the demographics of charitable estate planning
DESCRIPTION
A review of statistical and demographic trends in the U.S. and Australia related to charitable bequest planning and planned givingTRANSCRIPT
The demographics of charitable estate planning
Russell James Professor Texas Tech University
It’s kind of a
BIG DEAL Why this new data is
so important
The entire “lifetime” movie (tracking same people from mid-life to post-mortem)
New data
Previous data
Old data
Small one-time snapshots in life
Post-mortem for largest estates
The entire “lifetime” movie • Matches sequence of lifetime responses with post-
mortem distributions for over 10,000 decedents
• Identifies timing of plan changes
• Large, federally-funded, longitudinal, in-person, well-compensated, nationally representative, study on health and retirement issues
Warning!
This might not be pretty
52%
54%
56%
58%
60%
62%
1998(n=18,987)
2000(n=18,142)
2002(n=17,353)
2004(n=17,464)
2006(n=17,033)
2008(n=16,464)
2010(n=18,370)
2012(projected)
U.S. population aged 55+ with a will or trust
States allowing “Transfer on Death” deeds in 1995
States allowing “Transfer on Death” deeds in 2000
States allowing “Transfer on Death” deeds in 2005
States allowing “Transfer on Death” deeds today
(+2013 legislative action in 6 more states)
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
1998(n=18,987)
2000(n=18,142)
2002(n=17,353)
2004(n=17,464)
2006(n=17,033)
2008(n=16,464)
2010(n=18,370)
2012(projected)
U.S. population aged 55+ with will only or trust
Will Only
Funded Trust
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
1998(n=18,987)
2000(n=18,142)
2002(n=17,353)
2004(n=17,464)
2006(n=17,033)
2008(n=16,464)
2010(n=18,370)
2012(projected)
Charitable estate beneficiary among U.S. population aged 55+ with a will or trust
0%
1%
2%
3%
4%
5%
6%
7%
1998(n=18,987)
2000(n=18,142)
2002(n=17,353)
2004(n=17,464)
2006(n=17,033)
2008(n=16,464)
2010(n=18,370)
2012(projected)
U.S. population aged 55+ with a charitable estate beneficiary in will or trust
Where’s the boom?
0
20
40
60
80
100
120
140
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
$ B
illio
ns
An
nu
ally
Est. High ('98-'17)
Est. Middle ('98-'17)
Est. Low ('98-'17)
Charitable bequestsreceived
Charitable bequests:
Predicted v.
Received
Estimated annually is 1/20 of 20 year estimated total from P.G. Schervish and J. J. Havens (1999) “Millionaires and the millenium: New estimates of the forthcoming wealth transfer and the prospects for a golden age of
philanthropy”. Bequests received are inflation-adjusted numbers from Giving USA 2013
0
20
40
60
80
100
120
140
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
$ B
illio
ns
An
nu
ally
Est. High ('98-'17)
Est. Middle ('98-'17)
Est. Low ('98-'17)
Charitable bequestsreceived
Estimated annually is 1/20 of 20 year estimated total from P.G. Schervish and J. J. Havens (1999) “Millionaires and the millenium: New estimates of the forthcoming wealth transfer and the prospects for a golden age of
philanthropy”. Bequests received are inflation-adjusted numbers from Giving USA 2013
Charitable bequests:
Predicted v.
Received
Charitable bequests since 2000 have trended flat…
What’s going on?
