Business to Arts (Ireland) passed along this Fortune article. It details a plan led by Gates and Buffet which asks billionaires to give away half of their fortunes. The article: The $600Billion Challenge supposes this giving pledge could near half of an estimated $1.2Trillion in wealth.
In 2007 I read gathering of the world’s top philanthropists. It was organized by the Rockefellers. One line from the 2007 BusinessWeek article smacked me in the face: “Most philanthropists, even experienced ones, say that it’s harder to give money away effectively than it is to make it.” I wrote then that if you’re effective (at having an impact) then there’s plenty of money out there.
The things I wonder about as they relate to INCREASED PHILANTHROPY…
If Gates and Buffet encourage more billionaires to step up this will mean (given current challenges) that we’ll see even more (maybe a lot more) challenges about giving money away EFFECTIVELY. [Note to social ENTREPRENEURS… this is a HUGE source of UNDER LEVERAGED working capital, I still think people that want to try to ‘be sustainable without philanthropy’ should think twice. This is a PROBLEM and you HAVE A SOLUTION.]
The whole ‘death tax thing‘… and its impact on planned giving.
I had a beer last week with a financial planner who specializes in understanding this stuff. He says the lapse of the death tax this year is not as dramatic as it would seem. Don’t quote me my takeaways (I need to do follow-up research). He said money could flow to heirs this year tax free BUT that taxes on the sale of appreciated assets were MUCH higher… effectively taxing the funds in a different way. He also said that starting in 2011 the estate tax will increase and impact many more households. In 2009 the top tax bracket hit those with $3.5M+ estate, taxing it at 45%. In 2011 the top tier will be expanded to include all those estates valued at $1M+ and the tax will be raised to 55%!!! Think about those implications!!!
At the same time the estate tax jumps and broadens, we move into the era of the boomers that will supposedly account $100T in transfer of wealth (over the next 30 years). In other words, with our without the Billionaire’s challenge we’re going to see market forces that drive an unprecedented level of planned giving — I would think. People will plan differently… thinking, “Heck, if the government’s going to get most anyway we should think more about directing it to go where we want.” Financial planning conversations will focus much more on planning for the transfer of wealth. Just about any homeowner with a pension will qualify for the $1M threshold.
Conclusion??? Philanthropy could continue to explode. Giving USA reported that 2009 Giving in the US dropped to $304B from $315B in 2008. This is a change of 3% (roughly). It was also only the second decline in 30 years. Given that other sectors saw 20% and 30% drops at the same time I’m not sure 3% is even significant! Tech, Housing, Banking, these have seen a MASSIVE correction. With the growth of philanthropy I often wonder if there will ever be a ‘correction’… it’s not speculative, it doesn’t form bubbles like the markets mentioned above.
With the ‘Billionaire pledge’ and the rise of estate giving this gives us some pretty cool things to think about. I can’t pick stocks to save my life so I’m not the best at predicting the future. Would love to have others weigh in on what this all means… or what it could mean.