The Giving-While-Living Shift
Three times the number of donors adopted giving-while-living timelines in the last decade.
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A sense of urgency to solve global environmental and social issues is driving profound changes in how wealthy families are structuring their philanthropic plans. Traditional models, which aim to pay out charitable gifts for generations, are increasingly being replaced by plans that emphasise immediacy over perpetuity.
Three times the number of donors adopted giving-while-living timelines in the decade beginning in 2010, compared with the 1990s—38% of respondents versus 12%, according to a 2020 survey by Rockefeller Philanthropy Advisors in New York City. Of those, 76% chose to spend down philanthropic assets within 15 years, the survey found.
This trend is likely to continue, says Olga Tarasov, Munich-based director of knowledge development for Rockefeller Philanthropy. “There’s anecdotal evidence that the inequalities brought to the surface by the pandemic have accelerated this trend,” she says.
While the issues addressed by donors are the same regardless of time frame, environmental causes are particularly benefiting by the rising spend-down trend, Tarasov says. “When you look at reasons for giving, the environment is a higher priority for spend-down philanthropic plans.”
The giving-while-living trend is driven by a desire by donors to witness the impact of their gifts, says Dien Yuen, assistant professor of philanthropy at the American College of Financial Services. “The Gates Foundation started this and many have followed. They want to push money out the door now to see things in action.”
Tax planning is also a factor, especially during the longest bull market in history, when investors are sitting on enormous investment gains.
“There’s a big tax benefit to using securities to make gifts while alive,” says Andy Rosenberger, head of tax managed solutions at Orion Advisor Solutions in Omaha, Neb. “You don’t have to realize gains when you give them away and you create a charitable deduction that can offset income elsewhere.” When bequeathed at death, a charitable deduction isn’t permitted.
For folks who have a multigenerational charitable foundation but want to shift to a spend-down strategy within a shorter time frame, legal issues may have to be addressed.
“Charters of a foundation or family office often stipulate a timeline, and the default setting is in perpetuity,” says Tarasov. “But changing is difficult if a family is divided.”
Embracing Lifetime Giving
Most wealthy families aren’t committing to sunsetting all philanthropic assets by the end of their life expectancies, but are doing some of both—giving now and setting up foundations for giving over generations—says Caroline Hodkinson, head of philanthropic advisory at Bessemer Trust in New York. “There’s a spectrum, and most of our clients are in the middle.”
There is a notable difference in how clients approach giving during life versus at death, most notably, a stronger desire for both control over how gifted assets will be used and evidence of impact, says Crystal Thompkins, head of philanthropic solutions at BNY Mellon Wealth Management. “The lifetime mission involves a more dynamic conversation. Clients want to see diversity in leadership. Track records on success,” she says.
The Lifetime Giving Tool Kit
Lifetime donors must carefully weigh various charitable tools, Thompkins says. “It used to be that the uberwealthy focused on private foundations and donor-advised funds were considered only good for chequebook philanthropy,” she says. “But that’s shifting, because you can use donor-advised funds in really creative ways to meet lifetime planning goals.”
Charitable lead trusts are attractive when interest rates are low. Donors get a larger income tax deduction for the amount transferred to the trust when rates are low, Thompkins says.
The trust pays annual income to charity, and at the end of its term, remaining assets go to beneficiaries. They require in-depth planning because they have tax, estate-planning, and legal implications, Thompkins says. “That trust conversation has been deprioritized at a time where there is a sense of urgency around meeting need.”
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Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
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Vacationers scratching their travel itch this season are sending prices through the roof. Here’s how some are making trade-offs.
3 min
Capri Coffer socks away $600 a month to help fund her travels. The Atlanta health-insurance account executive and her husband couldn’t justify a family vacation to the Dominican Republic this summer, though, given what she calls “astronomical” plane ticket prices of $800 each.
The price was too high for younger family members, even with Coffer defraying some of the costs.
Instead, the family of six will pile into a rented minivan come August and drive to Hilton Head Island, S.C., where Coffer booked a beach house for $650 a night. Her budget excluding food for the two-night trip is about $1,600, compared with the $6,000 price she was quoted for a three-night trip to Punta Cana.
