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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free 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.
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Ask the Editor: Capital Gains and Tax PlanningAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on capital gains tax rates and end-of-year tax planning
-
Time Is Running Out to Make the Best Tax Moves for 2025Don't wait until January — investors, including those with a high net worth, can snag big tax savings for 2025 (and 2026) with these strategies.
-
Time Is Running Out to Make the Best Moves to Save on Your 2025 Taxes
Don't wait until January — investors, including those with a high net worth, can snag big tax savings for 2025 (and 2026) with these strategies.
-
4 Smart Ways Retirees Can Give More to Charity, From a Financial AdviserFor retirees, tax efficiency and charitable giving should go hand in hand. After all, why not maximize your gifts and minimize the amount that goes to the IRS?
-
I'm an Insurance Pro: If You Do One Boring Task Before the End of the Year, Make It This One (It Could Save You Thousands)Who wants to check insurance policies when there's fun to be had? Still, making sure everything is up to date (coverage and deductibles) can save you a ton.
-
3 Year-End Tax Strategies for Retirees With $2 Million to $10 MillionTo avoid the OBBB messing up your whole tax strategy, get your Roth conversions and charitable bunching done by year's end.
-
'Politics' Is a Dirty Word for Some Financial Advisers: 3 Reasons This Financial Planner Vehemently DisagreesYour financial plan should be aligned with your values and your politics. If your adviser refuses to talk about them, it's time to go elsewhere.
-
For a Move Abroad, Choosing a Fiduciary Financial Planner Who Sees Both Sides of the Border Is CriticalWorking with a cross-border financial planner is essential to integrate tax, estate and visa considerations and avoid costly, unexpected liabilities.
-
I'm a Financial Adviser: This Tax Trap Costs High Earners Thousands Each YearMutual funds in taxable accounts can quietly erode your returns. More efficient tools, such as ETFs and direct indexing, can help improve after-tax returns.
-
A Financial Adviser's Guide to Divorce Finalization: Tying Up the Loose EndsAfter signing the divorce agreement, you'll need to tackle the administrative work that will allow you to start over.
