The Great Wealth Transfer: Will It Be Great for Nonprofits?

The eye-popping projections for the Great Wealth Transfer make you wonder why charities aren’t going all in on planned giving.

Total giving from all sources — living individuals, foundations, corporations, and bequests — rang up at $557 billion in 2023, according to “Giving USA” estimates. Cerulli Associates, a financial-research firm, predicts that $18 trillion will flow to charity over the next 24 years through wealth transfer alone — an average of nearly $750 billion per year.

The “great” part of the transfer alludes to the size and accumulated wealth of the baby boom generation. Nearly 4.2 million Americans will turn 65 this year, the high point in a phase some experts call Peak 65.

But anyone who’s been in the nonprofit world a while may recall a rosy projection for an earlier wealth transfer that didn’t pan out. Two Boston College researchers created buzz in the 1990s with estimates that charities would be swimming in bequests by 2017. The numbers were so far off by 2006 that the Chronicle followed up with a story featuring disappointed fundraisers.

What’s different this time? A lot, say the bulls. The baby boom generation is bigger and will be richer than the silent generation that preceded it. Anyone who bought a home 30 years ago is likely sitting on significant appreciation, and the stock market has exploded since the early 1980s, when the youngest baby boomers were just entering the work force. Baby boomers are the first generation in which two-income households were the norm, and they had fewer children than older generations — all of which may mean more money will flow to charity.

“The great wealth transfer was overblown in the 1990s,” says Patrick Schmitt, a co-founder of FreeWill, a provider of will-making software that nudges people to give to charity. “It’s really starting now.”

Is This Just Fantasy?

Throwing some cold water on all the optimism is the scholar regarded by many as the foremost academic expert on planned giving — Texas Tech’s Russell James. The financial projections by Cerulli and other financial firms, he argues, are long on hype.

“They all just look for the biggest numbers they can put in their slide decks,” James says. “This is an area where people are much more interested in fantasy than reality.”

The stark wealth inequality in America means that most of the transfer will occur among the uber-rich, James says. Because they’re wealthy, they tend to live longer than other Americans, and the most generous among them are typically the very oldest, he says. Those factors could drive up the median donor age at which half the total dollars transfer to about 89 or 90, he says.

That’s a long wait from Peak 65.

And — at least at the outset — few of the transferred dollars will filter down to everyday charities. Instead, the funds will primarily go to private foundations, donor-advised funds, and the large institutions that have traditionally locked down the biggest gifts, such as universities and hospitals, he says.

“It’s a misunderstanding that the transfer of wealth is automatically going to be going to the public charities that we are familiar with,” James says.

Related Content

1. Planned Giving

   How to Position Your Nonprofit for the Wealth Transfer

2. Next-Gen Donors

   Don’t Ignore Next-Gen as the Wealth Transfer Begins

But even James agrees with many others that the number of bequests is entering a long uptrend, providing a unique opportunity for charities to help secure their financial future. Soon enough, the baby boom giving bulge will itself be a thing of the past — and charities that failed to secure planned gifts when the getting was good may regret that they didn’t try harder.

“There are not enough Gen Xers to fill the shoes of baby boomer donors — they just don’t exist,” says FreeWill’s Schmitt, alluding to the fact that birth rates were lower in the generation that followed the baby boom. “If your core donor is 70, in 15 years there will be fewer 70-year-olds than there are today. The way that you bridge the mountaintops of boomers and millennials is you get planned giving to carry you through the trough.”

What does all this mean for charities, and how can they best position themselves to benefit?

Nonprofits need to start by investing in planned giving, many experts say. Even at many large charities, planned giving is often a sideshow. Yet some who made the commitment years ago are now reaping the rewards.

At the American Cancer Society, “realized gifts” — the fundraising term used to describe funds received at death — are now one of the largest items in the charity’s budget, averaging $170 million per year, or more than a quarter of revenue. The charity made a strategic decision to expand its planned-giving team after receiving an unexpected surge in bequests in the 1990s, says Bobby Collier, who has been at the charity for 25 years and now oversees a team of more than 35 planned-giving officers.

