With Giving Pledge, 'Half' Can Mean Different Things

Billionaires who sign the Giving Pledge are under no legal obligation to fulfill their commitment to give at least half their wealth to philanthropic causes and, for a variety of reasons, many have not, Bloomberg News reports.

Launched in 2010 by Warren Buffett and Bill and Melinda Gates, the Giving Pledge initiative emphasizes that signatories are agreeing to a moral — rather than legal — obligation. However, public disclosures of lifetime and estate giving of the ten Giving Pledgers who are now deceased reveal that only two — Marion Sandler, who signed the pledge with her husband, Herb, and Jim Stowers, who pledged with his wife, Virginia — have given more than $1 billion — in both cases, before the campaign was formally launched.

Indeed, determining the value of an estate can be a tricky business. Take the case of Albert Lee Ueltschi, a Kentucky-born pilot who sold his FlightSafety International pilot-training schools to Buffett's Berkshire Hathaway, signed the Giving Pledge in 2012 and died a month later, at the age of 95, with Berkshire stock worth nearly $2 billion. Ueltschi's will stipulated that nothing go to charity if the U.S. estate tax was a dead letter, as was the case in 2010. But by 2012 the tax was back on the table, and a third of Ueltschi's estate ended up going to charity, bringing his total giving, in life and death, to $260 million. Another $200 million will be added to that total as soon as the Internal Revenue Service issues its final acceptance of the estate's tax return. Once that happens, Ueltschi's son James told Bloomberg, his father will have done what he had committed to — but only because he had provided for various beneficiaries through a variety of tax-planning vehicles and, as a result, much of his estimated $4 billion fortune isn't legally his. "Those assets don't belong to my father and they do not belong to his estate," said James Ueltschi. "The Giving Pledge is half [of] whatever is left."

In reality, a pledge to give half of a $1 billion fortune to charity often becomes half of $600 million, assuming the 40 percent tax on large estates is levied in full. What's more, it can take years for the IRS to sort out when and how much of an estate has been bequeathed, as was the case with George P. Mitchell. Based on Bloomberg data, Mitchell had a net worth of at least $3 billion when he died in 2013, but the Cynthia & George Mitchell Foundation has yet to receive any funds from his estate pending IRS settlement of his final tax return, said Katherine Lorenz, the foundation's president and couple's granddaughter. At the time of George Mitchell's death, the Mitchells had given $400 million to various philanthropic causes, Lorenz added.

In the view of Robert Rosen, director of philanthropic partnerships for the Bill & Melinda Gates Foundation and coordinator of the Giving Pledge initiative, conversations about who gave how much, and when, is more of a distraction than anything else. "[The Giving Pledge is] really...about how iconic figures providing inspiration and support can inspire and serve as a model for society," said Rosen. "The conversation continues to evolve with what's expected and what becomes the norm of generosity, both in terms of the impact and the impact it has — that's our true north star. People do it in different ways and at different times because it's such a personal decision."