An update from the Wealth & Giving Forum

Ethical Markets - R SRI/ESG News

October 31, 2010

  • Why Public Pledging is Problematic: Unfulfilled Promises, Disputes and Law Suits
  • Hope and Alarm: Resurrecting our Discourse on WATER
  • Estate Matters: Monetizing a Highly Appreciated Asset to Achieve Charitable Giving Objectives
  • Wall Street Without Walls & W&GF: “Impact Investing” Seminar set for December 8 in New York
  • Discourse On Vulnerable Families: Center for High Impact Philanthropy Inaugural Seminar at Wharton, Nov 7-8

Why Public Pledging is Problematic:  Unfulfilled Promises, Disputes and Law Suits

Forget about the world’s richest man taking issue with the Giving Pledge, as reported in Robert Frank’s WSJ Blog: Carlos Slim, world’s richest man, rejects Gates-Buffett Giving Pledge: “Charity doesn’t solve anything”.  The real issue with public pledging is that it sets up a problematic challenge for the donor and creates tension with recipients of their purported largess, as three such cases reported in the Chronicle of Philanthropy (and cited below) illustrate so well.

But W&GF, and philanthropists who have participated in our programs, in turn take issue with Señor Slim when he states that “Charity doesn’t solve anything”.  Tell that to the 1 million people that now having clean drinking water thanks to charity: water, or to the hundreds of million people who benefit from disaster relief organizations, to cite a few.  In any case, at some point we will all reach a point where we have to make wealth allocation decisions and pass on our capital in a way that best matches our values and intentions.  The money will either go to the government, the kids, or a charity, or will be fed on by attorneys upon one’s death. As Ken Behring and Lewis Cullman Ken Behring, two leading American philanthropists who have spoken at W&GF gatherings have reminded our guests: “You can’t take your money with you to the grave. It will be interesting to see what how Mr. Slim’s estate will be settled in light of his comments.  Moreover, it’s even hard to question the value and impact of being “philanthropic” or “charitable” with one’s money, time, networks, ingenuity and intellectual capacity while living when one considers Robert F. Kennedy, Jr. passionate work with River Keepers to protect our water, our health and our national heritage.

In our last communiqué, we contrasted the kind of philanthropy W&GF encourages with the Giving Pledge approach.  One member of our community wrote back:   “I really appreciate a more subtle, humble low key approach to giving.  That was my great grandfather’s approach and I always respected him for it — no names on buildings, He just felt he was lucky to have succeeded and wanted to give back to the community that helped him succeed.” Now back to the unfulfilled promises and legal wranglings associated with pledges:

Making Donors Make Good on Their Pledges By IRVING WARNER

You may have heard the joke about the man who was so moved by the appeal at a fund-raising event that he leaped to his feet and pledged $50,000 to the cause. Everyone at the event was agog at the generosity of the donor. But as the weeks and months passed and the donor didn’t fulfill his pledge, the charity’s board members became more and more impatient.  Then they became angry.  Then they sued him. After a long legal battle, the charity won…

Museum Settles Dispute Over Pledge

The Museum of Contemporary Art, in Chicago, has reached an out-of-court settlement in a dispute over a $5-million unpaid pledge.  Under the settlement agreement… the museum has dropped its lawsuit against a former chairman of the museum’s board….

Duke U. Still Waiting for Much of $72-Million Pledge Made in 2003

September 22, 2010

A $72-million commitment made in 2003 to a Duke University fund-raising campaign remains largely unpaid, according to The Chronicle, the student newspaper…. The gift … at the time the biggest in the university’s history and a key part of the $2.36-billion Campaign for Duke, was to have been fully paid by December 2008.  William Schlesinger, former dean of Duke’s Nicholas School of the Environment, the main beneficiary, said the institution had not received any of the money….

Hope and Alarm W&GF Discourse on WATER:  Clean water for the poor and keeping the Hudson Clean

Pure Water for the World, a non-profit bringing clean drinking water to poor families around the world shared with is new and compelling research by UNICEF that shows how providing services to the children in the world’s poorest communities is highly cost effective.  As reported recently in the New York Times.

