Gift planning that carefully considers the donor’s concerns can help.
“I’d like to give more but just don’t see how I can,” is a familiar comment scribbled onto a response device that many gift planning officers have read. The handwriting, perhaps from a slightly shaky hand and with more precise letter formation, indicates the age of the note writer. Collectively this generation of givers is much more comfortable with pen and paper than a computer keyboard.
The problem shared by many older adults is that they probably consider their giving an isolated activity instead of part of a comprehensive estate and financial planning exercise. By combining personal and philanthropic objectives at this stage of life, you can show them a harmonious way to integrate giving with their other goals.
Age may be crucial
Most persons (in any age group) tend to procrastinate when planning their estates. However, as people age, they are more likely to be receptive to information on gift and estate planning.
There is an increasing interest in managing assets for life as well as transferringthem at death. According to recent reports, a 65-year-old person has more than a 25% chance to live to 90 years of age or beyond.
Furthermore, although persons over the age of 50 represent about 25% of the population in this country, they control most of the wealth and accumulated assets. Studies show that these persons had an estimated annual income of over $800 billion and controlled:
- 70% of the total net worth of U.S. households.
- 77% of all financial assets.
- 80% of all deposits in U.S. savings and loan associations.
We can conveniently segment “older” adults into three categories:
- 50 to 64 — “the workers,” middle adulthood
- 65 to 79 — “the recent retirees,” late adulthood
- 80 and over — “the surviving seniors,” old age.
The concerns of the three groups differ as do their life experiences, which must be considered as you help them meet personal and philanthropic goals.
For example, the oldest group was born before 1917. Their view of the world may incorporate childhood memories of World War I, and certainly vivid memories of the Great Depression.
The middle group, who were youngsters during the 1930s share common memories of bread lines and unemployment, but are more likely to have been affected deeply by World War II. Their working years were accompanied by a previously unparalled period of economic growth and prosperity. Now they are likely to be enjoying the early years of their retirement.
For the most part, the 50 to 64 year-olds are still working and enjoying the highest incomes they have earned. The youngest of these men and women are the first group of baby boomers to receive an invitation to join the American Association of Retired Persons.
In reviewing and recognizing the concerns each group may have, it becomes apparent that the youngest category continues to accumulate assets to assure financial security in later years; the middle group, on the other hand, is preserving accumulated assets so that extended retirement years are sufficiently funded. In the over-80 group, people are more likely to be maintaining their health and independence while considering how and what assets will be passed on to heirs and others.
Giving and solving problems
As you might imagine, the planning needs of each group are quite different.
Age 50 to 64: People in this group may be prospects for a large outright gift to be paid during their high-income years, or perhaps a planned giving arrangement designed to provide for them during retirement looming in their near future. They may also wish to provide for parents or other elderly relatives.
Age 65 to 79: The middle group that has already retired may be more interested in harassing existing assets to meet retirement and future needs of a “second retirement.” (See page 1 of November 1996 Give & Take for more on the second retirement.) Except for the very wealthy, these people may be reluctant to make large outright gifts of income or appreciated assets.
They may, however, be prospects for life income gifts that would allow them to enjoy the benefits of a current income tax deduction, an enhanced income stream, avoidance of capital gains tax, and management of assets. Other gifts from life insurance policies or “over-funded” retirement plans may represent options they would consider to meet charitable goals.
As both of the younger groups begin to experience the death of parents and spouses, the survivors become more and more receptive to the need for estate and financial planning.
Age 80 and older: More members of this age group are concerned about physical and mental health in addition to their financial well being. These concerns may cause some current donors to lapse even though they had previously arranged or are capable of arranging substantial charitable gifts in their wills or other estate plans.
Some of these individuals will discover gift planning vehicles which offer strategies that solve their dilemmas. For example, a gift annuity might maintain the cash flow to which a person has become accustomed, or a testamentary gift annuity might provide payments for life for a trusted family friend or relative.
While tax deductions and income are important, many older people may choose a life income gift plan as much for asset management as anything else.
One key to meeting each individual’s objectives will be to include charitable gifts in the overall estate plan. In many instances, people will be pleased with the results of integrated planning versus the “hit and miss” treatment of handling each need separately.