How to Give Away Money Like a Billionaire
Last year, Bloomberg reported on the philanthropic efforts of MacKenzie Scott, ex-wife of Amazon founder Jeff Bezos. According to Bloomberg, Scott donated some $8.6 billion to hundreds of nonprofit organizations over a 12-month period — more than the Bill & Melinda Gates Foundation and the Ford Foundation combined!
There are several things striking about Scott’s giving pattern. One, unlike most of her philanthropic peers, she does not use a private foundation as the vehicle for her giving: She simply makes gifts as a private individual. By doing so, she does not have any public reporting requirements like she would through a foundation. She is able to stay somewhat anonymous, and many of the organizations that received donations from Scott respected her privacy by not disclosing the size of the donation to Bloomberg.
Two, she supports a wide range of organizations — from social assistance organizations to education, the environment, religion, arts and culture, and health. Scott identified 286 of the recipient organizations in a blog post on Medium.com, in which she also wrote about her specific desire to support organizations that provide support and infrastructure to the nonprofit community.
Three, Scott’s giving is intentional, meaning she wants to have an immediate impact through her giving and implements her giving strategy with that intention. To wit, many of the recipient organizations reported that Scott’s gift was the largest ever received — by far. Many are from sectors of the nonprofit world that are historically underfunded or neglected. And her support of organizations involved in philanthropic and grantmaking infrastructure demonstrates her keen awareness that by strengthening the core of the nonprofit sector, all organizations can be lifted up, magnifying the impact of her giving.
No matter our net worth, here are three lessons learned from Scott’s giving that we non-billionaires can apply with our own giving.
Lesson 1: Identify the right vehicle for your giving
I often get approached by clients about wanting to set up a private foundation through which to donate. In most cases, however, a private foundation is not the ideal way to donate. Foundations come with a number of strings and restrictions, not to mention ongoing expense. Foundations are also public, required to disclose specific financial information that can be accessed by anyone. This characteristic of foundations alone is enough to turn off donors who wish to maintain their privacy.
Foundations can work well in certain situations. For most donors, other options are generally better suited. A donor-advised fund, for example, offers the grant-making and tax privileges of a foundation but at a much lower cost and with the added benefit of privacy and anonymity, if desired. I frequently set up donor-advised funds for clients and have found them to be both powerful and effective.
For some donors who are looking for an added benefit to go with their giving, a vehicle like a charitable remainder trust (CRT) can work well. A CRT provides an income stream to the donor and potentially others such as the donor’s children. After the income period ends, whatever remains in the CRT is paid to charitable organizations identified in advance. CRTs have been around since 1969 and can be applicable in a myriad of situations. Ask a Forum financial advisor about whether a CRT may be right for you.
For others, giving through an estate plan — such as a bequest in a will or trust, or a beneficiary designation through a retirement plan or life insurance policy — can be a simple way to make a gift now but “pay it” later. Billionaires like Warren Buffett and Bill Gates, who have pledged to give away most of their assets to charity, have surely set up giving instructions within their respective estate plans.
Or, like Scott, simply give assets away now, whether cash, stocks or even real estate. For nonprofits, cash is king, and while charities are grateful for planned gifts to be received in the future, a current gift is always welcome.
Lesson 2: Identify the cause(s) that matter most to you
With Scott’s net worth, she has the luxury of supporting many different areas of philanthropy. But most donors have one or two social issues that are of utmost importance to them, whether health care, poverty, the homeless, animals, education, the arts, civil liberties, religion, disaster relief or something else.
I coach my most charitable clients to draft a “giving mission statement” — a sentence or two that describes: 1) what’s important to them, 2) the values they hold most dear and 3) how they intend to make a difference through their giving. By doing so, donors can be more focused and effective with their giving. Fidelity Charitable, one of the largest donor-advised funds in the country, provides a worksheet to help donors craft their charitable mission statement here.
Lesson 3: Define what “making an impact” means to you
Scott has a clear vision for the impact she wants to make with her giving. But one person’s definition of impact is not the same as another’s.
For some organizations, demonstrating impact can take longer than others, something donors need to keep in mind. For instance, remember the Ice Bucket Challenge in 2014, which raised some $115 million for amyotrophic lateral sclerosis (ALS)? It wasn’t until 2019, five years later, than an independent report was issued detailing the impact of that amount of money flowing into ALS research. The impact was no doubt transformational for a disease like ALS — and yet, the hunt for a cure for ALS continues to this day.
Do you want your dollars to go to a specific area of an organization’s mission? Or are you comfortable giving to “where it’s needed most,” the unrestricted dollars organizations crave? Do you want to hear from the organizations you support with regular updates? Or, do you trust that the charities you support will make the best use of your dollars?
To learn more about impact philanthropy, check out the University of Pennsylvania’s Center for High Impact Philanthropy, which provides resources and education for donors on best practices related to making an impact through your giving.
With charitable intent and some smart giving strategies, you can be as effective and impactful a philanthropist as any billionaire.
