A recent study* about the trends in charitable giving for the year 2009 sheds some important light on how the past two years of economic turmoil has affected philanthropic giving by affluent families. It should come as no surprise that charitable giving declined in the year(s) studied. According to the Study, an analysis of charitable deduction records for those who itemized their charitable giving indicated that the average amount deducted for charity decreased by 9.9% for the years 2007 to 2008. In 2009 average charitable giving dropped a whopping 34.9%! As is often said, few families were spared the economic turmoil.

Here are some more interesting facts from the study:

Average charitable giving to structures such as a private foundation or trust increased 21%.

Quoting the Study, “Uncertainty in the economy affects many financial decisions including those related to philanthropy. Wealthy households reported that they give when they believe their gift will make a difference (72.4%), when they feel financially secure (71.2%) and when they know the organization is efficient in its use of donations (71%).

More than 46% of affluent households have a will with a specific charitable provision. Many of the families we represent seek information about the role of philanthropy in a family’s legacy planning. It is interesting to note that according to the Study over 85% instructed their children about philanthropy through the parents’ personal efforts.

The biggest question that will now be looming is the impact of the new law on the charitable giving of affluent families. The law is known as the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Act”). Will families choose to simply leave more to their descendants with a combined $10,000,000 exemption? By some estimates only 0.2% of estates would now be subject to a federal estate tax and it certainly can be argued that the larger the exemption the less important it is to worry about estate tax deductions, including charitable deductions. Or will affluent families be influenced by the age old question of just “how much is enough” to leave to their children so that they remain hardworking and productive members of their communities?

DISTRIBUTION(S) OF GIVING {photo1-left}

The Study shows that high net worth households’ largest share (22.1%) of their giving went to structures such as foundations and trusts. This is not surprising as these are the vehicles where one’s charitable goals can receive the most hands-on structure and control from the family.

ATTITUDES TOWARDS TAX POLICY {photo2-right}

How are affluent families impacted by changes in tax policy? It is interesting to note that according to the Study 43% of these families reported that they would leave more to charity if the estate tax were repealed! Fewer than half of all high net worth households (47.5%) reported that the amount they would leave to charity in their estate plans would stay the same if the estate tax were repealed, a noticeable decrease of 6.5% from 2007.

RISK TOLERANCE WITH PERSONAL AND PHILANTHROPIC ASSETS {photo3-left}

Rarely discussed in much depth are the comparisons of risk tolerance with personal and philanthropic investments. Two figures are interesting to note below. First, 25.7% of the respondents claimed to be completely risk averse with respect to the philanthropic investments, and 22.9% actually reported a willingness to tolerate above average or substantial risk with investments of their philanthropic assets.

WHICH PROFESSIONALS DO HIGH NET WORTH FAMILIES TURN TO WHEN MAKING CHARITABLE GIVING DECISIONS?

According to the Study, 93.8% of respondents looked to attorneys when making charitable decisions. It is also interesting to note that 88.9% of these high net worth families were satisfied with the advice they received from their attorneys.

*The 2010 Study of High Net Worth Philanthropy, researched and written by The Center on Philanthropy at Indiana University. This study reflects the attitudes of approximately 800 respondents throughout the United States with household incomes greater than $200,000 and/or net worth (excluding the value of their residence) of at least $1,000,000. According to the Study, the average wealth of those who participated was $10.7M. Half of those who responded had a net worth between $3M-$20M.