The greatest generational wealth transfer is upon us: How do we ensure that donated funds are used for charitable purposes?

ByRichard C. Sloan

Oct 11, 2021

Over the past seven years, I have had the incredible privilege of leading my family foundation. As I spend my working hours leading a team that makes decisions about how to distribute funds, I have the unique privilege of seeing up close the instrumental work that nonprofits do to meet the needs of our community. . Of housing our homeless neighbors To connect vulnerable youth with caring mentors, nonprofits make sure donated dollars get to the people who need them most.

As charities continue this important work, they simultaneously face financial hardship. A report showed that more than a third of associations across the country are likely to close within two years. In addition, the nonprofit workforce has lost nearly 960,000 jobs, a devastating blow to the local economies and the most vulnerable in our community.

Related For the Love of Humanity: How to Start Your Philanthropy Journey

While the outlook is uncertain for nonprofits, the baby boomer generation is planning the largest generational transfer of wealth in the history of the United States and the world. At the federal level, we have long established charitable tax deductions as a tax policy to encourage us to give. Now is the time to reignite a public conversation about what we mean by charitable giving.

I am a proud Minnesotan. Minnesotans are generous people – saving money for the public good is in our DNA. Our biggest companies ruled the nation in charitable giving in the second half of the 20th century. Over the next two decades, Minnesotans will be generous in putting money aside to support the charities we all see as essential and in dire financial straits. The simple fact is this: Our current charitable giving laws no longer work as intended to increase the flow of resources to charities, especially at a time when charities need help.

Currently, donors can set aside their funds with charitable intermediaries (private foundations and Donor Advised Funds (DAFs)) and claim the full tax benefits of charitable giving. However, there is no guarantee that these funds will ever be used for charitable purposes, breaking the link between tax benefits for charities and benefits for charities. Taxpayers foot the bill with no certainty of receiving the public benefits that flow from operating charities.

Related The journey of impact philanthropy and the work ahead of us

The the data clearly shows that we need to modernize our charitable tax policy. Over the years there has been a substantial shift in donations to CFOs and private foundations and away from direct contributions to charities. According to a report in may, charitable giving by individuals as a percentage of income has hovered around 2% over the past 40 years, while contributions to CFOs and private foundations have increased from 5% in 1991 to 28% of all donations by individuals. in 2019. Currently, over $ 1 trillions sit in private foundations and CFOs combined.

All of this charity-led wealth could do immense good, but in order to protect the vitality of the nonprofit sector, policy changes must be made to more quickly distribute the dollars of funds advised by donors and private foundations to active charities. Community foundations and other public intermediaries can play a unique role in ensuring this by connecting new donors with pressing community issues and leaders. No matter how it happens, donors who claim all the tax benefits of charitable giving must feel the urgency to give that money.

My family created our foundation as a way for us to work together professionally give money. We’ve come together by building working relationships with community leaders and investing in transformative ideas. But the most important and fulfilling part of my job is very simple: making sure we stick to our annual donation budget so that the foundation’s endowment is emptied by 2044. Much of our society is focused on l ‘efficient accumulation of wealth, I hope the charitable giving laws that govern private foundations encourage donor-advised funds and private foundations to make charitable distributions that meet or exceed the long-term financial returns of their endowment.

Related This data should change philanthropy forever

Societal problems are getting worse. Having lived last year as a resident of Minneapolis, I know this too well. Today’s philanthropists should help with today’s issues by focusing our attention and resources away from private control towards the community.

Bill Graves is the founding president of the John and Denise Graves Family Foundation. Prior to working with the foundation, Bill worked in the technology and creative consulting industries as a business analyst, writer, producer, and resource manager. He lives in northeast Minneapolis with his wife Mary and two daughters.

As president of the foundation, Bill represents the impact vision of the Graves family. He ensures that time and resources are dedicated to a broad impact and invests in the learning and growth of the Graves team to effectively execute this vision.

The post The greatest generational wealth transfer is upon us: How do we ensure that donated funds are used for charitable purposes? appeared first on Worth.

Source link