Posted June 1st, 2013

Bequest Boom or Bust?

Gift planners are constantly presented with new fundraising trends and ideas, many of which are promoted as the “next big thing.” One such concept currently circulating in the gift planning arena is the “Bequest Boom Treasure” theory, a fundraising strategy based on the massive size of the baby boomer generation.

Born between 1946 and 1964, this demographic contains some 70 million persons who will be turning 65 over the next 20 years, making them a prime market for fundraising appeals.

The oldest baby boomers began turning 65 in 2011. According to the Bequest Boom Treasure theory, people approaching this milestone are often motivated to prepare their wills. Following this assumption, each year until 2031, when the youngest boomers turn 65, a new group of baby boomers should start the process of drafting wills and other estate plans.

In reality, however, the will now being created by these baby boomers is normally not the first one and will likely not be the last.

Experience shows that:

  • A 65-year-old who creates a will in 2013 will more than likely revise it at least once. Factors such as the death of a spouse, the birth of grandchildren, tax reforms and health issues will necessitate changes at various points in life. 
  • As the donor’s situation and interests evolve and his or her will is modified, one or more of the charities named in the first will may be replaced with others whose missions more closely meet the desires of the aging donor. 
  • Economic factors such as medical care, assisted living expenses and the needs of family members may reduce the sum available for distribution to charities, or eliminate the residual from the estate plan altogether. 
  • Even if charitable interests are included in the wills of 65-year-olds, their charitable interests do not change and the anticipated sum available for charitable bequests remains available, statistics show that the bequest may not be received for 25 years or more. 

Making smart decisions

When making marketing decisions, consider the impact the baby boomers’ life expectancy will have on your organization’s current cash flow. Given that the life expectancy of a 65-year-old couple is now 25 years, funds spent encouraging a bequest may not be real-ized until 2028 or beyond. If bequests are promoted to younger boomers in their fifties, the wait will be a decade longer.

Why would the executive director, financial officer or board members accept this approach as their planned giving strategy rather than focusing on older donors who are about to create their final, and ultimately, operative will? Those involved in the decision-making process need to ask themselves which bequests are likely to mature more quickly and which bequests will produce a better return on program costs invested. While it is important to introduce the concept of charitable estate planning at all ages, the most effective programs will focus limited resources on encouraging bequests that are more likely to produce actual funds over the next decade.

To learn more about the best ways to market gifts to various generations, consider attending one of Sharpe’s popular seminars. Visit sharpenet.com/seminars or call 901-680-5318 for details.

 

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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