The nature of the charity’s work often brings those fundraisers into contact with individuals who have personal or family experiences with cancer. Collier says he and his team believe they’re providing a service when they encourage donors or volunteers to get their affairs in order by creating a will or estate plan. “After they’ve gotten their financial needs met, then we can have that discussion about how would you like your legacy with our mission to ultimately be handled.”

Uncomfortable Conversations

Fundraisers need to overcome any queasiness. Discussing planned gifts is “the least comfortable conversation” for most fundraisers, says Trish Davis, vice president of major gifts and planned giving at Komen, the breast-cancer charity. She has a one-page tip sheet that she shares with other Komen fundraisers to help kick-start bequest conversations for those who may be more be at ease working on major gifts or events.

Many fundraisers are attracted to the idea of working with people their own age, James says, believing that if they secure a planned gift at age 50 or 60, the plan will still be in effect at death. But it’s not unusual for estate plans to be rewritten when people are in their 80s with hardly a look at what’s in the prior will, he says. The aging donor may forget to make annual gifts, and the fundraiser may neglect to stay in touch as a result. When communication recedes, the counted-on bequest may not survive in the donor’s final estate plan, James says.

Davis is all too aware that could happen.

“Almost all of our bequests are revocable,” Davis says. “So we very well could be written out, right? It really is on us to do a good job of keeping in touch and letting them know about the programs that we have. And hopefully, the work we’re doing is still important to them 10, 15, or 20 years down the road.”

Investing in Next Gen

Nonprofits and community foundations can position themselves for gifts by connecting with younger donors who stand to inherit wealth in the coming transfer. Charities like 21/64 pioneered the work of trying to engage and strengthen the philanthropic knowledge of a younger generation of donors a generation ago.

Such services are of interest not only to inheritors who want to learn more about philanthropy, but also to the patriarchs and matriarchs in families.

Previous generations might have been content to leave money in a foundation for family members or philanthropy professionals to distribute after their death, says Michael Moody, a professor of philanthropic studies at Indiana University. But wealthy baby boomers are choosing to create family foundations or donor-advised funds while they’re still alive and to involve their children in the work.

“They’re wanting to be in charge of it and involved with it now,” Moody says. “We may see less being passed on in estates because people are giving the money away before they pass away.”

Jumi Falusi Samen, a senior director at 21/64, says she’s currently working with a wealthy family that will leave a “massive” portion of their estate to significantly increase their family foundation. “They’re strategically engaging not only their children but also their grandchildren,” Falusi Samen says. “They’re hoping the structure will allow the family to make decisions collectively, and they’re exploring how the group of cousins can work together.”

Many community foundations have invested in such “next gen” work — with varying levels of success. One of the most successful programs is at the Greater Houston Community Foundation — a relatively young foundation that is celebrating its 30th anniversary this year. In 2010, the foundation’s board decided that it could add value by offering instruction to young inheritors and entrepreneurs about the increasingly complex charitable world.

Nathan Lindstrom for the Chronicle

Lacey Fluor Goossen was in her late 20s and newly married when a friend invited her to participate in the foundation’s Next Gen Donor Institute. The yearlong program offered evening educational sessions on various topics — including how to be a proactive rather than a reactive donor and how to think strategically about philanthropic impact. Fluor Goossen built a network of philanthropic peers through the program and began participating in giving circles.

“In my excitement around all of that, and in talking to my family and my parents, they said, ‘Well, how do we get involved? What should we be doing?’” Fluor Goossen recalls.

Her parents, Peter and Ann Fluor, who had no prior involvement with the community foundation, opened their own donor-advised fund at the community foundation. Since then, Fluor Goossen and her two brothers have each opened funds — as has her father’s business partner, K.C. Weiner. (Fluor Goossen is chief operating officer of the oil and gas company Texas Crude Energy and heads the family office for both the Fluors and the Weiners.)

