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1998-2052:
The Epoch of Giving
If someone were to give away $10,000,000 a day it
would take more than 11,000 years to divest of $41
trillion.
Yet in 1999,
Paul Schervish and John Havens wrote a technical
and thoroughly researched article estimating
that within just 54 years the U.S. adult population
will transfer $41 trillion to succeeding generations.
This is the gross amount from 87,839,311 estates not
transferred to a surviving spouse, equaling more
than $2 billion per day.
Because negative economic news had cast some doubt
on the continued accuracy of their projections, Schervish
and Havens reevaluated their 1999 conclusions in 2002.
Perhaps not surprisingly, they decided that $41 trillion
is still accurate.
Mark McPherson
of law firm McPherson & Associates, P.C.
cites a statistic indicating that only 15% of boomers
expect to inherit money. The boomers are slightly pessimistic,
but they are probably not that far off. Schervish and
Havens also estimate that, of the $41 trillion, $1.6
trillion will be paid in estate settlement fees (i.e.
to lawyers, appraisers, CPAs, and such), $8.5 trillion
will be paid in estate taxes, and $6 trillion will
be given to charity. All that means that of the initial
$41 trillion, only $24.6 trillion will be dispersed
to heirs.
However,
our colleagues Schervish and Havens say these numbers
are conservative. They will most likely
be larger if secular real growth in wealth increases
from the 2% annual rate they used in their calculations!
For example, if the growth rate is 3%, the estimated
value of estates increases to $72.9 trillion, estate
fees increase to $2.9 trillion, and estate taxes increase
to $18 trillion. If the growth rate is actually 4%,
the estate value soars to $136.2 trillion, with estate
fees rising to $5.5 trillion, and estate tax collections
estimated at a whopping $40.6 trillion. Each of these
more robust projections carries with it a correspondingly
larger proportion given to heirs and charities.
The question this raises for nonprofits is clear.
In the new millennium, organizations must be deliberate
and strategic in their efforts to win a place in the
hearts and minds of their donors, many of whom are
making plans to transfer vast amounts of capital to
succeeding generations.
Sources: Millionaires and the Millennium: New Estimates
of the Forthcoming Wealth Transfer and the Prospects
for a Golden Age of Philanthropy, Schervish, Paul G.
and Havens, John J., Social Welfare Research Institute,
Boston College, Boston, MA, October, 1999; Why the
$41 Trillion Wealth Transfer Estimate is Still Valid,
Schervish, Paul G. and Havens, John J., Social Welfare
Research Institute, Boston College, Boston, MA, January
2003.
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The Brave New World of Planned Giving
Given the numbers indicated in the study by Schervish
and Havens (see companion article), it is no small
surprise that nonprofits invest a great deal of time
and energy into identifying current donors who have
the capacity to plan for and give large gifts. While
such facts are necessary, they are only part of the
equation. Data analysis can often take you only so
far. And major gifts officers are typically stretched
to the limit when it comes to their caseload and the
time it takes to engage with the next generation of
major donors.
For these reasons, charities increasingly engage temporary
researchers, perhaps on loan from an internal department
or from a skilled outside firm, to inquire and learn
important lessons about prospective major donors.
Regardless of who handles the inquiry, such research
typically takes on one of two forms, and in some cases,
both. One type of research learns about the heart of
the donor, the other learns about the head. On the
one hand, heart knowledge is typically gathered through
one-on-one conversations with donors. These talks are
very helpful in framing the potential approach and
content of future discussions between planned giving
personnel and prospective major donors.
This kind
of research can help answer general questions like “What do they like most about us?”, “What
can we do better?” and “Why would they
give to us?”
These discussions may also take place between an interviewer
and two or three prospective donors, for example, a
married couple or a group of related donors.
“Head” knowledge, on the other hand, typically
consists of top-of-mind answers to more routine questions.
Many nonprofits reach out to prospective major donors
through a screening survey that actually develops quantitative
information – items like the level of interest
in planned giving information, whether or not the donor
has a will or estate plan in place, their likelihood
to include a charity (or your charity) in their will,
whether or not they have heirs, or ratings of affinity
with your organization. In fact, Campbell Rinker has
developed a standardized mail survey questionnaire
for just such a purpose, as well as a way to seamlessly
provide the resulting data back to the client.
Having an independent group conduct interviews among
your constituents can provide insight that would not
typically be shared with a direct representative of
the organization. Furthermore, these kinds of prospect
research can actually conclude with a nonprofit organization
obtaining personally identifiable information on individual
donor prospects. For this to happen there must be full
disclosure, and the prospect must agree to have their
information shared. This is not typical of true market
research, where information that could identify the
respondent is never shared with the research sponsor
and results are provided only in aggregate form.
Of course,
conducting prospect research is not for every organization.
It requires capable in-house staff,
or an outside research partner you can trust with sensitive
and confidential donor data. It also mandates a certain
organizational willingness to utilize new information
as it comes to light – whether it is on an individual
level or on a broad scale.
However, as time goes on, we have seen more and more
organizations embrace these techniques as an organizational
necessity. There is simply too much potential involved
in this brave new world of planned giving to leave
anything to chance.
Campbell
Rinker is often called upon to measure the affinity,
loyalty, goals and motivations of potential
major donors, adding depth and insight to known facts
about a donor’s giving capacity. If you would
like to learn more about these services, please call
Dirk Rinker at 888-722-6723, or email him at Rinker@CampbellRinker.com.
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