Philanthropy’s best-kept secret: the more you have, the less you’re required to give

The 50 largest private foundations in America hold more than $535 billion between them. Their obligation is to distribute 5% of it each year, a minimum unchanged since 1969. Across the sector as a whole, average payout now runs closer to seven percent, but that average conceals where the money sits. Research from FoundationMark found that 17 of the 40 largest US foundations, the ones holding the greatest share of assets, averaged less than 5% over five years. The floor moves least where the capital is greatest, not out of any particular reluctance, but because the incentives were never built to push it higher. That single, static number is quietly becoming the most consequential figure in American philanthropy, and this is the year to ask whether it still works.

Warren Buffett’s continued lifetime giving has, once again, prompted the familiar commentary: taxes, timing, control. But the terrain beneath those questions has shifted. The One Big Beautiful Bill Act, signed last July, permanently raised the federal estate tax exemption to $15 million per person, removing much of the urgency that drove a decade of estate tax motivated giving, while introducing new floors and caps that reduce the tax benefit of charitable deductions for individuals, corporations, and higher rate donors alike. Individual filers now face a new floor before any deduction applies. Corporations must clear a one percent income threshold to qualify at all. Higher rate donors see their deduction capped below their marginal rate. Every lever that once nudged wealth toward charity has grown weaker. The payout requirement was never tied to any of it, and so it alone remains untouched, the one mechanism left where policy, not personal inclination, still governs the pace at which capital moves.

The figure is worth a closer look, particularly among those who sit closest to it. Candid’s most recent giving forecast found that a meaningful share of private foundations arrive at their annual payout less as a matter of strategy than of arithmetic: calculating what five percent requires, and settling there.

One respondent to the survey put it plainly: the number is not aspirational, it is a calculation performed against a tax form. Mr Buffett’s own foundations, to be run by his three children, will in time hold tens of billions of dollars in Berkshire stock, subject to that same requirement. When the MacArthur Foundation voluntarily raised its payout to six percent in 2025, later reporting an actual 2025 rate of 7.1 percent, the move made news precisely because so few large foundations have chosen to. Most of the largest foundations in the country name health, education, or environmental causes among their core priorities, areas that together already draw roughly a quarter of all US charitable giving, and yet the causes within them that depend most on sustained funding remain the most exposed to a payout structure that, at the top of the sector, still favours patience over pace.

In law, the difference between a family foundation and a direct gift is that five percent minimum. In practice, it is control. A direct gift transfers the asset and the judgement behind it. A foundation retains both within the family, sometimes across generations. That is not, in itself, a difficulty; family stewardship has its own coherence and its own dignity. But “foundation” and “charity” are not interchangeable. One is a structure, the other an outcome, and a five percent floor guarantees only the survival of the former.

The argument that family foundations concentrate influence and defer impact for decades while assets compound is fair, and worth taking seriously. The answer is not to cast suspicion on those who steward them, but to extend funders the same scrutiny already extended to grantees, in the same spirit in which it is already offered. Nonprofits are routinely asked to demonstrate impact years in advance, often by donors never asked to do the same in return.

What goes unasked is larger than any single number. Whether philanthropy was ever meant to be permanent, or whether a foundation still making its decisions in 2075 is stewardship rather than deferral conducted patiently and in good order. The largest intergenerational transfer of wealth in American history is now underway, and a considerable share is passing to women, as widows, as heirs, and as the family members who already run these foundations day to day, whatever name sits on the letterhead. Rarely is it asked whether the generation inheriting a foundation inherits the discipline that should come with it, or simply the responsibility. Rarer still is anyone asking what the organisations on the receiving end make of any of this. The donor’s reasoning gets examined at length; the communities depending on the outcome are treated as a destination, not a party to the decision.

Five percent was a compromise, settled in 1969 and left untouched since. This year, for the first time in a decade, the tax code has largely stopped encouraging charitable giving on its own account, which leaves the payout floor no longer one safeguard among several, but the only one left. The question is not whether any particular donor is behaving well; most, in my experience, are trying earnestly to do right by causes they care about. It is whether the figure governing all of them is still the right one, and why raising it by even a single point remains the one reform in philanthropy that capital itself is reluctant to entertain.

Dr. Vandana Arcot is a physician and Founder & Director of Komselj, a philanthropic strategy advisory that has mobilised more than $72 million in philanthropic capital across health equity, gender equity, education, and climate stewardship.  www.komselj.com

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