Most Wealthy People Bequeath Nothing to Charity, Study Finds

Four of five wealthy Americans leave nothing to charity when they die, according to a new study by the Treasury Department.

But among those who do bequeath money to charity, the wealthiest give a bigger share of their assets than do less-wealthy people, the study also found.

Those conclusions are based on a review of 60,082 federal tax returns filed for people who died in 1992 and whose estates were valued at $600,000 or more.

Only 19 per cent of the returns reported a bequest to charity. The study found similar results in a review of returns filed for people who died in 1982.

Estates under $600,000 were not required to file an estate-tax return in 1992. The filing threshold moved up to $650,000 this year and is scheduled to rise to $1-million in 2006.

Charitable bequests totaled $8-billion in 1992, or about 8 per cent of the donors’ net worth after adjustments for lawyers’ fees and other estate expenses.

People with the biggest estates — those valued at $20-million or more — bequeathed about 26 per cent of their wealth to charity. Those with estates of $600,000 to $1-million gave 3.5 per cent.

However, tax breaks reduced the comparative cost of charitable giving for people who died with big estates.

For a donor who died with an estate of $20-million in 1992, every dollar bequeathed to a child cost an additional $1.22 in estate taxes. By contrast, because charitable gifts are tax-deductible, every dollar donated to charity cost only that dollar.

The study was conducted by David Joulfaian, an economist in the Treasury Department’s Office of Tax Analysis. It found that 2.2 million American adults died in 1992, but that only about 60,000, or 3 per cent, had estates large enough to file an estate-tax return.

Of those returns, 31,724 were for estates valued between $600,000 and $1-million. Only 263 returns were for estates of more than $20-million.

The study found that the wealthiest people not only bequeathed more to charity than did less-wealthy ones, but also were more likely to give when they were alive.

Seventy per cent of people with estates large enough to file an estate-tax return reported charitable contributions in the year before their death, according to the 1982 data used in the study.

Sixty-two per cent of those with estates valued at $300,000 to $500,000 contributed to charity during their lives, while 89 per cent of those with estates of $10-million or more gave to charity, the study found.

However, charitable gifts during life tended to represent a smaller percentage of bequests among people with the biggest estates than among those with smaller ones.

For example, charitable gifts amounted to an average of 10 per cent of bequests among people with estates valued at $300,000 to $500,000, but only 2.9 per cent among those with estates of $10-million or more.

“The Federal Estate and Gift Tax: Description, Profile of Taxpayers, and Economic Consequences,” O.T.A. Paper 80, is available free from the Office of Tax Analysis, U.S. Department of the Treasury, 1500 Pennsylvania Avenue, N.W., Washington 20220.