WEALTH

PHILANTHROPY

Ultra-wealthy Palm Beach and Collier counties share the distinction of being home to some of the most generous philanthropists in Florida.

Charity Begins at HOME

Why donor-advised funds are the fastest growing CHARITABLE-GIVING vehicle in the U.S.

By Judy Martel

American generosity marked an all-time high in 2019, with donations to charity totaling nearly $450 billion, according to the latest Giving Report by the Lilly Family School of Philanthropy at Indiana University–Purdue University Indianapolis. But that impressive statistic doesn’t tell the whole story. In Florida, a different report reveals an uneven philanthropic landscape— one that in 2018 was mostly concentrated on a tale of two ultra-wealthy counties: Collier and Palm Beach.

A study of individual giving from 2011 to 2018 by Florida Nonprofit Alliance, a statewide association of nonprofit organizations, shows that the bulk of individual charitable contributions originated in Southeast and Southwest Florida. Furthermore, the pool of statewide donors has been steadily shrinking from a cross section of Floridians to a smaller group of wealthier contributors.

“I think it’s fair to expect the wealthy to give more,” says Leah McDermott, program manager of Florida Nonprofit Alliance. But disproportionate giving at the community level means some areas of the state will benefit more than others. Individuals make up the lion’s share of charitable donors, and every contribution, however small, can still make an impact. “The money doesn’t mean less because the amount is less,” McDermott adds. “We hope we can inspire all income levels in all regions of the state to give.”

Based on reported IRS data for charitable giving, in 2011 47 percent of the total donations in the state came from individuals with an adjusted gross income of $200,000 or more. By 2018, 75 percent of contributions came from upper-income donors, but the pool was significantly smaller, says McDermott. What’s more, donors in just four Florida counties—Palm Beach, Miami-Dade, Broward, and Collier— were responsible for 46 percent of all charitable contributions in the state in 2018. Two of those counties were particularly notable: Palm Beach

County donations increased a whopping $539,000 (27 percent) from 2016 to 2018, while Collier County came in second, increasing by $106,000.

Leslie Lenkowsky, PhD and professor emeritus of public affairs and philanthropic studies at Indiana University, has been following the upward trend in giving among the wealthy and credits donor-advised funds (DAFs) for part of the upswing. Individuals establish these increasingly popular charitable funds through a sponsoring organization, often a community foundation, though it could also be a bank or mutual fund.

“Think of a donor-advised fund like a bank account that exclusively holds deposits until donors are ready to make a ‘withdrawal’ by allocating the money to a specific charity,” Lenkowsky explains. These funds are relatively easy to set up, and donors enjoy the same tax benefits as if they gave directly to charity, but with an added feature that allows them to take an immediate tax deduction in the year in which they contribute the money to the DAF while waiting months, or even years, before determining which charities the funds will benefit.

This ability to front-load the fund with money and decide where to allocate it later was especially attractive in 2017, the year before the Tax Cut and Jobs Act went into effect, says Sabeen Perwaiz, executive director of Florida Nonprofit Alliance. The new tax law increased the standard deduction, and some financial advisers counseled the wealthy to “bundle” charitable contributions into a single year before the changes took effect, so a higher deduction could be claimed among those who itemize.

Philanthropic giving in Florida will likely continue to fluctuate each year, based on various factors including income security, stock market performance, and community need. Perwaiz finds a ray of hope in the influx of new residents to Florida and says that Florida Nonprofit Alliance plans to do a “deeper dive” by conducting a survey of giving to help them better understand how to engage potential donors.

“At the end of the day, people are giving,” says Lenkowsky. The test in Florida will be finding ways to consistently engage donors across the wealth strata. Since the recession, charitable contributions from those with incomes under $100,000 have been dropping off, says Perwaiz, “and we really do need that «to come back.”