Why do rich people give?

There are many reasons why the wealthy donate to charity. But you don’t have to be wealthy to give. It is more important to know, from my experience, that wealthier donors give from appreciated assets. That means that they will look at assets like stocks, mutual funds, property or tangible items like art to give to charity. They always hope, like all donors that their donation makes a difference in the lives of others through the organizations they support. They also see that their donation will be coupled in most cases with the tax credits or tax deductions, which reduce the tax owing on their asset(s) from which the donation was made.

The question shouldn’t be why do wealthy people give but how do they give? Wealthy people utilize techniques that are available to anyone who thinks about giving to charity. The first step is to identify where the funds should come from. The easy answer is the wallet, where the donor can write a cheque, make a donation via credit card or give cash. All of these are after-tax donations, which means the person giving the donation has already paid tax on these funds. So when a donation comes from the wallet the donation will cost more than if you had given an appreciated asset.

When a donation is made from an appreciated asset, the person giving the donation should look at the tax owing and calculate how much they should give from their capital gain to reduce the tax and not touch the principle which was used to grow the asset. This is best accomplished with the donor’s tax advisor, financial advisor or in some cases their lawyer.

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