3 min read
November 2, 2023
The potential reward for approaching donors about planned giving has never been greater. Are you prepared?
The Greatest Wealth Transfer in History has Begun.
Over the next 25 years, an estimated $70 trillion will be passed from the baby boomers to the next generation in what is being called the greatest wealth transfer in world history. Some estimate that this number could reach as high as $140 trillion!
There are three main recipients for that money to transfer to: children, the government, and charities.
For the long-term success of your mission, you want to be thinking about how your organization can be a part of this “great wealth transfer.” Here’s how you can ensure you are well-positioned to help donors find the best outlet for their wealth if that outlet happens to be your organization.
Where will that money go?
You may think that all parents wish to give as much to their children as possible, but that is often not the case. Many parents wish to give their kids enough to bless and provide for them, but not so much that they rob them of the fulfillment that comes with developing passions and working to achieve their goals. Other times, parents don’t feel that their children’s values align well with their own.
You may also think that people desire to give as little as possible to the government. You would be right about that! I have never known anyone to prefer that Uncle Sam receives their wealth instead of their loved ones or their favorite charities. After all, they worked hard their entire lives to amass this wealth and it has already been taxed throughout their lifetime.
This leaves a third potential recipient: charities. It is predicted that at least one-third of this wealth transfer will end up going to charities. If we know that there’s often a limit to what people believe they should pass on to their children, and that they wish to hand as little as possible to the government, it becomes understandable why charities will likely receive a large portion of this wealth.
Define “Wealth.”
People hold their net worth in assets, not cash. In fact, about 90% of the average American citizen’s wealth is in non-cash or complex assets. People simply are not incentivized to hold their money in cash. Even banks will only insure deposits of up to $250,000. People are incentivized to invest their wealth, earn higher returns, and protect it against inflation.
What Does This Mean for You as a Charity?
Despite the fact that about 90% of wealth is held in non-cash or complex assets, 80% of charitable giving is currently done with cash. That is a huge mismatch. More plainly, the overwhelming majority of the assets that your donors hold and are likely thinking about selling or transferring are not cash.
If charities wish to work more effectively with donors and seize this tremendous opportunity, they need to get serious about planned giving—and soon.
Planned gifts often take time to cultivate (sometimes years), so the earlier an organization can start, the better positioned and more successful it will be. To start, I recommend considering what types of assets are most likely held by your donors—stocks, private businesses, real estate, farmland, complex trusts, art, or other assets.
Dedicate time and resources to make sure that:
- Your donors know it’s possible (and potentially beneficial) to make these gifts to your organization.
- You have the internal ability to accept these gifts.
- You have the willingness and expertise to engage donors in conversations about making these gifts.
If you find that you have limited staff time or expertise, don’t be afraid to seek help. You can consider expanding a staff member’s responsibilities, hiring a part-time staff member, or working with an experienced planned giving consultant to alleviate the strain of putting these essential elements in place on your own.
The potential reward for approaching donors about planned giving has never been greater. And neither has the potential value you can provide to donors by presenting planned giving as an option!
A donor’s favorite charity can become a meaningful part of the lasting impact they wish to have as they consider how to effectively distribute their estate.
Investing in planned giving and preparing to receive non-cash gifts might come at a (small) cost to you now, but that cost can generate significant value many times over once your planned giving program is up and running in service of both your mission and your donors.
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Interested in learning more about planned giving and how you can ensure your organization is prepared for the Great Wealth Transfer? Contact me for a free 30-minute consultation by emailing sconway@amphil.com. I look forward to helping you advance your mission and serve your donors by strengthening your planned giving offerings!
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