Donating to nonprofits was raised to a stellar level of attention recently when Warren Buffet gave $30.7 billion to the Gates Foundation, or did he?
The rest of the story is interesting.
An excerpt.
Warren Buffett Still has a Chance to do It Right
by Buzz Schmidt
Editors’ Note: this article was originally published in the September 2006 issue of Alliance Online (http://www.allavida.org/allianceonline/).
News of Warren Buffett’s $30.7 billion gift to the Bill and Melinda Gates Foundation reached me in Europe while I was attending a conference on non-profit accountability. The Gates Foundation would now comprise over 10 per cent of US foundation giving capacity, and Buffett had placed these assets into a vehicle with someone else’s name attached. The European press was awash with praise for this wealthy and selfless American and admonishments for charitably obdurate European billionaires. For one who has spent a lot of time in Europe over the past years, it was one of the few times when I heard praise for Americans. Why then am I perplexed by this event? Like Buffett’s transactions, it’s complicated. In a nutshell, it was an opportunity lost. But, unlike other gifts to private foundations, it was not an opportunity lost in perpetuity.
You see, Warren Buffett didn’t give the Gates Foundation $30.7 billion. Rather, he committed himself to passing 5 per cent of the value of a dedicated quantity of Berkshire Hathaway shares through Gates annually so long as Bill and/or Melinda Gates are involved. Unless something changes, this annual commitment is only for a limited time period, and the full story of Buffett’s philanthropy has yet to unfold.
Because he has committed himself to giving away 5 per cent of the value of the shares each year, the value of the shares that underwrite his Gates commitment will continue to climb so long as the annual growth of Berkshire’s share price exceeds 5 per cent – and they will remain in the control of Buffett or his estate upon the conclusion of the commitment. What Buffett has effectively done is to form a charitable lead trust, with an undetermined destination, not necessarily charitable, for a much greater residual value.
