Despite making up 14.4% of United States millionaires, philanthropic studies have often overlooked high-net-worth individuals of color. Yet, a recent Donors of Color Network (“DCN”) survey bucks this trend. What do the findings reveal about how Black donors can better amplify their philanthropic impact?

First-Generation Wealth Creation

A common trait among DCN survey participants was the self-made origin of their wealth. An impressive 65.5% were self-made, compared to 25% of wealthy Americans in a separate study. What’s more, roughly 90% of DCN participants said none of their wealth was inherited, in keeping with a larger national trend. For instance, the Urban Institute found that 26% of white families received an inheritance, compared to 10% of Black families over the same period.

The newness of their wealth also influenced many DCN survey participants’ attitudes. Many did not feel wealthy or considered their wealth transitory. But this perception can hinder philanthropic efforts, if donors mistakenly disregard certain strategies as only reserved for the “rich.” 

Seeking Systemic Change

Nearly all DCN participants shared personal experiences of overcoming bias and discrimination, shaping their philanthropic views. Many chose to tackle racial justice and other inequalities and several emphasized that meaningful change must address the economic, institutional, and political roots of injustice.

Yet focusing on impact requires a multifaceted giving plan — one that goes beyond direct donations to a public charity. Instead, those seeking diverse goals might benefit from a mix of philanthropic structures and may require professional guidance.

Transforming Affluence Into Influence

How can donors of color better assess their true giving potential and find the right strategies for change? 

  • Shifting Perspective: Wealth is subjective and can be seen as an abundance of what you value. Anyone can be a philanthropist by using a portion of their wealth to create the impact they desire. 
  • Sizing Surplus: Donors of color may benefit from analyzing how much liquidity they need to support their spending and other financial goals — including support for friends and family, as many DCN participants noted — and how much can be leveraged for philanthropy. 
  • Seeking Guidance: Philanthropic advisors — such as estate planners, nonprofit attorneys, accountants, and financial advisors — can help donors define their goals and match them with the right impact vehicles.  

From Success to Significance

Let’s explore a case study. Meet Sydney Williams, a 55-year-old entrepreneur with $6 million in investable assets and $2 million in real estate and other illiquid holdings. Wealth is more than a number for Sydney; it’s how she can make a difference. Here are some of her goals:

  • Sydney’s upbringing instilled a desire for self-sufficiency, so she wants to prioritize saving for her own retirement and her children’s education. 
  • As the most prosperous family member, she frequently assists her parents, siblings, and close family friends financially—and wants to keep doing so. 
  • Sydney also wants to give back to her community, which she credits for her success, by expanding access to Historically Black Colleges and Universities (HBCUs). 

Sydney’s financial advisor first helps determine how much liquidity she needs to support her spending and financial goals — or her “core capital” — based on annual spending of $110,000, including retirement contributions and education savings. Assuming a liquid portfolio of 70% stocks and 30% bonds, Sydney needs $4.3 million to endow her lifetime spending and has $1.7 million in “surplus capital” to gift to loved ones and charity

Empowering Loved Ones

Sydney’s advisory team then helps her size a gift to friends and family. Based on their needs, her estate planning attorney suggests funding an irrevocable gift trust — a friends and family trust (“FFT”) — with $1 million. This could support a one-time distribution of $150,000 for home purchases, debt repayment, and tuition, plus ongoing annual distributions of $40,000, including $25,000 for Sydney’s parents. To avoid an ongoing income tax liability, they recommend making the trust a separate taxpayer. Sydney also likes the idea of using the trust as a “family bank” to provide low or no-interest loans, extending the trust’s lifespan and ultimate impact. 

Based on her financial advisor’s modeling, the FFT is likely to meet Sydney’s distribution goals for at least 20 years but may struggle beyond 30 years. However, by structuring half of the trust’s initial $150,000 outlay as no-interest loans, Sydney can boost the trust’s potential longevity by an extra 10%. With this in mind, her estate planning counsel outlines her prerequisites for beneficiary loans (such as presenting a business plan).

Making a Lasting Impact

Sydney then turns to philanthropy. Since she wants to establish a scholarship program for local HBCU students, her advisory team suggests using a private nonoperating foundation — instead of a donor-advised fund — to meet her giving goals.

But how much should she contribute to the foundation? With a starting gift of $500,000 and a portfolio of 70% stocks and 30% bonds, the foundation would have $600,000 remaining after 20 years with annual distributions of $25,000. However, increasing the distributions to $40,000 would nearly deplete it.

Sydney’s team then proposes an alternate approach — redirecting $500,000 from the FFT’s initial funding to create a charitable remainder unitrust (“CRUT”) for her parents, with any remaining assets passing to the foundation at their death. If Sydney’s parents receive a 5% annual unitrust payment, this replaces the $25,000 distribution from the FFT and allows the FFT’s trustee to invest for a longer horizon suited to the trust’s younger beneficiaries. Further, the CRUT is likely to direct over $500,000 to the foundation after 15 years, extending its solvency by an additional 11 years. 

Building a Brighter Tomorrow

The DCN survey found that first-generation wealth creators among donors of color exhibit unique philanthropic patterns and behaviors. Their self-made status and comprehensive view of social issues add complexity to their giving decisions. However, with the right professional team, these donors can develop a philanthropic strategy that reflects their unique history, concerns, and vision for the future.