Charity pledges at risk from market meltdown
BOSTON (Reuters) - The financial crisis could force some philanthropic donors to pull out of pledges or at least delay some charitable giving, wealth management experts warn.
At most risk would be pledges that are tied to less liquid wealth, such as those based on large holdings of securities that have collapsed in value.
"Some obligations might not be followed through if offers were made via marketable securities," said Tim Vaill, president and chairman of Boston Private Financial Holdings, which owns 15 independently operated financial services firms around the country.
Most philanthropists would try their utmost to avoid this as it could be particularly embarrassing if their pledges had been publicly announced, but it could sometimes be unavoidable, the experts told the Reuters Wealth Management Summit in Boston this week.
More likely would be that payments are suddenly stretched out to a longer period, such as five years rather than three, said Katherine August deWilde, President and CEO of First Republic Bank, which was acquired by Merrill Lynch in 2007. "People are being careful about what they are committing now while they see what happens and add up the numbers," she said.
Once pledges are made on an official basis, as opposed to an informal agreement, backing out even in light of acute financial pain is far from easy.
"(The agreement) is written in stone, and not easy to change," explained deWilde. "If you are about to make a commitment today, you might do one of two things -- you might either wait six months and not make it right now, or you might say to the nonprofit, I'd like to give you this amount but I would like to make that contribution over a longer period of time."
Given increasing expectations of a deep recession, some areas, such as the arts, may suffer more from a drop-off in philanthropy than charities aimed at more immediate human needs such as the homeless and jobless.
"I would like to think that deep in the DNA among those who give, there is a feeling for social needs as opposed to supporting arts organizations," added Vaill.
While smaller charities are struggling with immediate funding issues, those with endowments are also certain to take a big hit in their investment portfolios. That could force some of them to be more prudent and less generous in the shorter term.
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