76
78
80
82
84
86
88
Me
dia
n A
ge a
t D
eat
h
Linear (Male Bequest Donor)
Linear (Female BequestDonor)
Linear (All Female)
Linear (All Male)
Wealthy people die old. Wealthy bequest donors die even older.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95+
Cumulative percentage of charitable bequest dollars by donor age at death
Over 80% of charitable bequest dollars come from decedents aged 80+
2000000
2500000
3000000
3500000
4000000
45000001
91
3 (
Age
10
1)
19
17
(A
ge 9
7)
19
21
(A
ge 9
3)
19
25
(A
ge 8
9)
19
29
(A
ge 8
5)
19
33
(A
ge 8
1)
19
37
(A
ge 7
7)
19
41
(A
ge 7
3)
19
45
(A
ge 6
9)
19
49
(A
ge 6
5)
19
53
(A
ge 6
1)
19
57
(A
ge 5
7)
19
61
(A
ge 5
3)
19
65
(A
ge 4
9)
19
69
(A
ge 4
5)
19
73
(A
ge 4
1)
19
77
(A
ge 3
7)
19
81
(A
ge 3
3)
The “baby bust” is driving demographics
Births
Key population not growing, YET
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 100+
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Total resident population by 5-year age groups
Temporary flat trend in key population
Coming demographic wave will impact CRT creation first, then CGA creation, then bequests realization
Realized Bequest Peak
Age: 88 Franey, J. W. & James, R. N., III (2013) Trending Forward: Emerging Demographics Driving Planned Giving. National Conference on Philanthropic Planning, Minneapolis, MN, October 15-17, 2013
CRT Creation Peak Age:
70-74
CGA Creation Peak Age:
75-79
The future is bright…
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ charitable estate recipient among those with will/trust by
family status
Grandchildren
Children only
No Offspring (unmarried)
No Offspring (married)
9%
11%
13%
15%
17%
19%
21%1
97
6 (
77
-82
)
19
77
(7
6-8
1)
19
79
(7
4-7
9)
19
80
(7
3-7
8)
19
81
(7
2-7
7)
19
82
(7
1-7
6)
19
83
(7
0-7
5)
19
84
(6
9-7
4)
19
85
(6
8-7
3)
19
86
(6
7-7
2)
19
87
(6
6-7
1)
19
88
(6
5-7
0)
19
90
(6
3-6
8)
19
92
(6
1-6
6)
19
94
(5
9-6
4)
19
95
(5
7-6
2)
19
98
(5
5-6
0)
20
00
(5
3-5
8)
20
02
(5
1-5
6)
20
04
(4
9-5
4)
20
06
(4
7-5
2)
20
08
(4
5-5
0)
20
10
(4
3-4
8)
Year (current age range)
Percent childless women age 40-44 in U.S.
0%
2%
4%
6%
8%
10%
12%
14%
16%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ inclusion of charitable recipient by education level
Grad School
College Grad
Some College
HS Grad
<HS Grad
5%
10%
15%
20%
25%
30%
35%
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
20
09
20
12
U.S. population share with bachelor's degree and above
55+ YEARS OLD
35 to 54 YEARS OLD
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ charitable recipient among those with will/trust by
giving/volunteering
Donor & Volunteer
Donor only
Volunteer only
Neither
30%
35%
40%
45%
50%
55%
U.S. aged 55+ giving ($500+) and volunteering
volunteer
charitable giving
Wills that
won’t
What ultimately happened to those written and witnessed will documents reported during
life?
Reported wills are often unused
16%
38% 10%
19%
11%
6%
Distributed estates where decedent reported having a written and witnessed will (n=6,063)
No will found
Will probated
Unprobated will: nothingmuch of value
Unprobated will: estateotherwise distributed
Unprobated will: trustdistributed
Unprobated will: other
Funded trusts more likely to work
75%
5%
10%
4% 2% 4%
Distributed estates where decedent reported having a funded trust (n=913)
Funded trust exists
No documents
Will probated
Unprobated will:Otherwise divided
Will - Nothing much ofvalue
Will - Unknown
Documents • The will is only a back-up
document • Ask about titling and
beneficiary designations (especially qualified plans!)
• Most wills are never used – let me explain why
• Encourage trust planning • Consider alternate will
language “a dollar amount equal to __ percent of my adjusted federal gross estate…”
Who are these
people?
