How do millionaires and billionaires donate their money?


Is there some kind of bank account transfer of one lump sum or physical cash or something else?

In: Economics

Bank account (or more likely, investment account) transfer. If they’re donating $100k or something, they’re not showing up with a suitcase of cash. 😜

Some rich people utilize Donor Advised Funds. This essentially lets them donate the money to the fund today, take the tax deduction immediately, and then invest the money and figure out which organizations to donate it to later.

Bank transfers work the same way with totals of billions of dollars as with totals of just a few cents. It is just a number. How many zeros it have does not play a huge role. So a bank transfer would work out just fine. The problem you imagine is not with individual bank transfers but the banks will lump together all bank transfers between them. They do regularly exchange this debt between each other to keep the sums low. On average there is as much money going into a bank as out of a bank. The problems is when there is an unbalance in the money transfers between banks. And when a bank owes another bank hundreds of billions of dollars over a year or two it is probably for the best if they settle their debt. They can agree on how to do it however they want. The easiest is if they both have debt in the same central bank they can just transfer the debt between themselves. Otherwise they do sometimes send trucks of cash, gold or bonds between each other to settle debt.

They’re not donating large amounts in cash. A great example is the Bill and Melinda Gates Foundation, which holds about 11 **Billion** dollars worth of Berkshire Hathaway stock (well, probably less after this week…).

Warren Buffet wanted to donate a large portion of his net worth, so over the years he’s gifted the foundation shares of his company. When the foundation needs money for project, they simply sell as many shares as they need to pay for it.

It depends on the amount of money. For a few thousand dollars, they can just write a check like anyone else. For larger amounts, they might choose to transfer assets (stocks, bonds, etc.) to the recipient instead of cash. For truly large amounts, the donation probably takes the form of a series of structured transfers or the creation of a new foundation endowed by the donor. This is because even someone worth billions of dollars doesn’t necessarily have that money just sitting in a bank account. It’s invested in stocks and other financial assets, and they live off the income flow from those investments. Their “donation” is to redirect some of that flow towards the recipient.