…” a new research study by Unicef “contends that providing services to the world’s poorest children in the most impoverished communities is not only just, it is also more cost-effective than the current policy of mainly helping the less poor in areas that are easier to reach. Agency officials say they can now document that $1 million spent in helping children 5 years old and younger in the most remote, disadvantaged areas of poor countries would prevent 60 percent more deaths than their current approach…”

It’s encouraging the heads of state and UN Secretary General are starting to follow the lead of Pure Water, charity:water, and the Blue Planet Network and urging greater action to bring clean water and improved sanitation to the 1 billion people who need them.

Closer to home, it’s been reported that the General Electric Company, after finally agreeing in 2006 to clean up the industrial pollutants it dumped in the Hudson River from the 1940s to the 1970s has asked the EPA to give it another year to start on Phase 2 of the clean-up.  G.E. contends that Phase 1 stirred up too much contaminated silt so it needs more time to figure out how best to proceed.  If the toxins are not fully removed, they will contaminate fish habitats for many years to come.  We can thank Robert F. Kennedy, Jr. (who spoke so passionately about this issue at our July 2007 event) and his RiverKeepers organization for their on-going work to clean up the Hudson and protect water ways around the globe.

Wall Street Without Walls & W&GF: “Impact Investing” Seminar set for December 8 in New York

W&GF will join Wall Street Without Walls to co-host a program on “Impact Investing” on December 8th in New York City.  This program will feature the forward thinking and practices of a diverse group of individuals and organizations that are committing capital to projects and businesses that have a positive social impact: New Jersey Community Capital, Huey Johnson of the Resource Renewal Institute, Generocity Partners of San Francisco, PI Mobility, a maker of electric bikes.  Further details will be forthcoming.

Estate Matters: Monetizing a Highly Appreciated Asset to Achieve Charitable Giving Objectives

Owners of highly appreciated assets (a concentrated block of stock or a residence with significant unrealized capital gains) worth say $6 million, are facing a significant capital gains tax problem in light of impending changes to the exclusion and tax rate on inherited assets.  As of January 1, 2011, the federal estate tax rate will peak at 55%, and the federal estate tax will be imposed on all estates in excess of $1 million that do not pass to a surviving spouse (or certain qualifying trusts).  To be clear, that means an individual who dies with a $50 million estate, will owe $27.5 million of their assets in federal estate tax upon death.

There are several ways to mitigate the tax consequences and to increase the amount of your wealth that transfers to your heirs and / or a designated charity.  The following example illustrates one such technique:

The first step is to establish a charitable remainder trust which will pay you an annuity for your lifetime and transfer any remaining property on your death to the charity of your choice.  You then contribute your highly appreciated asset to the trust and sell the asset.  Assuming that the asset is sold for say $6 million, this trust can be structured to pay you an annuity of approximately $369,000 per year.  In addition, you can retain control of how the assets are invested, be the trustee, and have the right to change the ultimate charitable remaindermen.  You avoid paying any capital gains on the sale of the asset, and receive an income tax deduction of nearly $2.7 million—that can be used over a five (5) year period to shelter income from the income tax.  You also set up a life insurance trust for the benefit of your descendants and purchase a $10 million life insurance policy on your life.  The annual premiums on this policy are approximately $333,000 a year.  Thus, you use the annuity (or the tax savings from the deduction) to pay for the life insurance (or finance the premiums on such policy) and if structured properly, upon your death $10 million will pass completely estate tax free to your descendants.   Thus, you are able to monetize your highly appreciated asset without paying any capital gains, live off the proceeds, provide for your children and honor charitable goals.

The above example has been provided in simplified form for informational purposes by Naim D. Bulbulia, Esq. of Short Hills, NJ and does not contain or convey legal advice.  The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a proper legal counsel.
Discourse on Vulnerable Families: The Center for High Impact Philanthropy Inaugural Seminar at Wharton, November 7-8

The Center for High Impact Philanthropy at the University of Pennsylvania is extending a special invitation to its inaugural seminar: Addressing the Needs of Vulnerable Families. Newark mayor Cory Booker will deliver the keynote in one of his first appearances since Facebook founder Mark Zuckerberg’s recent $100 million gift to the city of Newark.  The faculty for this seminar will include national experts in housing, health, hunger and family economic success.  You can read the full program here: Participants can register by completing the following form: Registration includes the opening reception and dinner Sunday, November 7th; breakfast, lunch, and closing reception Monday, November 8th; and all seminar materials.   For additional information, contact Autumn Walden at (215) 573-7266 or via e-mail at [email protected].