Lifetime predictors of a post-mortem bequest gift
1. % years giving
2. No offspring
3. Highest giving
4. % years reporting funded trust
5. Female
6. Last reported wealth
7. Not married
8. Last reported giving
9. Growing wealth
10. % years volunteering
20%
30%
40%
50%
60%
70%
8-10 yearspremortem
6-8 yearspre-mortem
4-6 yearspre-mortem
2-4 yearspre-mortem
0-2 yearspre-mortem
Timing of Lifetime Surveys
Lifetime giving and volunteering by estate
donors
Giving ($500+)
Volunteering
Bequest givers
may not be your donors,
but many used to
be
When do plans change?
Factors predicting when charitable plans are
ADDED
1. Approaching death (final pre-death survey)
2. Becoming a widow/widower
3. Diagnosed with cancer
4. Decline in self-reported health
5. Divorce 6. Diagnosed with
heart problems 7. Diagnosed with
a stroke 8. First grandchild 9. Increasing
assets 10. Increasing
charitable giving
Factors predicting when charitable plans are
DROPPED
1. Decline in self-reported health
2. Approaching death (final pre-death survey)
3. Becoming a widow/widower
4. Divorce
5. Diagnosed with cancer
6. Diagnosed with heart problems
7. Diagnosed with a stroke
8. First grandchild
9. First child
10. Exiting homeownership
1. Death feels near
• Final pre-death survey • Decline in self-reported health • Diagnosis with cancer • Diagnosis with heart disease • Diagnosis with stroke • Becoming a widow or widower
2. Family structure changes
• Divorce • First child • First grandchild • Becoming a widow or widower
Plans destabilize when
Most realized charitable plans (shown in red) added within 5 years of death
Total Number Total $
Although most charitable plans were added within 5 years of death, ONE longer-term plan was worth FOUR made in the last two years.
A 5% national sample of 2012 probate records in Australia showed an estimated • 31% of charitable wills were signed
within 2 years of death • 60% were signed within 5 years of
death
Baker, Christopher (October, 2013) Encouraging Charitable Bequests by Australians . Asia-Pacific Centre for Social Investment & Philanthropy - Swinburne University
Plans destabilize as death approaches
lifetime reports made as death
approaches
post-mortem transfers v. lifetime
reports
timing of the last changes made to
the final will
Most still report charitable plans 10 years later
0%
10%
20%
30%
40%
50%
60%
70%
1993/4 to 2004 1995/6 to 2006 1998 to 2008 2000 to 2010
10-Year retention of charitable estate plans
age 70+
age 50-69
So where does “Once in, Always in” come from?
Old data
Post-mortem for largest estates
Plans destabilize as death nears
We can see this only in
a LIFETIME survey
not in a
ONE TIME survey
The NCPG (2000) study showed that 90% of planned bequest donors don't change their plans
Fiction
Among those (avg. age of 58) WITH a charitable plan, 10% chose “Amount Decreased” when asked about their overall plan, “Has the amount of the charitable bequest ever increased or decreased?”
Fact It showed that IF charity stayed in, plan changes decreased total charitable amount 10% of the time
Practice suggestions
What now?
“Count it and forget it” doesn’t work!
A bequest commitment is the beginning, not the
end
Higher value in converting to irrevocable commitments: gift annuities,
charitable remainder trusts,
remainder interests is homes and farms.
Charitable plans signed
earlier
DO produce larger
gifts,
IF they stay in (or
they return later)
Don’t ignore your
oldest supporters
Half of all charitable bequest dollars came from decedents this age and older…
Current U.S. study:
Age 88
New Australian study (5% sample of national
probate files):
Age 90
Remember that most realized charitable bequests are added within 5 years of death
Age at Will Signing (by share of total charitable bequest $ transferred)
76%
11%
13% 80s+
70s
pre-70
Australian data from: Baker, Christopher (October, 2013) Encouraging Charitable Bequests by Australians . Asia-Pacific Centre for Social Investment & Philanthropy - Swinburne University
For those 75+ with lifetime connections,
stay “top of the mind” (service, service
communication, mission communication,
honoring/thank you, living bequest donor stories)
Many of our customers like to leave money to
charity in their will. Are there any causes you’re
passionate about?
