News on the world's richest

6/16/2010 @ 1:30PM |713 views

Gates, Buffett Raise The Philanthropy Stakes

In “The $600 Billion Challenge” Fortune magazine’s Carol Loomis tells an interesting tale of how Bill Gates and Warren Buffett have conspired to get other billionaires to publicly pledge to give away half their wealth before they die.

It’s not a new idea. Called a “sunset clause” or “sunset provision,” many donors these days are setting deadlines by which they or their immediate heirs must disburse assets directly to charity. This is in contrast to older charitable foundations that were founded to exist in perpetuity, paying out just the 5% per year required by federal law to keep their tax status, and often losing a connection with the original donor’s intent.

The Gates Foundation, which is also managing Buffett’s philanthropy, has stated that it would like to have liquidated itself by 50 years after the Gates’ deaths. The Buffett money is slated to be given away no more than 10 years after his estate is settled. The new deadline, to give away half your money before you die accelerates that trend significantly. (From reading the story, it’s not clear if it would count to give the money to a family foundation, or if the foundation itself must turn around and grant that money out to recipient groups.)

If this “great givers club” that Gates and Buffett are starting takes off it could add significantly to the surprisingly small club of living people who have already cut checks for $1 billion or more for charity. (See Billion Dollar Donors). Four of the top five–Gates, Buffett, George Soros and Eli Broad–were at the kick-off dinner that Loomis describes in her story.

Forbes has covered this trend of sunset philanthropy, mega-donors who are interested in leaving a mark on the world instead of a foundation. One problem is that many people declare they will give their money away quickly, but it’s hard to follow through. In “The Radical Philanthropist” Ebay founder Pierre Omidyar said in 2000 that by 2020 he would have given away all but 1% of his wealth. Since then, as his net worth kept growing, Omidyar has revised the plan or at least the timetable.

In “$100 Million, Anyone?” medical device entrepreneur Alfred Mann described his plan to give away his $2 billion fortune in $100 million chunks to universities. His motivation? He felt like his kids had already been supported enough by his wealth. He also wanted to control how the universities used the funds, which were meant to help commercialize scientific research. So far, however, few universities have accepted his terms.

In Dying Broke credit card billionaire Denny Sanford, who’s based in Sioux Falls, S.D., talked about his plan to give away all his money to children’s’ causes. Sanford, whose parents died when he was young, feels that children are the most worthy cause because they can not speak for themselves. He’s already given $400 million to help build a children’s hospital in South Dakota.

Another group that can’t speak for themselves? Pets. Back surgeon turned inventor Gary Michelson is another sunset philanthropist. He’d like his $2 billion fortune to support genetics research, but more colorfully: animal rights causes. (See a profile of Michelson here: Animal Nut)

In the past we have also listed those whose generosity got them booted off the Forbes 400. (See They Gave Too Much.) These include bankers Herbert and Marion Sandler, mutual fund investor James Stowers and Domino’s Pizza founder Thomas Monaghan, as well as several of the heirs to the Levi Strauss jeans fortune.

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