Last year, affluent Americans increased their average charitable giving amount by 48% compared to 2017 ($43,195 vs. $29,269). The 2021 Study of Philanthropy from Bank of America showed that almost 90% of affluent households gave to charities in 2020 - despite pandemic challenges. They found significant changes in how each generation is choosing to give, which has implications for philanthropists and the nonprofit sector moving forward.
What is philanthropy?
Philanthropy is an altruistic desire to improve human welfare, whereby individuals (often wealthy) establish private foundations to facilitate philanthropic efforts that align with their individual values. For example, Andrew Carnegie (one of the most famous philanthropists in the U.S.) is known for his contributions which included building over 2,500 libraries worldwide. Nonprofit organizations aim to support various social causes, like educational, health, scientific, public safety, and human rights causes. In the United States, organizations that qualify as nonprofits are exempt from federal tax liability under the Internal Revenue Code (IRC) 501(c).
How has the pandemic changed charitable giving?
A report showing shifts in household giving during the pandemic between May 2020 and May 2021 from Women’s Philanthropy Institute shows how COVID-19 highlights how social and economic changes may have impacted the charitable giving of U.S. households. With a focus on gender and marital status.
During these months 56% of U.S. households engaged in charitable activity in response to the crisis.
Most households maintained their giving levels, but those that did change were more likely to decrease versus increase. Women were more likely to decrease their giving in response to the gender-related challenges of the pandemic.
Overall, the pandemic influenced people to give more to those closest to them, rather than provide funds for organizations and nonprofits.
What are some ways I can give back?
Philanthropy can create a wonderful opportunity to apply your gifts and utilize your skills differently. Many of our clients want to incorporate charitable giving and philanthropy into their financial plan but need guidance. Through our continued planning process, we determine the most efficient way for clients to do their giving. This may include distributions from retirement plans, using donor advised funds for the transfer of appreciated stock, or more sophisticated solutions through charitable gift annuities or charitable remainder trusts. Some examples are:
Stipend to a Family Member
We all want to help our loved ones, but sometimes money hurts more than it helps. Even if you have the means to provide a stipend, consider the effect that your money will have on you, your spouse, and the person to whom you’ll be giving it. Ideally, a stipend should provide your loved one with a path towards financial independence, without putting your happiness, or your financial security, at risk.
Gifting to Children and Grandchildren
The benefits of gifting are numerous. First, gifting removes certain assets from your estate, thus saving your family members taxes upon your death. Second, you will get to watch as the benefits of your gift take root in your child's or grandchild's life. As with all forms of generosity, you will get a great deal of satisfaction from gifting. Imagine watching a grandchild graduate from college knowing you have helped provide tuition or a daughter buy her first house with funds you have given.
Developing and Reviewing Estate Plans
If you care about your family and their future it is vitally important to begin developing an estate plan today. Doing so can protect your assets from heavy taxation, provide more for your family after you are gone, and establish guardians for those you love.
Creating Your Own Foundation
Running a foundation is not only a financial investment, but also a time commitment. Tasks might include securing additional funds, publicizing your foundation, reviewing applicants for aid, and handling tax and legal issues. We will help incorporate your foundation plans into our your financial plan.
Creating a Fund Or Scholarship
Rhodes Scholarships have been one of the greatest sources of scholarships in the twentieth century. Since 1903 funds have been awarded each year to students who show promising achievement and a drive for international peace. Many famous individuals have been past recipients including President Bill Clinton, actor Kris Kristofferson and General Wesley Clark. You can get involved by starting your own or finding a specific scholarship you believe in. Your donations will not only secure the dreams of an aspiring student but also reap rewards for you.
Funding a Cause or Event
Money does not buy happiness. However, studies have shown that charitable giving does. Funding causes or events that matter to us strengthens our connectedness to other people, and makes us feel like we’re making a difference in our communities. Those good feelings can last a lot longer than the quick hit of happiness we get after a big impulse buy. But funding a cause or event also has its own set of potential pitfalls that need to be navigated if you want good works to be a part of your financial planning.
Gifting to a Religious Organization
Out of the billions of dollars donated every year by the private sector, a full 60 percent are given to religious organizations. This fact makes religious affiliates the number one destination for donated funds in America. Volunteer rates reflect a similar trend. In 2012, 33.1 percent of all the volunteers spent their time helping religious organizations and institutions. This includes teaching religious classes, helping out at services, doing missionary work among the poor, and even keeping the books for the group. Many donations are tax deductible. Keep receipts for all donations of money or goods to any organization. Look over the tax code, verify with the IRS, or talk to your personal accountant to be certain that your donation is eligible as a deduction.
How Can Mission Wealth Help?
If you are looking to increase your charitable giving or would like to review your giving options, schedule some time to talk to your Mission Wealth advisor. We can review your plan and work through some of our interactive Charitable Giving or Inspired Life tools to reestablish that connection and make sure you're living your best life possible with the money you have.
Let's discuss your charitable giving goals for 2022 and beyond and how the Mission Wealth's Charitable Planning & Philanthropy process can help you do the most good.
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