680 in 2007 to $75,867.
The study on high net worth philanthropy, which was conducted by The Center on Philanthropy at Indiana University, revealed that while wealthy households continue to support non-profits, they seem to be doing so in specific sectors. Sectors such as the arts, environment/animal care and international giving saw increases of between 4% and 21% in average amounts donated. But others, such as health and education, saw average giving amounts decline in 2009, though they are still among the top non-profit sectors supported by wealthy households. A significant increase in giving was seen in the percentage of households that gave to basic human needs, such as food and shelter, which jumped from 75% in 2005 to 85% in 2009.
The households surveyed have an income of over $200,000 and/or a net worth of at least $1 million, excluding the value of their primary residence. The average respondent had more than $10 million, and half of all respondents had a net worth between $3 million and $20 million.
Another interesting tidbit from the study was that although 65% of high net worth households reported supporting the same organizations or causes each year, 35% stopped giving to at least one organization in 2009, consistent with 2007 results, and 27% stopped giving to at least two organizations.
The reasons they stopped giving are also important to pay attention to: Fifty-nine percent stopped giving because of too frequent solicitation or an organization asking for an inappropriate amount; 34% decided to support other causes; 29% said household circumstances changed (e.g., retired, job loss, loss of financial assets, divorce, additional children, etc.); and another 29% said the organization changed leadership or activities.
“Nonprofit organizations may have asked for too much at a time when donors may have been more sensitive to being solicited because of declines in their personal financial conditions,” said Una Osili, Ph.D., director of research for the Center on Philanthropy at Indiana University, in a press release on Tuesday. “The message for nonprofits is that they should be aware of donors’ circumstances. Even if donors haven’t been as affected by the downturn, increased economic and financial uncertainty may be leading them to allocate their charitable dollars differently.”
Yet that doesn’t mean wealthy families stopped caring about causes. In fact, it seems that although their monetary giving may have dipped, more households are volunteering- giving their time to the organizations and causes they value. Almost 79% of high net worth individuals volunteered in 2009, up 4% over 2007 levels, with those volunteering more than 200 hours a year up from 27% in 2007 to 39% in 2009. And the more individuals volunteered, the more they gave. Non-volunteers donated on average $46,414 in 2009, while those who volunteered more than 200 hours donated $75,662.
Another important factor in giving is tax policy. Sixty-seven percent of wealthy households said they would somewhat or dramatically decrease their charitable contributions if there were no income tax deductions for their donations, up from 47% in 2007. If the estate tax were repealed, like it has been in 2010, 43% of wealthy households would somewhat or dramatically increase the amount they leave to charity in an estate plan, up from 36% in 2007.
With so many changes happening on the economy and tax front it’s no wonder that wealthy families have been reaching out to advisors and other financial professional for help with their giving. The study found that 68% of high net worth households used accountants in 2009, while 39% used financial or wealth advisors to help them make charitable giving decisions. And over 90% of wealthy households initiated discussions with their advisor.
In the end, the top three reasons wealthy families donated in 2009 was: they thought their gift would have an impact, they felt financially secure, and they thought the organization would good use of their donation.
“When needs are the highest, donors make sure their money is used in an effective manner, said Claire Costello, national foundation executive for Bank of America Merrill Lynch, in a phone conversation on Thursday. “Donors are cognizant of the times and want to get the biggest philanthropic bang for their buck.”
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access