What Is a Benefactor?
A benefactor is an individual that provides money or other resources to an individual, group, or organization. Being a benefactor does not require an individual to be wealthy, though the term is most frequently associated with significant financial gifts to charities and university endowments.
- Benefactors are literally people who "do good" are people who give gifts without expectation of return.
- A benefactor typically refers to someone who gives financial gifts to an entity known as the beneficiary.
- In contemporary times, the largest benefactors create foundations for charitable giving or give money to non-profit institutions like universities.
- The resources provided by a wealthy benefactor may be referred to as patronage.
- In some cases, very wealthy individuals start charities using their own money. This approach can provide the benefactor with a more significant say regarding how donations are used.
How a Benefactor Works
Benefactors are people in the position of doing good deeds by giving money without the expectation of being reimbursed or getting something in return. Due to this, benefactors may be older, wealthy individuals who seek to do good by giving their money to younger people in need, charities, and nonprofit institutions.
Benefactors may have several reasons to give away their money, time, and other resources, and it is common for individuals to help specific individuals and organizations that they care about. Whether to a charity, endowment, or other nonprofit, donations are commonly associated with benefactors.
Because donations to third parties can be written off of one’s taxes, they are typically factored into a benefactor’s financial and estate planning.
A recurring donation often means that the benefactor has sought out causes that carry enough meaning to prompt financial support. For example, a benefactor may send a fixed amount of money to a religious organization each year or provide annual funds to a local school.
How to Become a Benefactor
There is a wide array of ways that individuals can help others out financially.
A passive option is to have funds automatically sent to a designated beneficiary at a given point in time. For example, a life insurance policy allows the policyholder to designate one or more individuals who will receive the proceeds when the policyholder dies. This approach can also be used with retirement accounts, such as a 401(k). The beneficiaries may be individuals or family members but can also include charities or endowments.
Parents who help their children financially are also considered benefactors. For example, parents may help pay for college expenses or may help pay for the rent of a recent college graduate. In both cases, the parent assists through financial gifts, even though the child is not considered a charity. In addition, parents often list their children as the beneficiaries on their life insurance policy or retirement account. This is another way parents act as their children's benefactors.
Benefactors and Taxes
Benefactors often benefit from their generous donations when tax season arrives. However, it is essential to note. Charitable contributions can only reduce your tax bill if and when you itemize. You will total up all of your charitable gifts when that occurs rather than taking a standard deduction.
According to the IRS, if you give cash to a qualifying public charity in 2021, you can deduct up to 100% of your adjusted gross income.
Benefactor is a Latin load word to English that literally translated means "one who does good" or "one who does good deeds."
Examples of Benefactors
Some of the most significant charitable foundations are associated with a single benefactor. These organizations often focus on a specific range of focus, such as alleviating hunger or improving education. In the U.S., the list includes the Bill & Melinda Gates Foundation, the Open Society Foundations, and the Ford Foundation.
Charitable Foundations Created by a Benefactor
The Bill & Melinda Gates Foundation was initially called the William H. Gates Foundation and was founded by Gates in 1994. It has an endowment of $46.8 billion. In 2006, billionaire investor Warren Buffett gifted the foundation 10 million Berkshire Hathaway B shares to be distributed every July in increments of 500,000 shares. As a foundation's benefactor, Buffett has donated $27.3 billion as of 2019, the most recent figures available as of October 2021.
The Open Society Foundations was created by a gift from the famous hedge fund manager and currency trader George Soros. According to the Open Society Foundations website, Soros has gifted over $32 billion of his fortune to the foundation.
The Ford Foundation was created in 1936 by Edsel Ford, son of Henry Ford, the founder of the Ford Motor Company. Edsel Ford created the foundation to receive and administer funds for "scientific, educational and charitable purposes, all for the public welfare." Edsel gave an initial gift of $25,000, which is roughly $465,000 in 2020 dollars.
Benefactors to Universities
Benefactors have been key to the continuing work of universities since Holy Roman Emperor Frederick I Barbarossa signed the Authentica Habita, also known as the Privilegium Scholasticum, in 1155 A.D. Through the Middle Ages and the Early Modern Period, benefactors donated books from their libraries, but benefactors have historically given cash in the modern age.
American industrialists of the 18th and 19th centuries sometimes created new universities with a new endowment of cash, for example, Ezra Cornell, who endowed Cornell University with a gift of $500,000 in 1865.
The most significant single contribution to a university came from Michael Bloomberg, who announced a gift of $1.8 billion to John Hopkins University in 2018. That gift for scholarships to low-income students comes on top of the $1.5 billion he has previously donated to the school.
What Is the Difference Between a Philanthropist and a Benefactor?
The terms philanthropist and benefactor have very similar meanings, but typically, a benefactor gives to individuals, groups, or charities to support or improve their existence. A philanthropist focuses on a cause or area of interest, like the arts, and donates their skills, talents, time, and money to help create a better existence for humankind.
What Qualifies as a Beneficiary?
A beneficiary can be an individual, a group of individuals, charity, or other entity, like a nonprofit.
How Can One Find a Benefactor?
If you are the head of a charity, you can seek out benefactors by holding fundraising events. If you are an individual, such as a student, you can ask your financial aid office about individual scholarships or grant opportunities, which might be funded by a benefactor. If you have parents who support and subsidize your education and endeavors, they are your benefactors.