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Majority of Wealthy Unaffected by Tax Incentives, Not Interested in Leaving a Legacy

(Nov. 13, 2006) A new study reveals that a strong majority of wealthy donors in the United States would maintain or increase their charitable giving if the estate tax was repealed in the United States, and only a quarter of those donors are motivated to “leave a legacy” in their giving.

Another finding of the new study confirms something that fundraisers have known for a long time: making “the ask" is vital. Close to two thirds of those who participated in the study indicated that “being asked” is an important motivator in their decision to make contributions.

The survey, conducted by The Center on Philanthropy at Indiana University on behalf of Bank of America, surveyed nearly 1,000 households whose investable net assets were at least $3 million. The wealthiest 3 percent of American households are responsible for approximately two-thirds of all charitable giving.

Previous studies have shown while tax incentives don’t typically determine whether someone will give or not, they do play a role in the size of a gift, especially with larger contributions. However, in the Bank of America Study of High Net-Worth Philanthropy, most respondents (86 percent) said their estate plan giving would remain the same or increase even if the estate tax were eliminated. Similarly, 52 percent said their giving would not change even if all charitable giving tax incentives were eliminated, while 38 percent said their giving would decrease somewhat and 7 percent said it would decease dramatically.

Further showing the resiliency of giving by the wealthy, households with “dramatic decreases” in wealth still gave an average of $121,116 to charity in 2005, while those with “dramatic increases” were only slightly higher, with average donations of $141,298.

“AFP has always suggested that donors to nonprofit organizations—whether charitable or political—are motivated primarily by reasons unrelated to personal tax benefits,” said Paulette V. Maehara, CFRE, CAE, president and CEO of AFP. “Tax factors may help influence a donor’s decision, but taxes aren’t why individuals give. People give because they want to make the world a better place, not because they might get a tax benefit.”

Meeting Critical Needs vs. Leaving a Legacy

Wealthy donors indicated they were most motivated to give by the notion of “meeting critical needs” (86 percent) and “giving back to society” (83 percent). Only a quarter of respondents (26 percent) said “leaving a legacy” spurred their giving, with a desire to “limit the funds available to my heirs” cited by the fewest participants (8 percent). More than six in 10 (62 percent) said one of their reasons for giving was “being asked.”

Educational organizations were most likely to be the recipients of contributions from these wealthy donors (80 percent), with religious (72 percent), health (70 percent) and arts organizations the next most popular. Overall, 98 percent of respondents gave to charity, compared with 67 percent of the overall population.

Almost three-quarters of respondents said they would give more money if charities spent fewer funds on administration. Nearly 60 percent indicated they also would give more money if they were able to determine the impact of their gifts.

About the Survey

The study consisted of mail surveys randomly distributed to 30,000 households in high net-worth areas of the United States (those where the average amount of investable net assets were $3 million or more). The questionnaires were mailed and received between June 7, 2006, and Sept. 26, 2006. The response rate for this survey was 4.66 percent.

Total giving questions were modeled after the philanthropy questions from the Center on Philanthropy Panel Study (COPPS), a module of the Panel Study on Income Dynamics conducted at the University of Michigan.

The initial report of the study is available online free of charge at the Indiana University Center on Philanthropy website.

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