Working paper, draft available on request
The Wealth Draw-down of the Fabulously Rich: Insights from Private Family Foundations
Abstract. We connect genealogical records to the universe of 501(c)(3) private foundations to provide novel insights into the late-in-life assets holdings and charitable contributions of the wealthiest households in the U.S. This linkage allows us to track life-cycle financial assets and charitable disbursements for 8,276 families, each holding an average of $20.65 million in family foundation assets annually. In contrast to life-cycle models that predict a steady draw-down of assets late in life, we find that the death of the eldest family member leads to a 96.9% increase in foundation assets within two years. Yet few are prepared to distribute their wealth postmortem — charitable disbursements take years to match post-death inflows and funds are more likely to fall below the five-percent rule to qualify for non-profit status. We also find that the doubling of the lifetime estate and gift tax exemption in the 2017 Tax Cuts and Jobs Act caused a 47.2% reduction in postmortem inflows into family foundations, which suggests that many family foundations are used to reduce estate taxes. These findings contribute to our understanding of inter-generational wealth inequality.
Keywords: private family foundations, intergenerational wealth inequality, bequest motives, charitable giving, estate taxation, Tax Cuts and Jobs Act, donor-advised funds.
JEL codes: D31, D64, G51, H24.
In brief
When the eldest member of a very wealthy family dies, the family’s private foundation roughly doubles in size within two years, the opposite of the gradual late-life drawdown that standard life-cycle models predict.
Linking IRS filings for the universe of U.S. private foundations to genealogical records, the paper tracks 8,276 family foundations holding an average of $20.65 million in assets. Charitable giving lags far behind the post-death inflows, which come mostly from surviving family trustees and often as noncash assets, and foundations become more likely to fall below the five-percent payout requirement. After the 2017 Tax Cuts and Jobs Act doubled the estate and gift tax exemption, post-death inflows fell by 47.2%, suggesting many families use foundations to manage estate taxes.
| Panel A. Design | ||
|---|---|---|
| Question | How do the wealthiest families draw down assets late in life, and how much reaches charity? | |
| Setting | The universe of U.S. 501(c)(3) private foundations linked to genealogical records | |
| Data | IRS Form 990-PF filings and NCCS data, 2000–2023; 8,276 family foundations | |
| Method | Staggered difference-in-differences around deaths of the eldest family member, compared with asset-matched foundations | |
| Panel B. Reported effects | ||
| Foundation assets within two years of a death | +96.9% | |
| Charitable outflows | Rise slowly | |
| Likelihood of meeting the 5% payout rule | Falls | |
| Post-death inflows after the 2017 tax law | −47.2% | |
Summarized from the paper. See the paper for exact estimates and specifications.
Read and cite
The draft is not yet posted. Email for a copy.
Ahn, Changhyun, and Rawley Z. Heimer. “The Wealth Draw-down of the Fabulously Rich: Insights from Private Family Foundations.” Working paper.
@unpublished{heimer2025foundations,
author = {Ahn, Changhyun and Heimer, Rawley Z.},
title = {The Wealth Draw-down of the Fabulously Rich: Insights from Private Family Foundations},
note = {Working paper},
year = {2025},
url = {https://rawleyheimer.com/papers/wealth-drawdown-private-family-foundations.html}
}
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