Gift Planning in the African American Community
The African American community has a strong tradition of giving its time, talent, and treasure to others. Historically, these gifts have gone to churches, a donor’s alma mater, and civic organizations such as the Urban League and NAACP.
According to the 2016 U.S. Trust Study of High Net-Worth Philanthropy, African American households give 25% more of their discretionary income to charitable organizations and causes than their white counterparts.
Despite this culture of giving, when I first mention gift planning to many individuals, they initially balk at the idea, believing it to be an option only for the extremely wealthy. However, a planned gift can simply be a gift of assets made during an individual’s lifetime and/or at their death as part of their overall financial or estate plan. In fact, the advantage of gift planning is that it allows a donor to look at their total asset base and give in ways that they may not have deemed possible. These gifts can include bequests, life insurance policies, donor advised funds, and more.
As philanthropic institutions, nonprofits, and faith-based organizations explore ways to grow their donor base and sustainability, they must build relationships with communities that have often felt disconnected from the traditional philanthropic landscape. Here are four reasons why gift planning is important for the African American community:
1. Creating a Legacy
Gift planning provides an opportunity to create a legacy for future generations. In addition, many African Americans give because they have seen their parents and grandparents do so. According to the 2016 U.S. Trust Study of High Net-Worth Philanthropy, many African Americans surveyed stated that they had a family tradition of giving and want to continue this tradition. Giving through a planned gift can continue this legacy for generations to come.
2. Giving the Maximum to Family While Minimizing Taxes
Planned gifts can help individuals minimize their federal and state income and capital gains taxes. For example, individuals can contribute real estate and stock to charitable institutions, receive a charitable deduction, and in most circumstances, avoid paying capital gains taxes on the transfer. In addition, donors can avoid taxes on charitable gifts made from IRA accounts during lifetime and from taxable retirement accounts upon the account holder’s death. Importantly, there are tax advantages to gifting certain assets to heirs and to charities. For example, heirs will be taxed when receiving assets from a retirement account. You can avoid ordinary income taxes by leaving retirement assets to charities instead of heirs. Charitable gifts made from taxable retirement accounts after the donor’s passing are not subject to ordinary income tax.
3. Supporting Important Causes
Gift planning allows individuals to support their favorite charitable causes in perpetuity through endowments. For donors who endow scholarships at higher education institutions, some direct their gifts toward first-generation students attending college. Others may direct their scholarships to need-based students. Donors can determine the long-term impact they want to have on the African American community and with input from gift officers, design their gift accordingly.
Planned gifts also allow individuals to make larger gifts than they might have normally think possible by utilizing a wide range of financial assets, such as a beneficiary designation in a life insurance policy or retirement account, real estate, or tangible personal property. According to Hugh B. Price, former president of the National Urban League, “Black philanthropy provides the indispensable financial foundation that guarantees the survival of vitally important nonprofit institutions while also fueling their ascent to new heights of impact and excellence.”
4. Reducing the Racial Wealth Gap
Most African Americans give to institutions, causes, and grassroots organizations that directly support the African American community. Supporting these causes through planned gifts helps sustain organizations working to improve a variety of outcomes for African Americans. In addition, certain planned gift instruments allow families to retain the majority of their assets and accumulate intergenerational wealth. Gifts such as charitable lead trusts can preserve assets for families long-term and provide current income to a nonprofit in the interim, and life income gifts can create an income stream for beneficiaries and thus help to reduce the racial wealth gap in the U.S.
The tradition of charitable giving, even among individuals with modest means, is alive and well in the African American community. By pooling resources through giving circles, churches, social clubs, and professional associations, African Americans have created unique systems of giving that have redefined philanthropy in America.
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