Russell James

Planned Giving Fortune Telling – Rates of Childlessness

This post is a follow-up to last week’s discussion on the Schervish/Havens “Wealth Transfer” projections from the late 90s (and re-estimated around 2006). Good news is that we should have a new set of projections – ones that should be real eye openers for the need to invest in planned giving!

Even with updated “Wealth Transfer” projections on the horizen, there are still some facts already glaring at the nonprofit sector right between the eyes. Fact: there are a lot of baby boomers and they are rapidly approaching planned giving revenue status. In other words, this cohort will start passing away in terms of numbers that it’s inevitable that planned giving numbers will skyrocket. In some sense, it’s a numbers game – the numbers are on the side of planned giving as boomers start reaching their 70s in a few years.

But, of course, there are so many other factors that could impact charitable estates and other planned gifts: retirement savings, longer lives, health care costs, inflation, spending habits, caring for elderly parents, divorce rates, ethnicity, etc… In fact, it seems practically impossible to accurately predict what will be with planned giving in the future (except, of course, for the BC folks).

Now to the main point of this post and the message to think about. The impact of childlessness on charitable bequests is well documented – I recall somewhere in the numerous reports I’ve read over the years that those without children left around 7 times more dollars in their charitable bequests (still searching for that source!) than those with children.

Professor Russell James, of course, has given us some very interesting looks at this issue. Take a look at this slide and let my commentary take you through it.

This slide comes from Professor James’ research on planned giving habits based on data from a large health and retirement study conducted over 15+ more years. It shows us the percentages (among those who actually have wills or trusts) that include charity in their estates – broken down by four key categories. Those with grandchildren (less than 10% of this groups leave charitable plans), those with just children (less than 15% with charitable plans), and then those without children (either married or unmarried).

The conclusion is clear from the slide: childlessness is a huge factor for inclusion of charity in estate plans.

That is what the past data is telling us – not surprisingly.

What about going forward? What are some of the big differences between the soon to be retiring generation of baby boomers vs. their predecessors?

Well, you could have guessed it – childlessness is a huge differential between the two generations. Women in the boomer generation pursued more careers and more successfully. Got married later, if at all. Higher divorce rate, too. Here is one more interesting slide from Dr. James:

This is a really cool slide which takes a little explaining. It just looks at women between ages 40 and 44 at yearly intervals and their rate of childlessness. Women who were in this age range in the 1970s until the early 1980s generally had a rate of less than 11% childlessness. This group happens to be in their 70s and older right now.

But, as the red line enters into baby boomer territory, starting around 1984, we start seeing a huge uptick in childlessness rates. In other words, not only are there more women about to enter their 70s due to the baby boom, but the percentage of those who never had children more than doubles.

Get the message? The numbers of women in their 60s is already much greater than the pre-boomer population in their 70s. But, add in this factor of childlessness among this group, it seems incredibly obvious that nonprofits need to adjust and of course, invest in their planned giving programs!

Changes Ahead for Planned Giving?

As promised, we are continuing with our follow-up to Dr. Russell James‘ webinar “Wills That Won’t – What the Decline of Wills and Estate Plans Means for Planned Giving Marketing” (click here to see the webinar). A special thanks to Dr. James, who shared his powerpoint slides with me, and to MarketSmart who hosted the free webinar.

Let’s get right to Dr. James’ headline and feature slide. Take a close look at this slide and think about it for a few moments:

This chart shows us a pretty steep decline in the rate of age 55+ U.S. population using Wills or Trusts. What is going on here? Less estate plans equals less planned giving dollars. Correct?

Take a look at this second chart that breaks down the “Will Alone” age 55+ group by age segments (Those using Living Trusts actually saw increased usage by the 55+ population over these years but it was a much smaller group):

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I am seeing one really big issue for planned giving in the future.

To me, this chart is confirming that Baby Boomers are not as tied to Wills as their predecessors. That is putting it mildly – easily over 60% of this cohort might not rely on standard wills to distribute their estates.

One other point that Dr. James pointed out in his webinar was the increasing use of “transfer on death” deeds for real estate and other things normally covered by wills.

Put these two facts together – decreasing use of wills and increasing use of transfers on death – and we have massive potential change for the planned giving world upon us within a few years.

