Charitable Bequest Demographics

Encouraging generosity: The demographics of charitable estate planning

Russell James, J.D., Ph.D., CFP®ProfessorTexas Tech University

It’s kind of a BIG DEALWhy 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

1998 (n=1

8,987)

2000 (n=1

8,142)

2002 (n=1

7,353)

2004 (n=1

7,464)

2006 (n=1

7,033)

2008 (n=1

6,464)

2010 (n=1

8,370)

2012 (projecte

d)52%

54%

56%

58%

60%

62%

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%

U.S. population aged 55+ with will only or trust

Will OnlyFunded Trust

1998 (n=1

8,987)

2000 (n=1

8,142)

2002 (n=1

7,353)

2004 (n=1

7,464)

2006 (n=1

7,033)

2008 (n=1

6,464)

2010 (n=1

8,370)

2012 (projecte

d)8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

Charitable estate beneficiary among U.S. population aged 55+ with a will or trust

1998 (n=1

8,987)

2000 (n=1

8,142)

2002 (n=1

7,353)

2004 (n=1

7,464)

2006 (n=1

7,033)

2008 (n=1

6,464)

2010 (n=1

8,370)

2012 (projecte

d)0%

1%

2%

3%

4%

5%

6%

7%

U.S. population aged 55+ with a chari-table estate beneficiary in will or trust

Where’s the boom?

19901992

19941996

19982000

20022004

20062008

20102012

20142016

0

20

40

60

80

100

120

140

Est. High ('98-'17)

Est. Middle ('98-'17)

Est. Low ('98-'17)

Charitable bequests received

$ Bi

llion

s Ann

ually

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

19901992

19941996

19982000

20022004

20062008

20102012

20142016

0

20

40

60

80

100

120

140

Est. High ('98-'17)

Est. Middle ('98-'17)

Est. Low ('98-'17)

Charitable bequests received

$ Bi

llion

s Ann

ually

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?

1st estate decile

2nd estate decile

3rd estate decile

4th estate decile

5th estate decile

6th estate decile

7th estate decile

8th estate decile

9th estate decile

10th estate decile

76

78

80

82

84

86

88

Med

ian

Age

at D

eath

Wealthy people die old.Wealthy bequest donors die even older.

55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95+0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cumulative percentage of charitable bequest dollars by donor age at death

Over 80% of charitable bequest dollars come from decedents aged 80+

1913 (Age

101)

1918 (Age

96)

1923 (Age

91)

1928 (Age

86)

1933 (Age

81)

1938 (Age

76)

1943 (Age

71)

1948 (Age

66)

1953 (Age

61)

1958 (Age

56)

1963 (Age

51)

1968 (Age

46)

1973 (Age

41)

1978 (Age

36)

1983 (Age

31)2000000

2500000

3000000

3500000

4000000

4500000

The “baby bust” is driving demographics

Births

Key population not growing, YET

50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 100+0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

200120022003200420052006200720082009201020112012

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: 88Franey, 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…

1998 2000 2002 2004 2006 2008 2010 2012p5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

U.S. population aged 55+ charitable es-tate recipient among those with will/trust

by family status

GrandchildrenChildren onlyNo Offspring (unmarried)No Offspring (married)

1976 (77-82)

1977 (76-81)

1979 (74-79)

1980 (73-78)

1981 (72-77)

1982 (71-76)

1983 (70-75)

1984 (69-74)

1985 (68-73)

1986 (67-72)

1987 (66-71)

1988 (65-70)

1990 (63-68)

1992 (61-66)

1994 (59-64)

1995 (57-62)

1998 (55-60)

2000 (53-58)

2002 (51-56)

2004 (49-54)

2006 (47-52)

2008 (45-50)

2010 (43-48)

9%

11%

13%

15%

17%

19%

21%

Percent childless women age 40-44 in U.S.