Would you like to leave any money to charity in your will?
No reference to charity
Charitable bequest decisions are often unstable and easily influenced
Charitable plans among
1,000 testators
Charitable plans among
1,000 testators
Charitable plans among
1,000 testators
• Plans change every time a donor opens a new account with a TOD/POD or changes a joint account owner
• Plans become unstable as death approaches • Stay connected! Stay communicating!
The score doesn’t count until the clock runs out
A realistic boom is starting soon (5 years)
But, trusts do
Wealthy, consistent donors with a trust (especially childless
and unmarried)
Approaching mortality
& family changes
My favorite student evaluation from a personal finance class…
This class sucked. It was all about reality. I didn’t want to know this stuff.
Russell James, J.D., Ph.D., CFP® Professor Texas Tech University
www.EncourageGenerosity.com
www.EncourageGenerosity.com/ACBD.pdf
Encouraging generosity: The demographics of charitable estate planning
Drilling down…
Race and ethnicity in charitable planning
0%
2%
4%
6%
8%
10%
12%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ inclusion of charitable recipient among those with will
or trust by race/ethnicity
White (NH)
Black (NH)
Hispanic
10%
20%
30%
40%
50%
60%
70%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ use of will or trust by race/ethnicity
White (NH)
Black (NH)
Hispanic
0%
1%
2%
3%
4%
5%
6%
7%
8%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ inclusion of charitable estate recipient by
race/ethnicity
White (NH)
Black (NH)
Hispanic
Trends in use of funded trusts
0%
2%
4%
6%
8%
10%
12%
14%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ use of funded trust by race/ethnicity
White (NH)
Black (NH)
Hispanic
5%
6%
7%
8%
9%
10%
11%
12%
13%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ use of funded trust by household type
Married Households
Single Female HH
Single Male HH
0%
5%
10%
15%
20%
25%
30%
35%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ use of funded trust by wealth
Top 20%
60%-80%
40%-60%
20%-40%
Bottom 20%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ use of funded trust by education level
Grad School
College Grad
Some College
HS Grad
<HS Grad
Extra details
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
1998 2000 2002 2004 2006 2008 2010 2012p
U.S. population aged 55+ inclusion of charitable recipient among those with will
or trust by household type
Married Households
Single Female HH
Single Male HH
What are the best multi-item models to predict the amount of money left to charities at death?
Items 1 2 3 4 5 6 7 8 9 10 base rate 1,499 703 -242 -199 -826 -561 -836 -636 -567 346
Average $k giving 1,415 1,344 1,340 1,024 1,004 1,078 1,056 1,044 1,244 1,250
Last reported wealth $k 4 4 3 3 5 4 4 4 5
No offspring exists 9,774 9,722 9,815 9,807 9,917 9,868 9,844 9,325
$k of giving in last report 336 341 317 301 293 286 286
% years reporting funded trust 9,960 11,125 10,049 10,014 10,096 10,195
Highest reported wealth $k -2 -4 -5 -5 -5
Average reported wealth $k 7 10 10 10
Lowest reported wealth $k -13 -13 -12
Highest $k year of giving -113 -114
Married -2,409
What is the combined effect (considering both adding and dropping) of various lifetime changes on
the presence of a charitable plan existing
rank Δ factor Δ in conditional probability
1 Start (stop) giving 0.0798
2 Start (stop) volunteering 0.0585
3 Increase assets by 10k 0.0001
4 Increase annual volunteering hours by 100 0.0091
5 Being diagnosed with cancer 0.0728
6 $1k change in giving to charity 0.0010
7 Becoming a widow/widower 0.0572
8 The last survey before death 0.0528
