A major fundraising opportunity first forecast decades ago may finally be arriving, but many nonprofits are likely missing out.
In 1998, predictions by scholars that a golden era of philanthropy was imminent turned out to be ahead of schedule. The greatest transfer of wealth in American history would occur, researchers claimed, when the World War II generation and baby boomers die, leaving assets to the next generation and to charities.
Over a 55-year period ending in 2052, scholars said, the wealth transfer would total $41 trillion—including $6 trillion in charitable bequests. From 1998 to 2017 alone, they predicted, charities would receive $1.7 trillion. But by 2017, according to the annual charitable tally by Giving USA, bequests equaled less than 8% of what the researchers had projected.
Now, according to an analysis by Robert Sharpe, chief executive of Encore, a national philanthropic consulting firm, evidence of the wealth transfer is finally starting to show up. Starting in 2014, he found new growth by examining charitable bequest data released by the federal government.
Unfortunately, given the ongoing pandemic, he said, many charities have been unable to reimagine their planned-giving programs to take advantage of the upswing in bequests and other planned gifts such as charitable trusts and annuities.
“In this environment, it is hard for people to effectively respond to opportunities,” Sharpe said. “They’re not at work together, they’re remote working, and people are working for bosses they haven’t met in person yet, etc. There is lots of flux. In many cases, fundraising plans are up in the air.”
Fundraisers, added Sharpe, “are scrambling now, trying to make calendar goals in the next few weeks on top of everything else. After nearly two years, the lack of personal contact with major donors is starting to take its toll. It is also very hard to start new relationships via Zoom. The impact of COVID on fundraising will be felt for some time to come, especially with major gifts and bequests.”
By how much is bequest giving increasing? According to the federal data Sharpe examined—which accounts for about half of all estate gifts that come from less than 1% of Americans—bequests were less than $25 billion in 2013. They jumped to $35 billion the following year and $44 billion last year. One somewhat grim reason for increased bequest giving, Sharpe said, is a rise in death rates, which, after declining from 2000 to 2009, have gone up every year since then.
Another thing that bodes well for charities in the next 10 to 20 years: Baby boomers, the oldest of whom are now 75, are very different from their parents’ generation. First, they are more highly educated and financially savvy than their elders, and their assets have grown by record rates in recent years.
What’s more, baby boomers are more likely to be childless, a strong predictor of one’s likelihood to support one or more charities at death: Twice as many boomers are childless compared with their parents’ generation. And bequests, as financial advisors know, are a primary way for people to reduce state and federal taxes owed on their estates.
Since the estate tax has been eliminated for almost all Americans, baby boomers may be more likely than their elders to give during their lifetimes rather than donating through their estates. They are also more likely than their parents to give from their retirement accounts.
Childless boomers, in particular, will look to partnerships with charities as a way to protect themselves from financial scams and fraud. For example, creating a charitable gift annuity offers the donor a stable source of income, tax benefits and investment oversight by a charitable entity and its advisors.
Loyal donors, Sharpe said, elevate the charities they support to the status of a family member, and they “adopt charities as a way to leave a legacy.”
But few charities have spent much time considering the unique concerns and needs of baby boomers and how best to appeal to them for planned gifts in coming months and years.
One thing obscuring the beginning of the wealth transfer is the pandemic: “There is a backlog in the courts, and will processing is taking longer,” said J. Michael Fisher, vice president of development at Help Heal Veterans, a national charity that uses arts and crafts to provide therapeutic aid to vets. Fisher says that he just learned of a bequest finalized after nearly two years; that process would normally take six to nine months.
Another problem is that, like millions of Americans who quit their jobs during the pandemic in what’s being called the Great Resignation, fundraisers have joined the exodus. Many fundraisers moved during the health crisis and are unwilling to return to the office, according to Ron Schiller, an experienced fundraiser who co-founded the Aspen Leadership Group, an executive search firm specializing in development positions.
“The fundraising job market is hotter and more competitive than I have ever seen it,” Schiller said in an interview. “Candidates are more demanding. I am talking to a lot of VPs about employees who don’t want to work like they did before. Do they let these people go, allow them to work remotely or come up with some hybrid mix of remote and in-person work?”
“Answers will vary by organization, but the overall definition of workplace has changed,” Schiller added. “Managers unwilling to explore new models are likely to face increased challenges with recruitment and retention.”