With moderate economic growth of 3 percent and the current tax provisions for charity, philanthropic gifts during life and at death could explode to $40 trillion by 2061, according to a recently released study. At the current economic growth rate of 2 percent, total charitable giving is forecast at nearly $27 trillion.
The information comes from a 2011 study examining the impact of the recession on the transfer of household wealth to heirs, taxes and charity. Released in May by Boston College Center on Wealth and Philanthropy, it found that on average, household net worth declined by 25 percent during the recession.
The rich lost much less than the majority
But the averages don't tell the whole story: Financially, the rich fared much better than the bulk of the population. The estimated 10 percent of households with a net worth of $1 million or more back in 2007 lost approximately 21 percent of their wealth in the recession, while the net worth of the roughly 50 percent of households with less than $100,000 plummeted by 81 percent.
Because the rich are typically the largest donors to charity, the effect of the recession on philanthropic giving was minimized, the study concludes. It also finds that the frequency and amount of gifts during life, rather than as part of an estate, are increasing.
Post-recession giving hits a record high
A separate report this week supports the findings of the Boston College study. Total giving in 2013 reached a post-recession record $335 billion, according to Giving USA Foundation and Indiana University Lilly Family School of Philanthropy. That's a 3-percent inflation-adjusted increase over the prior year.
The 2007 peak in charitable giving was $349.50 billion, adjusted for inflation.
Most of the increase last year came from wealthy individual donors, who gained more disposable income, thanks to a bull stock market, the report says. In particular, there was a marked increase in large gifts of $80 million or more.
Forecast for donations looks bright
Whether the four-year trend of rising charitable donations continues will depend on several factors going forward, including the economy, unemployment numbers and stock market volatility, according to Patrick Rooney, associate dean for academic affairs and research at the Indiana University Lilly Family School of Philanthropy.
"In recent years, our school has projected that giving could take several years to return to pre-recession highs, based on the contemporary rates of growth in giving," Rooney said in a release.
"This year, we are more optimistic. If total giving continues to grow at the current inflation-adjusted, two-year average rate of 4.2 percent, we estimate it would take just one to two more years to reach or surpass the pre-recession peak."
There are many ways to donate to charity: Find out how the rich and famous do it.
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