Family philanthropy is a key driver of social change and a great way for high-net-worth (HNW) families to clarify their values, commit to a mission and work collaboratively across generations to build and protect their legacies.
We recently analyzed the grantmaking activities of more than 1,000 private foundations over the past 24 months to understand how and where wealthy families are focusing their giving. Our findings provide a benchmark for affluent philanthropists and the advisers who support them.
Here are our top five discoveries about HNW donors:
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.
They don’t just give the minimum
If you think affluent families only use their foundations to park assets and get tax benefits, think again. While foundations are required to give away 5% of their assets every year, those in our research sample gave away an average of 7.4% – a trend that has been constant in the 12 years we’ve conducted this analysis. Even more impressive, the smaller foundations, or those with less than $1 million in assets, were the biggest heroes in 2020: They gave an average of 15% of their assets.
They’re increasingly generous
The foundations we studied collectively funded approximately 1,000 more grants and dispersed $15 million more in 2020 than in 2019, an average of $339,032 per foundation. They also doubled their grants to individuals (GTIs), a giving capability unique to private foundations that enables donors to issue emergency funding directly to people in need instead of granting to a public charity.
They will answer the call
Judging from their actions in 2020, foundation donors will move swiftly to help in times of urgent need. After the United States declared a national emergency in March 2020 due to COVID-19, foundations nearly doubled their year-over-year grant volume in April from 5.6% to 9.7% of total activity. They also increased their giving to human services and public/societal benefits charities, which experienced the highest year-over-year increases of all the charitable sectors tracked.
Additionally, the dollars that donors granted to charity exceeded the funds they invested in their foundations for only the second time in 20 years (the first being in 2019), demonstrating a pronounced commitment to philanthropy during a time of heightened need.
They're loosening the reins on how their dollars are spent
Typically, philanthropists carefully define how they want their foundation dollars to be used by issuing “specific-purpose” grants. However, as they endeavored to meet the onslaught of urgent need in 2020, they eased their restrictions and gave more “general purpose” grants to afford charities maximum flexibility in how to use the funding. At 46% of all grants in 2020, it’s the most balanced split we’ve seen since 2010 when general purpose grants represented just 32% of giving.
Their resources are growing
Foundation endowments experienced double-digit growth in both 2020 and 2019, helping to fund the 2020 increase in grants and set the stage for future giving. Part of the growth was fueled by investment returns (roughly 55% of endowment assets are allocated to equities) and part was a factor of new contributions from funders who replenished an average of 57 cents for every 83 cents they disbursed in grants and expenses – a sure sign of ongoing charitable intent.
Despite the headlines that are given to megadonors, such as the Gates Foundation and the Ford Foundation, 98% of the roughly 100,000 private foundations in the U.S. have endowments of less than $50 million and 63% have less than $1 million. Great work is being fueled by people out of the spotlight who are quietly and persistently pursuing their philanthropic missions and effecting change.
To view our full study on HNW giving, visit here.
-
What Wall Street's CEOs Are Saying About Trump's TariffsWe're in the thick of earnings season and corporate America has plenty to say about the Trump administration's trade policy.
-
The Role of the U.S. Dollar in Retirement: Is It Secure?Protect your retirement from de-dollarization, because “capital always goes where it is treated best."
-
To Stay on Track for Retirement, Consider Doing ThisWriting down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
Within Five Years of Retirement? Five Things to Do NowIf you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
-
The Home Stretch: Seven Essential Steps for Pre-RetireesThe decade before retirement is the home stretch in the race to quit work — but there are crucial financial decisions to make before you reach the finish line.
-
Three Options for Retirees With Concentrated Stock PositionsIf a significant chunk of your portfolio is tied up in a single stock, you'll need to make sure it won't disrupt your retirement and legacy goals. Here's how.
-
Four Reasons It May Be Time to Shop for New InsuranceYou may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
-
Before You Invest Like a Politician, Consider This DilemmaAs apps that track congressional stock trading become more popular, investors need to take into consideration some caveats.
-
How to Put Together Your Personal Net Worth StatementNow that tax season is over for most of us, it's the perfect time to organize your assets and liabilities to assess your financial wellness.
