CHARITABLE TAX PLANNING STATISTICS

H. King McGlaughon, Jr., JD, , Wachovia Nonprofit and Philanthropic Services

The number of 501(c)(3) organizations, 1996–2006 692,524 733,790 773,934 819,008 865,096 909,574 964,418 1,010,395 1,045,979 1,064,191 654,186 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

PROJECTIONS OF FILINGS

THE NUMBER OF PROJECTED FILED TAX RETURNS FOR TAX-EXEMPT ORGANIZATIONS (FORM 990s) IS PROJECTED BY THE IRS TO BE 1.023,900 BY THE YEAR 2012

The Dimensions of Giving

 More Americans give than individuals from any other country in the world  80% of US households donate money each year to over 1.5 million charities, social welfare organizations and religious congregations in the U.S.

 an estimated 75% of those donors receive no tax benefit from their charitable gifts  As our wealth increases, the percentage contributed rises markedly  95% of families with a net worth in excess of $1 million give to charitable organizations annually  98% of families with a net worth in excess of $5 million give annually Source: Chronicle of Philanthropy

Millionaire Households (in Millions)

6 5 4 3 2 1 0 10 9 8 7 1989199219951998 20012003200420052006 9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

Households Percent of Total

The Importance of Giving for the Affluent

Income Contributed to Charity by the Affluent

$10,000,000 $1,000,000 $100,000 $10,000 $1,000 Amount Contributed Percent of Income $13,113 $65,780 $211,000 $488,000 $1.5 million $5.5 million $1-5 million $5-10 million $10-20 million $20-50 million $50-100 million $100+ million

Family Net Worth

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Source: Boston College - Social Welfare Research Institute & Bankers Trust



The Dimensions of Giving

Aggregate contributions from individuals, corporations and foundations for 2006 was $295 billion, an increase of 5% over 2005    contributions from individuals (lifetime, at death and through private foundations) made up more than 90% of the total since 1959 contributions have grown at an average of 3% per year above inflation contributions fall an average of 0.7% in recession years Source: Center for Philanthropy at Indiana University

LARGEST DONORS

 2007 –  Leona Helmsley – 4 billion  Barron Hilton – 1.2 billion  Jon and Karen Huntsman – 627 million  T. Denny Sanford – 503 million  George Soros – 475 million  John Kluge – 400 million  See more at: The 2007 Slate 60.

2006 CONTRIBUTIONS: $295 BILLION BY TYPE OF RECIPIENT ORGANIZATION Arts, culture, and humanities Public-society benefit $14.03

5.4% $13.51

5.2% Environment and animals $8.86

3.4% Human services $25.36

9.7% International affairs $6.39

2.5% Education $38.56

14.8% Health $22.54

8.7% Foundations $21.70

8.3% Unallocated giving $16.15

6.2% Religion $93.18

35.8%

Average rates of change, 1987–1996 and 1997–2006 by type of recipient (adjusted for inflation) Religion Education Health Human services Arts, culture, & humanities Public-society benefit Environment and animals International Foundations 0.4% 2.0% 5.9% 3.4% 1.4% 6.1% 8.9% 2.7% 4.9% 4.2% 4.2% 8.0% 7.3% 6.6% 9.9% 8.4% 7.9% 1997 –2006 1987 –1996 16.2%

Total giving, 1966–2006

300 250 200 Inflation-adjusted dollars Current dollars 150 100 50 0 1966 1971 1976 1981 1986 1991 1996 2001 Recessions in yellow: 1969–70; 1973–75; 1980; 1981–82; 1990–91; 2001 2006

Total giving by source Five-year spans, adjusted for inflation $ in billions 1,381.94

1,200.69

551.47

563.91

597.70

671.94

766.08

829.65

1967 –71 1972 –76 1977 –81 1982 –86 1987 –91 1992 –96 1997 –01 2002 –2006 Individuals Bequests Giving USA uses the CPI to adjust for inflation.

Foundations Corporations

Individual giving as a share of income, 1966–2006 Personal income and disposable personal income 2.6

2.4

2.2

2.0

1.8

1.6

1.4

1966 1971 1976 1981 Personal income 1986 1991 1996 2001 Disposable personal income 2006

What DOES Matter? – Source of Wealth

Philanthropy is one of the top 4 financial issues for UHNW (Ultra High Net Worth) investors

91%

Asset Management Estate Planning

73% 89%

Philanthropy

51%

Philanthropic Motivation

80% 70% 60% 50% 79% 69% 63% 50% 46% 40% 30% 20% 10% 29% 11% 0%

Desire to support worthwhile causes Responsibility to share good fortune Meet community's critical needs Help organization that has benefitted you or friend Set example for children Fill gaps left by government cutbacks Tax benefits

4% 2%

Respect and recognition Pressure from peers

Motivation for Increased Giving

The Current Market Environment

The Current Market Environment

CRTs are excellent asset management tools

•

Tax free asset management zone

•

Ability to move around in market without concern for realization of gains in portfolio

•

Creates cash flow through Income Tax Deduction, conversion of dividends a/o interest into income stream based on total value

•

Ability to control taxability of income stream through changes in asset allocation

The Current Market Environment

“CLTs: Leverage Market Down-Turns”

•

Tax benefits inverse to market conditions

•

Strong stocks that have lost value

•

Client intends to hold

•

Deflated value makes for optimal CLT funding

•

Leverage the Market AND the lifetime estate/gift tax exemptions

The Boom in Donor-Advised Funds Total Assets

  Size of Donor Advised Fund Market grew almost 800% from 1995 to 2005 Proliferation of “commercially sponsored” DAF programs

$7.5 Billion $2.4 Billion $12.3 $14.6 Billion $10.2 Billion Billion $20.8 $18.8 Billion $17.3 Billion Billion 1995 1999 2000 2001 2002 2003 2004 2005

Source: The Chronicle of Philanthropy

Growth in Private Foundations:

 Over 60,000 private foundations in US today.

 50% were created in last 10 years.

 Funding of private foundations is at its highest level ever in terms of annual transfers to private foundation endowments.

Giving to foundations, 1978–2006

$ in billions 9.12

4.98

5.30

1.61

1978 2.39

1981 4.96

1986 Data: The Foundation Center 6.60

4.46

1991 29.22

29.50

25.67

16.23

12.63

1996 Inflation-adjusted dollars Current dollars 2001 2006