“That way, everyone can still be together and we can still have that family time,” she says.
With hotel prices and airfares stubbornly high as the 2023 travel rush continues—and overall inflation squeezing household budgets—this summer is shaping up as the season of travel trade-offs for many of us.
Average daily hotel rates in the top 25 U.S. markets topped $180 year-to-date through April, increasing 9.9% from a year ago and 15.6% from 2019, according to hospitality-data firm STR.
Online travel sites report more steep increases for summer ticket prices, with Kayak pegging the increase at 35% based on traveler searches. (Perhaps there is no more solid evidence of higher ticket prices than airline executives’ repeated gushing about strong demand, which gives them pricing power.)
The high prices and economic concerns don’t mean we’ll all be bunking in hostels and flying Spirit Airlines with no luggage. Travellers who aren’t going all-out are compromising in a variety of ways to keep the summer vacation tradition alive, travel agents and analysts say.
“They’re still out there and traveling despite some pretty real economic headwinds,” says Mike Daher, Deloitte’s U.S. transportation, hospitality and services leader. “They’re just being more creative in how they spend their limited dollars.”
For some, that means a cheaper hotel. Hotels.com says global search interest in three-star hotels is up more than 20% globally. Booking app HotelTonight says nearly one in three bookings in the first quarter were for “basic” hotels, compared with 27% in the same period in 2019.
For other travellers, the trade-offs include a shorter trip, a different destination, passing on premium seat upgrades on full-service airlines or switching to no-frills airlines. Budget-airline executives have said on earnings calls that they see evidence of travellers trading down.
Deloitte’s 2023 summer travel survey, released Tuesday, found that average spending on “marquee” trips this year is expected to decline to $2,930 from $3,320 a year ago. Tighter budgets are a factor, he says.
Too much demand
Wendy Marley is no economics teacher, but says she’s spent a lot of time this year refreshing clients on the basics of supply and demand.
The AAA travel adviser, who works in the Boston area, says the lesson comes up every time a traveler with a set budget requests help planning a dreamy summer vacation in Europe.
“They’re just having complete sticker shock,” she says.
Marley has become a pro at Plan B destinations for this summer.
For one client celebrating a 25th wedding anniversary with a budget of $10,000 to $12,000 for a five-star June trip, she switched their attention from the pricey French Riviera or Amalfi Coast to a luxury resort on the Caribbean island of St. Barts.
To Yellowstone fans dismayed at ticket prices into Jackson, Wyo., and three-star lodges going for six-star prices, she recommends other national parks within driving distance of Massachusetts, including Acadia National Park in Maine.
For clients who love the all-inclusive nature of cruising but don’t want to shell out for plane tickets to Florida, she’s been booking cruises out of New York and New Jersey.
Not all of Marley’s clients are tweaking their plans this summer.
Michael McParland, a 78-year-old consultant in Needham, Mass., and his wife are treating their family to a luxury three-week Ireland getaway. They are flying business class on Aer Lingus and touring with Adventures by Disney. They initially booked the trip for 2020, so nothing was going to stand in the way this year.
McParland is most excited to take his teen grandsons up the mountain in Northern Ireland where his father tended sheep.
“We decided a number of years ago to give our grandsons memories,” he says. “Money is money. They don’t remember you for that.”
Fare first, then destination
Chima Enwere, a 28-year old piano teacher in Fayetteville, N.C., is also headed to the U.K., but not by design.
Enwere, who fell in love with Europe on trips the past few years, let airline ticket prices dictate his destination this summer to save money.
He was having a hard time finding reasonable flights out of Raleigh-Durham, N.C., so he asked for ideas in a Facebook travel group. One traveler found a round-trip flight on Delta to Scotland for $900 in late July with reasonable connections.
He was budgeting $1,500 for the entire trip—he stays in hostels to save money—but says he will have to spend more given the pricier-than-expected plane ticket.
“I saw that it was less than four digits and I just immediately booked it without even asking questions,” he says.
The coastal area southeast of Melbourne is providing a permanent escape as the pandemic endures.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