When I do my training sessions, I usually reserve one or two slides for “pay on death” gifts. After seeing Dr. James’ presentation, I am thinking that fundraisers need to be better prepared on these options. Banks accounts, IRAs, retirement accounts, sometimes real estate, life insurance, and so on – all can be transferred outside of one’s will to heirs/charitable interests. Planned giving is not just about getting into as many peoples’ wills as possible.

Anyway, as Dr. James mentions in the webinar, there are a bunch of reasons why even getting written into a will doesn’t guarantee an actual gift (actually, earlier research from Dr. James suggested that close to 60% of charitable bequest intending individuals never actually saw the charitable intentions come to fruition).

For me, this raises a lot of questions. Simple bequests have always been the “bread and butter” of planned giving. Yet, we see a trend that counters this history and should make us wonder how to market our programs to account for this trend.

Next up for new posts:

The Baby Bust v. the Baby Boom
What ever happened to the Boston College/Havens-Schervish Wealth Transfer predictions?
Rates of childlessness and/or never married among Boomers – maybe Nonprofits will see an explosion in planned giving dollars after all?

Thank you as always for staying tuned into the Planned Giving Blog!

What moves people to add any charities to their estate plans?

As promised in my previous post, I plan to slowly release different data points from Russell James’ recent webinar “WHAT THE DECLINE OF WILLS AND ESTATE PLANS MEANS FOR PLANNED GIFT MARKETING” (click to view webinar) which looked at data from a long-term (15+ years) health and retirement study that also tracked attitudes and actions regarding charitable estate intentions. The study involved over 25,000 respondents who answered questions every two years about a series of health and retirement issues; over 10,000 respondents passed away during the study giving us plenty of pre- and post-mortem data points never seen before in the planned giving world.

Look at the top ten factors to cause someone to put charity in their estate plans. 7 out of 10 have to do with coming to terms with one’s mortality. In other words, testamentary planned giving (bequests) happen when people realize they will not live forever.

Now take a look at the top ten factors for REMOVING charity from one’s will:

The exact same 7 factors for adding charities were in the top ten for removing charities! Basically, this seems to tell us that anything that causes someone to address their estate plans – most likely coming from a realization of one own mortality – is a cause for potential change.

What does this mean for nonprofit planned giving programs? Well, these data points should at a minimum teach fundraisers about when they should talk to prospects about planned giving. The problem is that waiting until these death awakening moments happen may be too late. Lots to think about here.

Stay tuned for more interesting findings to come!

New Planned Giving Insights

If you have a free hour, check out this link to a fascinating web presentation from Dr. Russell James (sponsored by iMarketSmart.com) about some really cool, new Planned Giving data:

WHAT THE DECLINE OF WILLS AND ESTATE PLANS MEANS FOR PLANNED GIFT MARKETING
Presented by Dr. Russell James J.D., Ph. D, CFP

http://imarketsmart.com/resources/webinars/wills-that-wont-landing-page/

I actually plan on watching the webinar over again, taking better notes and reporting back on each of the major findings.

Here is a teaser of some of the points I gleaned from my not-so-clear notes:

The top trigger for people to add a nonprofit to their estate plans (will, trust or account beneficiary designation) was experiencing any apprehension of death (i.e. facing one’s own mortality). Cancer and other major health declines also made the top 10. Family structure change (death of spouse, divorce, etc…) was next. Not that surprising but read the next point…
The top triggers for people to remove a nonprofit from their estate plans were essentially the same as the triggers to add a nonprofit! In other words, anything that motivates a change of one’s estate plans could be good or not good for a nonprofit (now you understand why we emphasize stewardship!).
Most charitable plans are added within 5 years of death! Wow. If that is true, not only is it a case for stewardship but it’s a huge case for traditional PG marketing (i.e. newsletters!).
Planned giving is currently experiencing the Baby Bust! As Robert Sharpe has warned for the last 20 years or more, there was a serious drop in births in the late 1920s and 1930s. And, any positive impact by the Baby Boomers on planned giving is 5 years away! Meaning, planned giving programs need to gear up for the impact of the Baby Boomers.

That webinar was so full of cool stuff, I plan on releasing and analysing the data points over the next few months!

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