The twin benefits of charitable giving—supporting a cause and minimizing taxes—have long held great appeal for the wealthy. In an effort to understand how actively they are involved in the stages of the giving process, we surveyed 446 individuals with a net worth of $5 million or more and a history of giving at least $50,000 a year to nonprofit organizations.

One of the first issues that surfaced in our study was the degree to which affluent donors want to exercise authority and control in the selection of the charities they support and in how their contributions are used. Almost three-quarters (72.2 percent) of respondents characterized themselves as wanting a high degree of both; we refer to them as high-influence givers. By contrast, the remaining quarter—low-influence givers—were less interested in participating in the process.

Typically, most charitable gifts, regardless of the total wealth of the donor, fall under the category of checkbook philanthropy, meaning monetary gifts made in response to specific fundraising requests or one-off situations such as benefit events and auctions. While this form of giving is no less important, it often occurs without much forethought, and may not afford the philanthropist or the charitable organization some of the benefits that are gained by planned giving.

Yet many wealthy individuals have initiated some kind of planned giving to structure their philanthropic activities. Just over half of our survey participants had already established a planned gift, but there was a greater disparity when viewed by segment. About two-thirds, 62 percent, of the high-influence individuals had established a planned gift, while just 39 percent of low-influence givers had done so.

A Simple Plan
There is no question that a planned-giving process can yield numerous benefits, but it can also be an emotionally taxing experience, because it often forces givers to face issues surrounding estate planning and mortality. It is also highly complex, requiring the expertise of financial and tax professionals to navigate smoothly and successfully. In an effort to understand motivations, we asked the 247 respondents who have planned gifts a series of questions. The opportunity to proactively reduce taxes was of material importance for 87 percent of high-influence givers, but far less significant for low-influence givers. Just 35 percent of that group cited tax implications as one of the major drivers in the decision to establish a planned gift.

A large portion of both segments, however, cited a broader planning effort as playing a principal role in their decision to create a planned gift. Of high-influence givers, 97 percent said the planned-giving process was part of a wider effort that focused on financial planning, estate planning or both, as did 90 percent of low-influence givers.

While the results are similar across segments, the rationale is likely different: High-influence givers often want a similar level of involvement in all their financial affairs, and they treat philanthropy as an extension of a bigger initiative, while low-influence givers see the planned-giving process as a way of taking action now to reduce the need for involvement down the road.

Many affluent donors make contributions with little or no advance planning, possibly sacrificing substantial benefits.

There are a number of vehicles for the charitably inclined to consider, and our respondents have used most all of them (see chart below). Yet they use some more often than others. Among survey respondents, the most popular vehicle for high-influence givers is the charitable remainder trust, with 60 percent reporting they have established one. Thirty-four percent of high influence respondents prefer private foundations. By contrast, almost three-quarters of low-influence givers use a simple will bequest as the way to structure their charitable gifts. Twenty-nine percent of the low-influence group use donor-advised funds.

A portion of our survey respondents—most in the low-influence category—also use charitable lead trusts, life insurance and charitable gift annuities. (Click image to enlarge)

About half of the individuals who have established planned gifts report that they have additional planned-giving needs. A much larger percentage of high-influence givers—58 percent—expect to enhance their existing gifts or establish additional ones, as compared with just 19 percent of the low-influence givers.

For making future donations, high-influence givers cited the same gifting vehicles—private foundations, charitable remainder trusts and charitable lead trusts—as their low-influence counterparts. The latter group, however, expressed an interest in exploring other options, with the highest level of interest—52 percent—being in the establishment of a private foundation. After that, interest in other giving structures dropped off considerably, with just 13 percent identifying the donor-advised fund as a product of interest.

Russ Alan Prince is the president of Prince & Associates, a market research and consulting firm for the affluent, and the author of more than 35 books on related topics. Hannah Shaw Grove, an author and columnist, is an expert on the behavior, concerns and finances of affluent consumers.