Lacey and her husband, Matt, plan to use part of their fund to support charities focused on mental health. Today, even the grandchildren are involved — participating in monthly volunteering outings that the community foundation coordinates at local charities.

Lacey’s brothers live outside Houston, but the extended Fluor family now gathers annually for a multiday retreat that includes a strategy session on philanthropy. Lacey has brought tools to help Peter and Ann think about impact and the kind of legacy they hope to leave, including a card game that uses images to spark philanthropic discussion.

“When we first started this, our philanthropic structure really lacked sophistication,” Peter Fluor says. “Lacey brought a knowledge and sophistication that we adopted. She also will lead the stewardship of any future charitable and legacy gifts that we might have.”

Technology Over Head Count

Some charities are investing in technology and marketing to attract more planned gifts.

Komen is a 43-year-old nonprofit with more than $100 million in annual revenue, but when Davis joined the organization five years ago, it had received only 20 known bequests. In 2021, the charity contracted with FreeWill to become a featured partner. Essentially, Komen is paying to be highlighted as an option when the software nudges people creating a will to consider making a charitable gift.

The partnership is paying off, Davis says. Komen now has more than 1,000 known bequests — and more than $400 million in the pipeline.

FreeWill, founded in 2017, is a public-benefit corporation whose investors include Bain Capital’s impact fund. The company has helped 1 million people create wills in which they’ve allocated $11 billion to charity, Schmitt says.

The conventional wisdom in fundraising is that soliciting a planned gift should be done in person. But Covid upended many assumptions about fundraising, and Davis says that the charity’s success with FreeWill shows that a remote approach can work and that an investment in technology — rather than new employees — can pay off.

“One thing that we’ve learned is that donors will meet you where you’re at,” Davis says. “We don’t necessarily have to spend the money to go and meet with every single donor that may put us in their will. I don’t think that that’s a good investment. Instead, I’m investing in smart technology that’s helping me expand.”

The key to planned giving, many experts say, is a soft sell. Going in hard after a bequest puts the specter of death front and center and will turn donors off.

Instead, Schmitt suggests a humorous pitch for estate planning. (Only 25 to 30 percent of people have a will, according to studies by FreeWill and Caring.com.) “Something like, ‘Even if you live to 250, you still need a will.’ It’s a lighter version of ‘You’re definitely gonna die. Get a will, you know?’ That’s when people just recoil from it.”

Once people get engaged in estate planning, it’s an easy next step to ask them to consider including a bequest.

Creating a social norm that makes a planned gift seem like the natural thing to do can also help, says James, at Texas Tech. That’s why so many charities share stories of existing donors who have already made bequests.

That approach is especially vital in rural areas, where community foundations not only have to persuade people that planned gifts are worth making, but also have to persuade residents that their communities are worth saving.

The Nebraska Community Foundation is a leader in this work. After the farm bust of the 1980s, many small towns in Nebraska and throughout the Midwest lost population, and people began to doubt whether their communities were sustainable.

Jeff Yost, the community foundation’s president, has been working to build philanthropic capital in small towns around the state for 27 years, but it’s only in recent years that his vision has coalesced around the twin goals of helping both communities and individuals move away from a scarcity mindset and toward a vision of abundance.

The approach, used by community foundations in many largely rural states, including Kansas, Iowa, and Wyoming, starts by identifying the household net worth in a county, estimating how much of that wealth will transfer in the next decade, and then imagining a future in which 5 percent of the transfer goes to charity.

The Nebraska campaign, called “Five to Thrive,” is helping affiliated foundations in small towns like Ord, McCook, and Shickley build endowments. The funds remain tiny but are growing. Shickley’s endowment, featured in the Chronicle in 2011 — has quadrupled since that time, to $2.4 million, and paid out $1 million along the way.

