Wealth Transfer to Reach Nearly $9 Trillion by 2027, Study Finds

Wealth Transfer to Reach Nearly $9 Trillion by 2027, Study Finds

An estimated $8.8 trillion will be passed down to Gen X and millennial Americans by 2027, creating a potential windfall for charities, a report from the Chronicle of Philanthropy finds.

Based on an analysis of household wealth data by LOCUS Impact Investing and the Center for Rural Entrepreneurship, the report, $9 Trillion and Counting (28 pages, PDF), found that if just 5 percent of the total was captured by philanthropy, it would add up to $441 billion, or the equivalent of ten Bill & Melinda Gates Foundations. What's more, a 5 percent annual payout on those philanthropic assets would generate $22 billion a year in grantmaking, or five times what the Gates Foundation disbursed in 2016. Assuming an average economic growth rate of 3 percent, CRE projects that the total amount of wealth transferred in America will reach $97.2 trillion by 2067, and if 5 percent of that — some $4.9 trillion — were set aside for philanthropy, it would generate $243 billion a year in grantmaking, or nearly six times the total given by private foundations in 2014.

These trends add up to an unprecedented opportunity for bequests and other planned gifts, especially over the next three decades, according to CRE co-founder Don Macke. Whereas a 2014 report from the Center on Wealth and Philanthropy at Boston College predicted that between 2007 and 2061 charitable bequests would total $6.3 trillion, the new study does not attempt to predict a dollar figure, noting instead that Americans currently have $75 trillion in household wealth, 56.9 percent of which is held by people between the ages of 55 and 74.

The report includes case studies of nonprofits that are working to take advantage of the opportunity — including the Nature Conservancy, which is making gift planning a priority; the American Heart Association, which is using data to enhance its planned-giving appeals; and the Southwest Initiative Foundation, which is pioneering a program designed to manage donated farmland for income rather than selling it. In addition, the report offers tips for searching for and securing planned gifts, including starting early, knowing donors' ages, and identifying the most loyal donors.

The report notes that "[s]ubstantial bequests don't always come from donors who give a lot during their lifetimes, deferring the benefits of building a relationship with planned-gift donors even more." Jeff Comfort, vice president of principal gifts and gift planning at the Oregon State University Foundation, told the report's authors that loyalty to an organization, not massive annual gifts or capital-campaign contributions, is the surest indicator of a candidate for a bequest; fundraisers should look for donors who have given "$100 or $500 a year for twenty-five years."

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Heather Joslyn. "$9 Trillion Will Transfer From Americans' Estates, New Analysis Says." Chronicle of Philanthropy 04/17/2018.