Year (current age range)

1998 2000 2002 2004 2006 2008 2010 2012p0%

2%

4%

6%

8%

10%

12%

14%

16%

U.S. population aged 55+ inclusion of charitable recipient by education level

Grad SchoolCollege GradSome CollegeHS Grad<HS Grad

19701973

19761979

19821985

19881991

19941997

20002003

20062009

20125%

10%

15%

20%

25%

30%

35%

U.S. population share with bachelor's degree and above

55+ YEARS OLD35 to 54 YEARS OLD

1998 2000 2002 2004 2006 2008 2010 2012p0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

U.S. population aged 55+ charitable recip-ient among those with will/trust by giv-

ing/volunteering

Donor & VolunteerDonor onlyVolunteer onlyNeither

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 (projecte

d)30%

35%

40%

45%

50%

55%

U.S. aged 55+ giving ($500+) and vol-unteering

volunteercharitable giving

Wills that

won’tWhat ultimately

happened to those written and witnessed will documents reported during

life?

Reported wills are often unused

16%

39%10%

19%

11%6%

Distributed estates where decedent reported having a written and witnessed will (n=6,063)

No will foundWill probatedUnprobated will: nothing much of valueUnprobated will: estate otherwise distributedUnprobated will: trust distributedUnprobated 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: Oth-erwise divided

Will - Nothing much of value

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 giving2. No offspring3. Highest giving4. % years

reporting funded trust

5. Female

6. Last reported wealth

7. Not married8. Last reported

giving9. Growing wealth10. % years

volunteering

20%

30%

40%

50%

60%

70%

Lifetime giving and vol-unteering by estate

donors

Giving ($500+)Volunteering

Timing of Lifetime Surveys

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. Divorce6. Diagnosed with

heart problems7. Diagnosed with

a stroke8. First grandchild9. Increasing

assets10. 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. Divorce5. Diagnosed with

cancer6. Diagnosed with

heart problems7. Diagnosed with

a stroke8. First grandchild9. First child10. 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

1993/4 to 2004

1995/6 to 2006

1998 to 2008 2000 to 20100%

10%

20%

30%

40%

50%

60%

70%

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 testatorsCharitable

plans among1,000 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®ProfessorTexas 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

1998 2000 2002 2004 2006 2008 2010 2012p0%

2%

4%

6%

8%

10%

12%

U.S. population aged 55+ inclusion of charitable recipient among those with

will or trust by race/ethnicity

White (NH)Black (NH)Hispanic

1998 2000 2002 2004 2006 2008 2010 2012p10%

20%

30%

40%

50%

60%

70%

U.S. population aged 55+ use of will or trust by race/ethnicity

White (NH)Black (NH)Hispanic

1998 2000 2002 2004 2006 2008 2010 2012p0%

1%

2%

3%

4%

5%

6%

7%

8%

U.S. population aged 55+ inclusion of charitable estate recipient by race/

ethnicity

White (NH)Black (NH)Hispanic

Trends in use of funded trusts

1998 2000 2002 2004 2006 2008 2010 2012p0%

2%

4%

6%

8%

10%

12%

14%

U.S. population aged 55+ use of funded trust by race/ethnicity

White (NH)Black (NH)Hispanic

1998 2000 2002 2004 2006 2008 2010 2012p5%

6%

7%

8%

9%

10%

11%

12%

13%

U.S. population aged 55+ use of funded trust by household type

Married HouseholdsSingle Female HHSingle Male HH

1998 2000 2002 2004 2006 2008 2010 2012p0%

5%

10%

15%

20%

25%

30%

35%

U.S. population aged 55+ use of funded trust by wealth

Top 20%60%-80%40%-60%20%-40%Bottom 20%

1998 2000 2002 2004 2006 2008 2010 2012p0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

U.S. population aged 55+ use of funded trust by education level

Grad SchoolCollege GradSome CollegeHS Grad<HS Grad

Extra details

1998 2000 2002 2004 2006 2008 2010 2012p8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

U.S. population aged 55+ inclusion of charitable recipient among those with

will or trust by household type

Married HouseholdsSingle Female HHSingle 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 10base 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 0.07982 Start (stop) volunteering 0.05853 Increase assets by 10k 0.00014 Increase annual volunteering hours by 100 0.00915 Being diagnosed with cancer 0.07286 $1k change in giving to charity 0.00107 Becoming a widow/widower 0.05728 The last survey before death 0.0528