In what is shaping up to be the greatest wealth transfer in U.S. history, an estimated $59 trillion will be transferred from 93.6 million American estates between 2007 and 2061, a new study from the Center on Wealth and Philanthropy at Boston College finds.
Based on a scenario assuming 2 percent economic growth and the continuation of current tax provisions, the report, A Golden Age of Philanthropy Still Beckons: National Wealth Transfer and Potential for Philanthropy (68 pages, PDF), estimates that through estates, heirs will receive up to $36 trillion, federal estate taxes will claim $5.6 trillion, and bequests to charities will total $6.3 trillion. Over the same period, giving to charity is expected to total roughly $27 trillion, with more than $20 trillion of that given by donors who are still living.
Funded by the Dakota Medical Foundation and the Impact Foundation, the report updates a 1999 study that estimated a transfer of wealth between 1998 and 2052 totaling $52 trillion (in 2007 dollars). For the first time, the report tracks accelerated wealth transfer — the trend among high-net-worth donors to allocate more of their wealth to trusts, foundations, charities, family limited partnerships, and other vehicles during their lifetime — and estimates that it will account for 17 percent of the total amount transferred, or some $10 trillion.
The report also notes that while the Great Recession reduced the amount likely to be transferred and given to charity by about 25 percent, the impact of the recession was blunted by the fact that the wealthiest families, which account for most of the transferred wealth and charitable bequests, lost a relatively smaller percentage of their net worth.
"These estimates present an extraordinary opportunity for nonprofits today and in coming years," said CWP director Paul Schervish. "Despite the trend toward lifetime giving, it is both realistic and valuable for charities to remain encouraged about the potential for bequests. Charities should take whatever steps possible to obtain their share of the projected bequests and to expand the amount of bequests and, for that matter, all giving beyond our predictions."
"One way we found that works," said Pat Traynor, president and CEO of the Dakota Medical and Impact foundations, "is to train charities about the most effective ways to motivate their current donors to shift more of their income and estate tax liabilities and more of their financial growth to charitable giving." Nonprofits that are prepared to tap the projected $26.9 trillion in total charitable giving, said Traynor, "will not need to put on hold their goals such as providing critical services for the elderly, bold health transformation initiatives, tremendous improvements in education, and enriching cultural offerings."