Ian Mitchell King

In 2023, we can expect a few key trends in how wealthy people give money to charity. These include giving assets, giving through a trust, and giving in a way that saves money on taxes. Changes in the economy and trust in institutions are behind these tendencies. But they don't always mean that people are giving less. The stock market has finally recovered, a big change from a year ago, but there are still worries about a recession. This is especially true given how quickly the Federal Reserve has raised rates.

In the end, it seems likely that stock prices will keep going up in 2023. Even though the market has been volatile lately, donating securities and real estate that have gone up in value is a great way to reduce taxable capital gains and get a big tax break for giving to charity.

Rich people can also give complex assets to a donor-advised fund, such as long-term appreciated C- or S-corp stock, private equity partnership interests, Bitcoin, and other cryptocurrencies (DAF). This lets people give a lot of money to their favorite charities and get big tax breaks simultaneously.

Donating assets that can't be easily sold can be hard. When thinking about giving these things away, talking to an experienced financial, charitable, and tax advisor is important. Donor-advised funds are a great option because they ensure your assets have a market and can help you save a lot of money on taxes while giving a big gift to charity. Foundations are starting to take trust-based practices seriously to fix the power imbalances between funders and nonprofit partners. Funders are putting their values into action by building relationships in this way.

But they should also think about how these changes will affect their legal and fiduciary responsibilities. Charitable donations and nonprofit operations are taxed in complicated ways, and funders must make sure they follow these rules if they use trust-based grantmaking practices.

Also, trust-based philanthropy is based on the idea of fairness, and funders must follow these rules if they want this method to work in the long run. This means that they must be aware of and accept their biases and the biases of the groups they support. For example, they should know how their own biases and privileges based on race affect how they make decisions. It also means asking the people they give grants to how they are working to make their communities fairer.

The drop in charitable giving is due to a drop in tax benefits, especially for people who itemize their tax deductions. Donors still try to find ways to lower their tax bill at the end of the year and give money to charities. Homes with more money and more income are more likely to help others. Twenty-seven percentage points more people in the highest income group give than in the lowest income group, and they give 16 times more.

Trust-based philanthropy will continue to grow in 2023 as big donors and large DAFs move to give money to charities they know and trust without restrictions. This will help funders and nonprofits build stronger long-term relationships and give them more tools to solve hard problems.

People with money are known for their social connections and kindness. They give to many different charities and are often willing to use their money to help make the world better.

The link between being rich and being kind is not always the same. One study found that people who thought they were poorer gave more money to a fake charity than those who thought they were richer.

Donor-Advised Funds (DAFs) are a smart way for people with a lot of money to donate assets that have gone up in value, like stocks and mutual funds, and still get a tax break in the same year.

Some researchers also found that people who thought they were lower on a ladder scale were more likely to give more money in a trust game where they had to add to someone else's donation. This suggests that subjective wealth may predict generosity, even if people's wealth changes over time. The richest Americans only give away 1.3% of their income, while the poorest Americans give away 3.2%. Even though this is a small number, it is a big difference.

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