“Success here isn’t just about the assets in the Nebraska Community Foundation network,” Yost says. “It’s about communities having a different psychological sense of what’s possible. From that standpoint, I think we’ve seen tremendous change.”

Encouraging participation remains a challenge in communities where memories of hardship linger. Jeana and Tanner Hackel own a successful construction business in Ord, but both grew up on feedlots where even the good years were tempered by worries that another bust was around the corner.

Nebraska Community Foundation

It took a presentation by Todd Mekelburg, the Nebraska Community Foundation’s director of gift planning, to persuade the Hackels that they had enough wealth to share some of it with their community. Mekelburg showed up with a bushel of corn in a plastic bin and then used a pitcher to remove 5 percent of the corn — about eight cups.

“Here’s this big bushel of corn, and then he fills the pitcher, which at first seemed like a lot,” Jeana Hackel says. “But it just left a small dent.”

Soon after, the Hackels committed 5 percent of their estate to the unrestricted endowment in the Valley County Community Foundation Fund.

Spending Down

Trends at the highest levels of philanthropy are having a spillover effect on how other donors think about their estate plans. Two hundred and forty people, most of them billionaires, have signed the Giving Pledge, committing to give at least half their wealth to charitable causes.

Keith Beverly, a financial planner who has completed training provided by 21/64 on multigenerational philanthropy, says he’s seeing more clients interested in spending down their wealth while they’re still alive, primarily through charitable giving. “They’ve done a good job with their children, and they don’t necessarily feel that the kids need to inherit tens of millions of dollars,” Beverly says. “They feel as though ... they can do more good and have more impact during their lifetimes as opposed to leaving larger sums to their kids.”

Abdullah Konte

That’s the same conclusion that Dan Morrissey came to after watching a documentary about Giving Pledge co-founder Warren Buffett on Netflix. Morrissey grew up in a modest home on the south side of Chicago with his father, a truck driver; his mom, a homemaker; and six siblings.

Morrissey took a job delivering auto parts while still in high school, and his big break came at age 22 when the company asked him to become general manager of a then-struggling store in the Baltimore/Washington area. His boss stuck with him even as he battled alcoholism throughout his 20s. Morrissey’s salary rose as the business prospered, and he retired at 58 with a net worth that has since grown to $5 million.

“Everything I’ve got was because I got up at 5:30 in the morning and went to work for 41 years,” he says.

Now 36 years sober, Morrissey serves on the board of South Shore Recovery Club, in Crownsville, Md. He met John Rodenhausen, director of gift planning at the Community Foundation of Anne Arundel County, after the foundation launched a special campaign to encourage small charities to start endowments.

Courtesy Dan Morrissey

The recovery center did start a small endowment. The two stayed in touch, and Rodenhausen told Morrissey how he could benefit the community and save on his personal taxes by opening a donor-advised fund.

Last year, Morrissey and his wife, Susan, committed 10 percent of their estate to open a fund at the community foundation. The family has already set aside $100,000 for the Morrissey Family Legacy Trust, which initially will focus on addiction recovery and nursing education.

Last summer, Morrissey took two of his three adult children (the third lives in Chicago) to the foundation’s Annapolis office to meet with Rodenhausen and get a better sense of how the fund works — and the role that they can play now and after Morrissey and his wife are gone. His daughter thought the new fund was great. But a son worried that the 10 percent estate gift was too much, especially if his parents’ costs balloon later in retirement.

“My whole goal was to lead by example,” Morrissey says, recalling the conversation with his children. “You do what you want to do, but I’m giving 10 percent of my money to these guys and you’re going to have the opportunity to manage it. I believe in helping other people. And hopefully you will, too.”

The Coming Windfall?
Cerulli Associates, a financial-research firm, forecasts that from 2024 to 2048, an estimated $123.7 trillion of wealth will transfer between generations. Nearly two thirds of that will come from baby boomers. Philanthropy will receive $18.38 trillion — roughly 15%.