Charities Can Expect $1-Trillion From Transfer of Wealth, Researcher Estimates

For years, fund raisers have anticipated a huge windfall from the “transfer of wealth” now under way as the parents of baby boomers die and dispose of their assets.

But no one has come up with a good estimate for how much of the total transferred — which two Cornell University economists predict will be $10.4-trillion — charities can realistically expect to receive.

Now, one researcher has posited a partial answer: Non-profit groups can count on getting about $1-trillion, “give or take a billion or two,” he says, in the form of planned gifts — bequests and other donations that offer tax and other financial benefits that are more generous than those available for cash contributions.

Russ Prince, a researcher from Shelton, Conn., based his findings on a survey of 519 households with net worths of $1-million or more.

In calculating the figure, Mr. Prince assumed that the stock market would grow at an annual rate of 8 per cent and that none of the tax laws covering estate planning or planned giving would change.

Some planned-giving experts are not convinced that the estimate is meaningful. Says Marc Carmichael, president of the National Committee on Planned Giving: “I am skeptical of any particular number.” Given all of the variable factors involved in such an equation, “it’s extremely difficult to get down to real numbers based on this multitrillion-dollar transfer of wealth,” says Mr. Carmichael, who is also president of R&R Newkirk, a Willow Springs, Ill., company that publishes planned-giving materials.

Other planned-giving experts say the survey data could be helpful as fund raisers plan their campaigns for the future. “It begins to help people in development start thinking about how to quantify the components of the wealth transfer process,” says Doug White, president of Charities Today, a Boston company that provides information on planned giving via the Internet. “Until now, we have just had this huge number,” he says.

The study, commissioned by the Prudential Investments Advisory Group and the Highland Capital Holding Corporation, also found that wealthy individuals are generally favorably disposed toward charities and that a large majority would like to do more for charity but feel they are already doing as much as they can. Nearly 95 per cent of the wealthy households surveyed said they contributed to charity on a regular basis. And over 80 per cent said they would like to do more financially for charities.

Asked which types of giving vehicles they would be interested in learning more about, households chose private foundations by a wide margin. About 90 per cent of those surveyed said they would like to learn more about private foundations, while the next largest category, charitable remainder trusts, was of interest to 35 per cent. Just over 1 per cent expressed an interest in learning more about gifts of life insurance.

The study also found that:

* About one-third of wealthy households have made planned gifts to charity, including charitable bequests in wills, charitable trusts, gift annuities, and other donations.

* Nearly 18 per cent of the respondents said they had created planned gifts other than bequests, including more than 9 per cent who had set up charitable remainder trusts. The next most popular method of planned giving to charity was through gifts of life insurance, made by 2.5 per cent.

* Of the respondents who created planned gifts, just over two-thirds said that financial advisers were the primary motivators in setting up the transactions. By contrast, fewer than 12 per cent said that fund raisers who worked for charities had encouraged their giving. Slightly fewer than 8 per cent said that charity board members or other volunteers had solicited their gifts.

* Among those who had created some form of planned gift, four-fifths of the respondents said that they had been “sold” on the transaction as if it were a financial product rather than a gift. The implication of the study, says Mr. Prince, is that “financial professionals are really driving the creation of planned gifts.” And that finding may be troubling, he says, because many financial planners promote particular products, whether or not they are appropriate.

Fund raisers, financial planners, and other advisers working with wealthy people should provide potential donors with a range of giving opportunities to choose from, rather than promoting particular giving tactics, says Mr. Prince.

“What is really important is getting away from the discussion of products and moving toward the whole process of making a gift,” he adds.