Design Principles for Donors #2: Wealth Stance

Uncategorized Dec 29, 2021
 

One of the most fundamental questions to consider as you make plans to gear up your giving is your stance on wealth. 

What is the portion of your wealth that exceeds your needs? What are you prepared to give away, and on what basis do you determine that?

This post is part of our series the 10W's for Donors:  Design Principles for Your Giving. 

This series is inspired by the idea that every donor comes to their giving with a unique combination of factors to incorporate and accommodate.   Whatever your level of giving, why not become more aware and deliberate about the key considerations shaping the design of your giving?  The greater your awareness of what’s driving your design choices , the greater your opportunity to land on giving that truly makes sense for the world and for you.    

 Mapping Your Wealth and Your Giving Goals

A great way to start getting insight on your wealth stance is by charting out a lifeline for your net worth and your philanthropic giving.  

Begin by drawing out a timeline showing your financial net worth from birth to the present.  Then extend this line all the way through to show the net worth you anticipate having at the end of your life.  You can show the scale in dollar values if you want, but the real point is the shape of the curve.  And yes, this does mean you are also reflecting on your expected span of life.   Next chart out your annual philanthropic giving from birth to the present.   Then project this line into the future to show the level of annual giving  you anticipate through the end of your life.  Go ahead and extend beyond your lifetime if you want to establish vehicles for giving that continue on.

 When we are doing this exercise with clients at Building Impact, we lay these two charts side by side and consider how well they reconcile.  Even if the scales are different, do the shapes of these curves correspond with each other? Are you OK with seeing your net worth diminish as your giving goes up? Do you want to reach the end of your life having maintained a certain level of wealth?  Or would you love to “bounce the check to the undertaker,” as Chuck Feeney is on track to do? The founder of Duty Free Shops, Feeney has given away the entirety of his $8 billion dollar fortune during his own lifetime. Now in his 90’s, he has reserved just $2 million to cover the costs of living expenses for himself and his wife.

 While it might sound straightforward, this exercise can be surprisingly challenging to complete.  Download the worksheet and give it a try!

Your Philanthropic Posture

A second key component of your wealth stance is your “philanthropic posture.” This is about how you identify the resources you intend to give away. As the graphic below illustrates, there are several possibilities.

 

  1. Not currently giving significantly. The first possibility here is that you’re just not interested in philanthropic giving. Unfortunately, there are LOTS of people with the capacity to give who aren’t so inclined. But we know you’re not one of them since you’re reading this book! The other possibility is that you are inclined to give, but your current income and/or wealth is below your own perceived threshold for having enough to be able to give in a significant way. Maybe you’re telling yourself—after I “make it” I’ll really get started with my giving.
  2. Giving from annual surplus. You determine your level of giving each year based on your level of surplus from ongoing economic activity.  This might be from employment earnings, investments, or profits from business ownership. Your net worth is probably growing, or at least holding steady when you are in this posture. This is where almost all of us start out in our giving. Some philanthropists continue operating this way even after the scale of their resources has increased by many orders of magnitude since their early days.
  3. Giving from clear corpus. You have identified a chunk of your wealth that you know is surplus to your other needs and you plan to give it away. This doesn’t necessarily mean you have the cash already on hand.  You might also fit into this category if you are preparing for an anticipated wealth event.  For example, from the sale of a business, a stock offering, or an inheritance. Either way, you have decided to dedicate a defined body wealth to your giving, and are figuring out how best to do that. Depending on whether you are still actively generating wealth, the relative size of your philanthropic corpus, and the pace of your annual giving you may see your net worth declining over time as you give away these resources.

Download the worksheet and use this as an opportunity to reflect on some key questions: Where would you place yourself currently when it comes to your philanthropic posture? What will it take for you to feel comfortable taking the next step in your giving, wherever you currently fall on this spectrum?  

 

 

 

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