When Warren Buffett announced his plan to channel billions of dollars worth of his personal fortune through the Bill and Melinda Gates Foundation in an effort to eradicate major diseases, philanthropy became headline news. Few can rival the size of Buffett’s donation — approximately $37 billion, or nearly 15 percent of the $260 billion that Americans donated to charity in 2005 — but experts say that more wealthy people are following Buffett’s lead in donating money while they are still alive and thus able to more actively determine how the money will be spent.
Executives interested in charitable giving can take a page from the Buffett playbook and do more than simply list a favored recipient or two in a will. There are new ways to manage one’s legacy while still alive. Perhaps more to the point, that June announcement should serve as a wake-up call to the philanthropically minded regarding the value of planning.
“You’d be stunned at how many people are so busy working that they don’t think about what happens next, either for their family or their own personal legacy,” says Dallas-based financial adviser Carece Slaughter. “They think that they don’t have enough money to make an impact; in reality, it’s never too early to start planning to give to your family and friends — and to those causes that you think are important.”
The process is essentially evolutionary, starting with basic estate planning and expanding as assets accumulate. There are three basic questions to ask:
- Who gets it?
- How much do they get?
- How and when do they get it and what is it to be used for?
The first two questions are fairly easy. Providing for family and others close to you comes first for nearly everyone; even Buffett, committed as he is to not making his children automatic qualifiers to the Forbes 400, certainly addressed their needs. Beyond that, estate-planning experts say that deciding where the rest of one’s money goes involves both research and soul-searching. For most people, the decision boils down to groups and causes that have touched their lives personally. This means giving to religious groups, colleges, and universities; supporting groups doing research into diseases that have affected loved ones; and so on.
As for how to transfer assets to a charitable organization, this is where it helps to be Warren Buffett. The vastly wealthy can afford to make substantial gifts while still alive, but the fact that such gifts are irrevocable should give pause to those of more modest means.
“You sound like a grouch if you discourage someone from doing something nice,” says Stephen Ziobrowski, a partner in the Boston office of law firm Day, Berry & Howard, “but you have to be careful about things that are irrevocable. Younger executives may be better off making gifts out of income — and thinking about the big gift down the road — rather than locking too much into place right now.”