Community Foundation for Palm Beach and Martin Counties

It should come as no surprise to anyone that high-net-worth donors and their trusted tax and financial advisers are a critical element toward ensuring long term charitable investment in our communities. The Community Foundation for Palm Beach and Martin Counties is an important partner in that process because we are a center of knowledge for opportunities for giving. We offer a variety of charitable avenues for giving now and in perpetuity that are tax smart, professionally managed, and accomplished with integrity and the accountability characterizing the very highest standard of ethical stewardship. Our mission as a charitable institution is in service to promoting philanthropy and investing in communities locally. However, we provide flexibility toward accomplishing a donor’s charitable goals, and flexibility is an asset toward encouraging a culture of giving, no matter the place or the cause.

With an economic recession in full bloom and deep worry about the implications for both giving and receiving charitable gifts, the Community Foundation is gathering intelligence about the status of nonprofits in our own backyards, and also tracking numerous studies on the impact of the economic recession on philanthropy more broadly. We sponsored this past week, in association with Bank of American Merrill Lynch (BAML), an event featuring a presentation and review of findings of the BAML 2010 Study of High Net Worth Philanthropy. David Ratcliffe, Managing Director and Head of U.S. Trust Philanthropic Solutions Institutional Sales presented the findings before a packed room of nonprofit leaders from throughout the region.

Nonprofits came to learn more about high net worth donors, what motivates their philanthropy, what drives their expectations for nonprofit performance, and why they may increase or stop writing checks. Traditional private and public sources are drying up that fund nonprofit activities. The incentive is high to find alternatives for shoring up existing sources of charitable capital and also attract new donors. The event provided nonprofit staff an opportunity to better understand high net worth donor attitudes and behaviors and get a better read on what motivates their impulse for giving.

There was some good news in the study that high net worth households haven’t stopped giving. The pattern of current giving is similar to donation levels as far back as 2005. A whopping 98% of wealthy households donated to charities in 2009, and slightly more than half of those households sustained giving to organizations that had earned their loyalty and trust, despite the economic recession. The proportion of giving as a percentage of income was also sustained at fairly steady levels in 2009, with high net worth families contributing slightly more than 9 percent of their income to charity, a little less than the approximate 11 percent in 2007.

What has changed, according to the study, is the that wealthy families are weighing more carefully the dollar amounts being given to charitable causes, with an overall decline in the average size of gift amounts trending downward by 35 percent from amounts recorded in 2007, after adjusting for inflation. Some causes fared better than others and some organizations actually experienced increases in the average amount of the gifts received from high net worth donors but there were few locals at the meeting reporting anecdotally they had been the beneficiary of such gratuities.

While there are few surprises in the study, one shoe waiting to drop is whether high net worth families will have as much incentive to give if the charitable deduction goes on the chopping block when Congress reconvenes to consider budget issues. Says the report, “In a shift from the previous studies, wealthy households reported being more sensitive to the effect of tax policy on their giving. About two-thirds (67 percent) of wealthy households would somewhat or dramatically decrease their charitable contributions if they received zero income tax deductions for their donations; 47 percent responded this way in 2007. If the estate tax were repealed, 43 percent of wealthy households would somewhat or dramatically increase the amount they leave to charity in an estate plan, compared to 36 percent in 2007.”

The nonprofit sector has already been transformed by the realities of an economic recession but elimination of the charitable deduction is a game changer, especially now that so many charities are serving as first responders to meet urgent needs of those increasingly abandoned to foreclosure, job loss, unemployment, and a bleak economy. If you are not paying attention to this issue, you should be. It could be a tipping point for philanthropy from which there will be no return.

The views expressed in this blog are mine and do not necessarily reflect the views of the Community Foundation.