In Uncertain Times, Donors Hold Back
Lisa Philp, head of philanthropic services at J. P. Morgan Private Bank, said many affluent families had previously been willing to give “a little of this, a little of that” to satisfy requests of various family members. Now they are becoming more focused, drawing up mission statements for family foundations.
By law the foundations must make a required minimum distribution each year, she said, based on assets in the previous year, even though for most people, those assets have shrunk. Some families are responding by adding more money, she said, but others see no choice but to reduce outlays.
“One of our clients cares deeply about three organizations — his alma mater, the medical center that cared for his mother, and his church,” she said, so “he is staying the course with his most valued groups and cutting back on others.” Some donors are focusing on children’s services and human services, Ms. Philp said, because those are areas where they fear government support is likely to decline as state and local governments face budget deficits.
Professor Droms outlined a strategy to help a charity while preserving an income stream. The donor, working with the charity’s planned giving office, can buy a charitable gift annuity, which will pay a lifetime income flow that can be tax-free to the donor. The charity inherits the principal after the donor’s death.
Donors can use part of the income to replace the asset in their estates by buying life insurance to benefit heirs, he said, and still realize 4 to 4.5 percent a year for themselves, which is more than today’s yield on many bonds and C.D.’s.
For a smaller gift, “just go ahead and give the money,” Professor Droms said. One donor in his 80s gave Georgetown a block of appreciated stock, thereby avoiding capital gains tax. He kept a much larger holding but left it to the university in his will.