The Future of Charitable Giving: Part 1

What does the future hold for charitable giving?

To answer this question, we must first look into the charitable giving data of this past year.

In 2017, Giving USA published that the gifts of Americans to charitable causes ended with a record-breaking $410 billion high-water mark, a 5.2% increase over the giving of 20161.

 

What did giving look like in 2017?

(graphs by Lindsay Long, figures by Giving USA)

 

What is responsible for this growth in giving?

In 2017, all four sources of charitable giving increased: individuals by 5.2%, foundations by 6%, bequest by 2.3%, and corporations by 8%.1 Key economic indicators, such as GDP and personal consumption, also showed strong growth in 2017.1

 

Where is this giving coming from?

The giving is primarily coming from the top end of the spectrum, the wealthiest people and organizations.

In 2017, mega-gifts grew from $1.495 billion to $4.1 billion, even with the floor of a mega-gift growing from $200 to $300 million.1 Giving to foundations represented the largest gain, 15.5%, in any sector of giving, due to several mega-gifts, mainly from tech donors, like Bill Gates and Mark Zuckerberg, and notably bequest gifts by David Rockefeller and Henry Hillman.1 Between foundations and donor advised funds, a large portion of mega-gifts and contributions from wealthy donors are parked in intermediary operations.1

 

What does all this giving from the top mean?

The rising figures in giving at the top suggests trouble in distribution of giving in the donor base.

Deeper analysis of the dynamics impacting the donor base suggests that income inequality is impacting giving trends.

Giving by those making over $500K a year increased by 57% (from 2003 to 2013).2 Giving by those making less than $100K decreased by 34% whilst giving by those making more than $100K increased by 40%.2 Regular and mid-level donors are estimated to be down by 25% from 2005 to 2015.2

While giving is consistently around 2% of GDP,3 who is giving is changing…

Only 56% of households gave in 2014, a 10-point decline from 2004.4 Households making over $200K a year make 52% of contributions; this is up from around 30% in the 2000s.5 From 2004 to 2014, the number of foundations grew by 28% and the number of assets of foundations grew an impressive 35%.6

 

What does this mean for the future of charitable giving?

It means that we are preparing for the ‘Silver Wave’, the largest transfer of wealth in history, as nonprofits stand to make extraordinary gains in bequest giving as about 10,000 Baby Boomers enter retirement each day.7 Though as of 2017, a majority of Americans do not have a will, approximately 60% of Boomers do.8

It is projected that Boomers will drive $9 trillion transfer of wealth over 10 years, and $97 trillion over 50 years.9

Heather Joslyn of The Chronicle of Philanthropy gives a good idea of what this would look like for charitable giving, “If only 5 percent of the assets projected to pass from Americans’ estates over the next decade were captured for philanthropy, it could create the equivalent of 10 Gates Foundations.”10

 

This is great for the future of charitable giving, right?

Yes! BUT…

A major monetary transfer of this nature was projected in the past (with the aging of the Greatest Generation), and fell short of expectations.

The late 1990s coincided with a boom in the establishment of private foundations – growing from around 32,000 in 1990 to over 86,000 in 2014).11 There has been a growing trend of ‘giving while living’ that could impact bequest giving by high-wealth individuals.12 People are also living longer (yay!) resulting in a delay in the roll out of these gifts.13

 

Stay tuned to our next post to see how tax reform will impact the future of charitable giving!

 

References:

  1. Giving USA: The Annual Report on Philanthropy for the Year 2017. Chicago: Giving USA Foundation, 2018.
  2. Collins, Chuck, Helen Flannery and Josh Hoxie. Gilded Giving: Top-Heavy Philanthropy in an Age of Extreme Inequality. Washington, DC: Institute for Policy Studies, 2016.
  3. Giving USA: The Annual Report on Philanthropy for the Year 2017.
  4. Wallace, Nicole. “Where Are My Donors?”. The Chronicle of Philanthropy, 5 June 2018. (accessed 12 July 2018).
  5. Lindsay, Drew. “How America Gives Special Report: Breaking the Charity Habit”. The Chronicle of Philanthropy, 3 October 2017. (accessed 12 July 2018).
  6. Collins, Chuck, Helen Flannery and Josh Hoxie. Gilded Giving: Top-Heavy Philanthropy in an Age of Extreme Inequality. Washington, DC: Institute for Policy Studies, 2016.
  7. Crowell, Andrew. “Preparing for the Wealth Transfer Tsunami”. US News & World Report, 9 November 2017.  (accessed 12 July 2018).
  8. Walls, Barbara Lumpkins. “Haven’t Done a Will Yet?”. AARP. (accessed 12 July 2018).
  9. Biemesderfer, David. “Historic Transfer of Wealth Offers Big Opportunities to Change the Philanthropic Landscape”. United Philanthropy Forum, 18 May 2018. (accessed 12 July 2018).
  10. Joslyn, Heather. “$9 Trillion Will Transfer From Americans’ Estates, New Analysis Says”. The Chronicle of Philanthropy, 17 April 2018. (accessed 12 July 2018).
  11. “Key facts on U.S. Foundations 2015”. Foundation Center. (accessed 13 July 2018).
  12. Soskis, Benjamin and Stanley N. Katz. Looking Back at 50 Years of U.S. Philanthropy. Menlo Park, CA: William and Flora Hewlett Foundation, 2016.
  13. Schervish, Paul G. and John J. Havens. “National Influence, Local Connection”. The Journal of Gift Planning 10, no. 3 (2006). Pgs 41-45.

 

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