Who Has the Ability to Make a Planned Gift?

Quite simply, virtually everyone has the ability to make a planned gift.

With this blog post, I’m going to throw a lot of statistics at you. Hang-in there. By the time you get through this piece, you’ll have a much clearer understanding of the ability of your prospects to make a planned gift. Let’s start by considering the following factoids which I uncovered while doing research for my book Donor-Centered Planned Gift Marketing:

  • Among survey respondents over age 30, 69 percent expect to leave an inheritance. (The Stelter Company)
  • People over the age of 50 control 70 percent of all privately held financial assets in the United States. (U.S. Census Bureau)
  • Of those 65 years or older, 81 percent owned their own home in 2005. (U.S. Census Bureau)
  • Of those 55 to 64 years of age, 79.8 percent own their own home. (U.S. Census Bureau)
  • The average home value in 2000 was $96,442. (U.S. Census Bureau)
  • The median household net worth for those aged 65 and older was $108,885 in 2000. (U.S. Census Bureau)
  • A 2005 study found that 50.3 percent of U.S. households owned equities in some form with 34.7 percent owning equities outside of employer sponsored retirement plans. (Investment Company Institute and Securities Industry Association)

While the above figures will fluctuate with changes in the economy, one fact is consistent: The vast majority of older Americans have sufficient assets with which to make a charitable planned gift should they choose to do so. A simple charitable bequest gift is certainly within reach of most Americans. Many Americans can even afford a charitable gift annuity which can be established with some charities in some states for as little as $1,000. A great many Americans own appreciated securities some of which they could donate if they chose.

While nearly all Americans have the ability to make some type of planned gift, the size of those gifts will vary greatly. Most will be somewhat modest to the recipient organization even if meaningful to the donor. The size of a planned gift will depend on many factors of which ability is just one. And, ability is something defined by the donor who will consider his/her assets, obligations, and desires. For example, a woman with an estate valued at just under $1 million decided that her children did not need an inheritance from her estate. So, she made arrangements for virtually her entire estate to be donated to a scholarship foundation through a charitable bequest. Another person, with a similar estate size, might have reached a different conclusion about the needs of her family and, therefore, might have given a much smaller amount or might have structured the gift differently. To understand a prospect’s perceptions about the ability to make a gift and the prospect’s family needs, one must talk with the prospect.

To better understand the impact of estate size on planned giving, Dr. Russell James, III of Texas Tech University looked at estate giving by estate size. James, revealed at the 2009 AFP International Conference that estate gifts from those with estates valued at less than $100,000 do not even equal the donor’s total annual giving. However, as estate values grow, so too does the size of estate giving and the ratio of estate giving to annual giving. For example, among those with estates valued at $500,000 to $999,999, estate giving was 1.89 times greater than the annual giving total for these individuals. Those with estates valued at over $5 million have estate giving totals that are more than 11 times greater than their annual giving total. These figures represent total estate values, total annual giving, and total estate gift value rather than figures related to giving to a particular organization. Since donors tend to support far fewer organizations with a planned gift compared to their annual fund donations, the multiple of planned gift to annual donation to a particular organization might be many times greater than the study has indicated.

When looking at ability, it might seem that development professionals should focus their efforts on those with the largest estates. However, the downside of targeting those individuals who have estates greater than $5 million is that they are often less likely to support existing nonprofit organizations and, instead, likely to establish a private foundation or donor-advised fund with their estate gifts. While this might be a perfectly fine development for the nonprofit sector as a whole, it is not particularly helpful to the development professional attempting to secure an estate gift for a particular, existing organization.

When looking at donor ability, measured by estate size, the best prospects will often be those with larger estates. Those with larger estates tend to have the ability to make larger estate gifts. Those gifts will be even more meaningful relative to annual gift size for these donors. However, those with the largest estates will be more likely than those with smaller estates to establish a private foundation or donor-advised fund with their estate gift.

Finally, development professionals need to understand that just because a prospect has the ability to give does not mean he/she will. There are many factors that impact propensity to give. However, estate size is an important indicator of how much a donor is likely to be able to give should they make the decision to give. Most folks have the ability to give. It’s just a question of interest, willingness, and amount.

That’s what Michael Rosen Says… What do you say?

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3 Responses to “Who Has the Ability to Make a Planned Gift?”

  1. The next question I have is whether there is any data showing the age at which individuals begin writing charitable contributions into their estate plans. I would assume that most individuals begin writing estate plans when they have their first child. But do they think charitably at that stage in their lives? This blog post suggests that a capable development officer armed with appropriate tools and knowledge can have a significant impact in the life of an institution by engaging donors in this conversation early and often.

    • Steve, thank you for your comments. Your question about the age of first-time bequest donors has to do with propensity rather than ability. Of course, propensity is a very important part of what makes a priority planned giving prospect, as you’ve correctly identified. For bequests, there have been a number of research studies that have looked at the issue of age and bequest giving. For example, the Center on Philanthropy at Indiana University found that among those they surveyed that “people with a charity named in their will tended to be between 40 and 50 years of age.” They also found that those most likely to consider a charitable bequest commitment were between the ages of 40 and 60. In another study, an NCPG (now PPP) Donor Survey found that the average age when an individual names a charity in his/her will is 49. I think you’re correct; it’s a life-cycle issue. People tend to draft their first will when they are in their forties, so it is somewhat natural that that is when they’d make their first charitable bequest commitment.

      Cautionary Note: While those in their forties might have a strong propensity to make a bequest commitment, those folks might not be the best prospects for a nonprofit organization. Bequest commitments are revocable. Someone in his/her forties has plenty of time to change his/her mind or shift priorities during the coming decades. Also, it will take the organization a very long time to realize the gift. Older prospects might have a lower propensity to make a bequest gift, but they might be less likely to remove a given charity from their will and the gift is more likely to be realized sooner. However, regardless of the priority given to younger prospects, organizations can feel comfortable discussing planned giving with such people if the organization’s resources permit it.

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