Philanthropy is an increasingly important part of people’s financial pictures. It allows individuals to link their personal goals and values to the way they save, invest and spend their money. For “high-net-worth” families, it’s an opportunity to unify a shared legacy for generations to come. Let’s look at some recent trends in high-net-worth philanthropy.
We recently examined the giving activities of nearly 1,000 private foundations with assets between $1 million and $500 million over the past two years to understand how wealthy families are pursuing their philanthropy.
While some of the highs and lows we experienced in that period may feel like incomparable moments in time, they’ve had a lasting impact that sets the stage for future giving.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
These top five findings provide a benchmark for established and aspiring philanthropists.
1. Philanthropists Are Giving Away More.
Supported by double-digit endowment growth and the residual effects of 2020, private foundations increased their giving in 2021. The foundations we analyzed gave away a total of $689 million in 2021, an increase of $40 million over the prior year, and an average of $727,129 per foundation.
2. Philanthropy Is Becoming More Concentrated.
At the same time, these foundations funded 500 fewer grants in 2021, indicating a shift from getting aid to as many recipients as possible during the intense and rapidly changing needs of 2020 to increased targeting of their dollars in an effort to create greater impact.
3. Foundations Are Going Above and Beyond More Often.
Our data indicates that a large number of foundations regularly give more than the annual mandatory distribution requirement of 5%, signaling a strong commitment to go above and beyond for charitable causes.
In 2021, the foundations in our study disbursed an average of 7.2% of their assets, with smaller foundations (those with assets between $1 million and $10 million) giving away 8.9% of their assets.
4. Prepandemic Norms Are Reemerging.
In addition to fewer, more concentrated grants, there is other evidence that philanthropists are starting to revert to prepandemic giving patterns.
First, there was a notable decrease in grants to human services and public/societal benefit organizations, which both saw sharp increases during 2020 as donors focused on the public health emergency and tackling systemic racial inequities.
Second, we observed less use of general-purpose grants, which were especially useful during the pandemic, and more specific-purpose grants that have long been favored by major donors, as they allow them to ensure their gifts align with their mission.
Third, during the recovery of 2021, there was a 64% decrease in grants to individuals, which were used abundantly in 2020 to get aid quickly and directly to the people and places that needed it most.
5. Foundation Size Influences Makeup of Endowment Portfolio.
Smaller foundations have the highest allocation to equities, ending 2021 with 61.5% exposure. They also maintain the highest level of cash at 12.4%, as the increased liquidity enables higher levels of giving.
Conversely, larger foundations have more complex portfolios. They have an average allocation of 23.5% to alternative investments, such as private equity and hedge funds, which is nearly five times the exposure of smaller foundations, and 8.4% of their assets are in a unique mix of life insurance, program-related investments, closely held stock, receivables, annuities, inventory and other nontraditional assets.
Learn more in the complete 2022 Report of Private Philanthropy.
-
Stock Market Today: Stocks Waver on Resilient Employment DataA private reading on payrolls had markets rethinking rate-cut bets just days ahead of the monthly jobs report.
-
Lamb Weston Stock Gains After Earnings Beat, Layoff NewsLamb Weston stock is higher after the french fry maker reported earnings and unveiled a restructuring plan that includes job cuts. Here's what you need to know.
-
This Trust Strategy Can Reduce Your Taxes Big-TimeUpstream basis planning can help younger wealthy people pay less taxes on highly appreciated assets if they appoint an aging relative as a trust beneficiary.
-
Three Major Estate Plan Mistakes to AvoidA complete and up-to-date estate plan can help ease your loved ones' worries and make things easier for them after you pass.
-
Which Type of Power of Attorney Is Right for You?Durable or limited? How about springing or military? There are many more kinds of POAs than just medical or financial.
-
How Employers Can Ensure They're Paying All Employees Fairly'Equal pay for equal work' has been the law since 1963, but pay gaps because of gender, race and other characteristics persist. How does a company get it right?
-
Do You Know How Much You've Saved in Your 401(k)?And are you sure you're enrolled in one? A surprising number of workers don't know where they stand with their company's retirement plan. Time to find out.
-
Riches vs Wealth: A Cautionary Tale From 'The Hobbit'The story of dwarven king Thorin Oakenshield in J.R.R. Tolkien's classic novel perfectly illustrates how the relentless pursuit of wealth can undermine the fulfilling experience of true riches.
-
Gen X: We Need to Talk About Your RetirementJuggling kids, aging parents and work? No wonder you don't want to talk about your own retirement. But there are four key areas you should be discussing now.
-
How Much Do You Need for a Comfortable Retirement?What you need to be comfortable in retirement won't be the same as what your neighbor might need. Here's a scenario in which $1 million might be enough.
