Editor’s note: Ken Nopar is a columnist for Rethinking65. Read more of his articles here.
Although the amount of annual charitable giving by Americans has declined only several times over the past 40 years in spite of economic downturns, market turbulence and world events, this year may be different. In the past, markets have recovered, turmoil has eased, and donors have continued to give generously to their favorite causes and organizations.
It is too early to predict the level of giving for this year, but at this point there is little optimism and significant concern among non-profit organizations. Governmental funding for different causes and charities has been reduced, paused or eliminated. And though some donors have tried to step up and increase their giving to help at this moment, many others have not.
On one day in mid-April, the Chronicle of Philanthropy’s daily email listed the following articles:
“Nonprofits Discuss How to Handle Potential Backlash from the Trump Administration” (NPR).
“‘It’s Brutal’: Sudden Grants Cuts Devastate Iowa Museums, Libraries, and Cultural Nonprofits” (Des Moines Register).
“Trump Threats to Tax-Exempt Status: Can the Rhetoric Become Reality?” (Chronicle of Philanthropy).
Philanthropic Fallout
Over the past month or two, many organizations have reduced or eliminated some programs and staff. It is difficult for organizations to know how to best plan or execute since the announcements about government support have often been issued without prior warning. In addition, some funding that was previously approved by Congress for 2025 and future years will not be forthcoming. There have also been many recent court cases and some of them have reversed, or at least paused, government decisions.
At the same time, the markets have dropped precipitously, provoking donors of all means to be more concerned about their wealth. Wealthy donors have typically maintained their levels of giving during prior economic or market upheaval, but lower-income donors have cut back. Furthermore, the percentage of adults who made charitable donations dropped to 46% in 2020 from 66% in 2000.
’Wait-and-See’ is Common
The 2024 Giving USA report states: “People give when they feel economically and financially secure. Uncertainty seems to have a dampening effect on giving, the data often shows. When there’s more uncertainty, donors say, ‘Well, I’ll wait before I make that large commitment.’”
Many donors are playing a wait-and-see game to see how the markets perform. Unfortunately, many smaller donors — and some larger ones — may not feel they have enough money, or perhaps high enough confidence in their asset levels, to increase or even maintain their level of giving. This may be especially true among seniors.
Some wealthy older clients who previously felt that they did not want to leave too much money to their heirs may have instead allocated more to philanthropy. Yet with uncertainty about the markets, the political situation, and the direction of the economy, they may ultimately shift this allocation to leave more to their heirs — either upon their death or during their lifetime. Some clients may also feel they need to keep more of their assets to themselves to maintain their standard of living.
Privacy Is Another Growing Concern
The uncertainty impacting so many areas today is also on the minds of some donors who are concerned with a lack of privacy. One fundraiser recently shared that she envisions more donors and companies will want to give anonymously to certain organizations for fear that some governmental agency may target them.
This could result in more individuals, families, companies or foundations establishing donor-advised fund (DAF) accounts since giving from DAFs is the only way to ensure anonymity. Typically, only 4% to 5% of grants from DAFs are anonymous, yet this may increase.
These anonymous grants from DAFs often make it difficult for charities to thank these donors, but these anonymous grants are better than no grants and allow donors to continue to provide support to the causes and organizations that they support.
Donors also seem to be taking steps to address the funding crisis caused by cuts to USAID, educational institutions, and other causes and organizations. The Council of Foundations released the following survey results last month, noting that among its members:
° 44% have or are considering shifting grantmaking priorities to address new or worsening funding gaps.
39% have or are considering increasing flexibility in grantmaking processes.
27% have or are considering increasing their overall grantmaking budget.
How Advisors Can Help
Advisors looking to strengthen client relationships should be thinking about how to help their charitably-minded clients who are confused or challenged by the current investment and philanthropic environment.
This is an ideal time to review clients’ giving priorities since they may have changed. You can likely reassure most clients that they still have plenty of assets to continue to support to the causes they believe in. Remember, no single solution will work for all clients. Instead, it’s important to ask clients questions like these that will help them articulate their priorities.
Do you want to give now, or would you be more comfortable giving later or upon your death?
Do you want to leave money to charity or to your heirs, or to both?
Do you have any illiquid assets that we don’t manage for you (i.w. real estate, privately-held business interests, life insurance) that you have considered donating? You can help your clients figure out whether donating these assets makes sense and can have a greater impact.
Do you need help determining a charitable mission or vision, getting their family involved, or identifying worthy charities? Connecting them to independent philanthropic advisors who do not provide investment, legal, or tax advice might help.
They are maximizing qualified charitable distribution from the required minimum distributions (RMDs) they’re taking from their IRA and other accounts.
They should establish a DAF, charitable lead or a charitable remainder trust. This is a way to continue to be generous in more challenging times.
As mentioned earlier, it is difficult to predict what will happen the rest of this year and beyond. However, advisors and clients who wait until there is complete clarity may miss an opportunity for the client to make a charitable impact in the near future. Since philanthropic clients are usually passionate about their giving, engaging them at this point of uncertainty would be wise and could contribute to a deep and lasting relationship.
Ken Nopar is the principal of Nopar Consulting. For nearly 20 years, Ken has helped donors; financial, legal, and tax advisors; and non-profit organizations increase the level of philanthropy in the country and world.
