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The demographics and statistics of charitable estate planning
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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