2 Foundations Choose Higher Payouts, Inviting Others to Do the Same

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February 16, 2016; Philadelphia Inquirer

NPQ has often advocated for foundations to consider higher payout rates, taking up the issue in some detail in Buzz Schmidt’s classic, “‘Deliberate Deployment’ or Perpetuity: Questions to Inform Timing Strategies for Philanthropy.” Since then, we have seen a number of foundations moving to deploy more of their assets in the here and now—if not by “spending down” more quickly, then by investing more of their full assets in mission-related activity. But Schmidt also suggests that foundations consider a set of questions in a more “deliberate deployment” strategy, and that is what we see in this story.

Two influential leaders in the Philadelphia area philanthropic community passed away this past January: Patricia Kind and Harold Taussig. The foundations they created, the Patricia Kind Family Foundation and the Untours Foundation, are memorializing their legacy through increased grantmaking. Together, foundation leaders are asking other foundations to join them in giving away more than the five percent required by law.

Throughout Patricia van Ameringen Kind’s long life, she supported some of the most vulnerable. She was trained as a nurse, and this training influenced her philanthropic support of those living in poverty in her community. She and her husband founded the Patricia Kind Family Foundation in 1996 to support the needs of Philadelphia’s poor. The foundation recognizes the essential work of smaller nonprofits by focusing its giving on organizations with budgets under one million dollars.

A day after Mrs. Kind’s death, another of Philadelphia’s most generous leaders, Harold E. Taussig, passed away at the age of 91. Mr. Taussig never forgot his roots as a small-business owner and entrepreneur. He was one of the first to see the value of offering vacationers the opportunity to stay in apartments instead of hotels. Through his Untours Foundation, he provided low-interest loans to startup businesses and other enterprises to create economic opportunity to alleviate poverty throughout the world. Since its inception, the foundation has made more than $7 million in low interest loans.

Although their methods differed, Mr. Taussig and Mrs. Kind shared a dedication to those living in poverty. To memorialize their generosity, the foundations they created are reaching out throughout the philanthropic community, asking other foundations to dedicate more of their resources toward alleviating poverty and underwriting second chances.

Foundations are only required to give away five percent of their assets to maintain their tax-exempt status. Administrative expenses, including staff salaries, are eligible to be included in that five percent, so even less than five percent of their assets may be given in grants each year. Leaders of the Patricia Kind Family and Untours Foundations are advocating for a different use of resources.

“The standard foundation structure of using only 5 percent of foundation assets to address a foundation’s mission is a waste of 95 percent of its assets,” said Elizabeth Killough, director of the Untours Foundation. “On top of not addressing mission, that 95 percent is often invested at cross purposes to the foundation’s mission.”

As the divide between rich and poor continues to expand, will these foundations’ efforts toward building a movement to spend more of their assets on the work of social change catch on?—Gayle Nelson

 

2 Foundations Choose Higher Payouts, Inviting Others to Do the Same

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Boomers Create Deep Wells of Donations & Volunteers: Are You Ready to Receive?

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November 2, 2015; New York Times and the Guardian

Baby boomers are projected to make a huge impact on the philanthropic community over the next two decades. According to a recent study, they will donate trillions of dollars to nonprofits across the U.S. Many are also volunteering and founding nonprofit organizations. (Over the last three years, interest in creating nonprofit organizations has nearly doubled for individuals between the ages of 50 and 70.) And they are getting something in return: Baby boomer volunteers report being significantly happier than those that do not volunteer.

A recent Merrill Lynch study conducted in partnership with Age Wave, an organization focused on this population, anticipates there may be 8 trillion dollars in donations from baby boomers over the next two decades. It is part of the $59 trillion dollars the boomers will transfer to younger generations in that same period.

Since baby boomers are wealthier than any other age group, it is not surprising they also give more. Another Merrill Lynch study reported that the median net worth of a household over 65 in 2014 was $216,100, significantly larger than $165,900 for households in the age range of 55 to 64 and $10,400 for those under 35. And households over 65 donated an average of $1,672 annually, compared to $1,462 for those 55 to 64 and $555 for donors between 25 and 34.

Many seniors are using donor-advised funds rather than creating their own foundations to complete their donations. The number of donor-advised funds has grown from 161,941 in 2007 to 217,000 in 2014—over a thirty percent increase. Funds placed into these accounts are immediately tax deductible regardless of when the donation is completed, and unlike foundations, there is no annual giving requirement. Donor-advised funds are also more difficult for nonprofits to research.

Many individuals are funding their donor-advised funds while working and donating once they retire. According to Fidelity Charitable, the average age of an individual opening a donor-advised fund falls in the early 50s, but the average age of a donor is 62. The median account balance is $16,000 and over 60 percent of funds have a balance under $25,000.

Another important transfer tool is a will. A will is essential for providing for children and other family members as well as creating a legacy. Of the $59 trillion expected to transfer from baby boomers only $36 trillion is expected to go to heirs; the remainder (an estimated $23 trillion) will be donated to nonprofits. Two thirds of these gifts will be planned gifts through wills and estates. This is thanks to a much smaller group than one might think since over half of Americans between 55 and 64 don’t have a will. Without a will, individuals lose the opportunity to donate and funds are often stuck in court for extended periods.

As readers will already know, people often give where they volunteer and baby boomers are active as volunteers. The number of seniors volunteering is at a ten-year high. The Corporation for National and Community Service reports one in three volunteers is an individual over the age of 55. This translates into more than 20 million volunteers giving almost 3 billion hours, worth about $67 billion.

Seventy percent of baby boomers surveyed reported that being generous was an important source of their happiness, so help out the elderly and consider the ways in which you might establish lifelong relationships with them. Do you have a volunteer program?

Original cite: https://nonprofitquarterly.org/2015/11/05/boomers-create-deep-wells-of-donations-volunteers-are-you-ready-to-receive/