Survey participants were selected from a panel of over 550,000 households that were balanced to U.S. Census figures. Of 150,000 panel households mailed, some 91,000 returned surveys answering questions about charitable giving. Of this group, nearly 11,000 identified themselves as planned giving donors. A portion of this group was sent a 4-page questionnaire about types of planned gifts made, their reasons for making them, and how they learned of the gift. The findings are based on the almost 1,600 households that returned the follow-up questionnaire.
The primary objectives included profiling the planned giving donors who responded and gaining a greater understanding of donor motivations. An additional goal was to identify planned giving trends by comparing this study with a similar study conducted by NCPG in 1992.
Charitable bequests were the most popular of all planned gifts in the study. Of the 1,579 gifts studied, bequests accounted for 782, charitable gift annuities numbered 370, and there were 427 charitable remainder trusts.
The study revealed that only 42% of responding households have a will. This statistic will be helpful in documenting common wisdom that the majority of adult Americans do not have a will.Eight percent of the households reported that they have included charitable bequests in their wills. This affirms the results of other surveys in recent years. One percent of households responding reported having charitable remainder trusts. Both figures represent a significant increase since the 1992 study.
While planned giving donors are spread across all levels of income, they do tend to enjoy somewhat higher income levels than the general population (this is particularly true in the case of charitable remainder trust donors). The majority of bequest donors are women, while charitable remainder trusts are more likely to be completed by men. Planned giving donors overall are older and less likely to have children at home. The vast majority also support charitable interests with cash gifts.
According to survey results, the most common way for donors to learn about bequests as a way of giving is through a specific charitys published material. Recommendations by professional advisors, friends, and individual visits by a representative of a charity are mentioned in approximately 10% to 20% of the cases.
The top two reasons donors cite for making a charitable bequest are a desire to support the charity and the ultimate use of their gift by the charity. See the chart below.
Note that the desire to memorialize a loved one is nearly as high a motivator for making a charitable bequest as the desire to save estate taxes. These results are indeed instructive for those considering the possible impact of reduction or elimination of estate taxes on levels of charitable bequests.
Only about one donor in three has informed the charity of a bequest. This comports with the experience of most charities that at the most one of three bequests is known about in advance. The most common reasons for not telling the charity in advance were lack of desire for attention at 53% and privacy concerns at 13%. This finding explains why charitable bequests can be influenced through marketing without necessarily discovering all bequests in advance, and underscores the importance of carefully and consistently maintaining relationships with donors who do tell an institution about their plans in advance.
While most bequest donors have some affiliation with the charity, a surprising 21% has no prior affiliation with the charity. It is possible that these donors, at the time of making their wills, choose a charity that addresses a cause in which they are interested, regardless of whether they gave to the charity during their lifetime. This finding may be of benefit to charities that fulfill missions that have a broad appeal.
The majority of bequest donors include more than one charity in their wills and most bequests (52%) are for specific amounts, although some include percentages (26%). Residual bequests (which are traditionally the largest source of bequest revenue) were reported by 14% of respondents. This indicates that past trends where a few large residual bequests make up the majority of income each year should continue in the future.
The average age of a bequest donor is 58 and the average income level is $75,000. Note that the age figures are based on living donors who responded. Numerous other studies and IRS statistics indicate that the average age of bequest donors at death is in the early eighties and the final will that includes the operative charitable bequest is completed in the donor’s late seventies, some three to five years prior to death.
Charitable remainder trusts
As one might expect, the findings about charitable remainder trust donors reveal very different characteristics than bequest donors. First, legal or financial advisors are the number one source of information for donors about charitable trusts, followed by charities through their published materials. Unlike bequests, the majority of trust donors are men with relatively high median incomes.
While the primary motivations for charitable remainder trusts are revealed to be the desire to support charity or the ultimate use of their gift by the charity, trust donors place more importance on tax savings and estate/financial planning issues than bequest donors. As in the case of bequests, however, the desire to memorialize a loved one was cited by a large percentage of trust donors as a primary motivating factor.
By their nature charitable remainder trusts tend to be larger gift amounts, with 26% of them having a fair market value over $500,000 when established. Almost 80% have payout rates between 5% and 9.99%. Over half have payout rates less than 8%.
Charitable remainder unitrusts are twice as popular as annuity trusts. Both unitrusts and annuity trusts are primarily funded with publicly traded stock, cash, or real estate. The majority of the trusts are designed to terminate and make distributions to charity(ies) upon the death of the beneficiary(ies). About half of the trusts designate a single charity as beneficiary with 25% naming three or more charities.
Of vital importance is the fact that 70% of the trust donors reserved the right to change the charitable beneficiary of their trust. This means that in seven of ten trusts, the charity’s interest is no more certain than in the case of a charitable bequest. Discovering existing trusts and attempting to motivate donors to make a charity’s interest irrevocable will presumably assume greater and greater importance in planned gift marketing efforts in future years.
The charitable beneficiary organization or institution serves as trustee in only 16% of the trusts. Individuals such as the donor or a family member are the most popular trustees and are likely to have outside assistance in administering the trust. The charity is aware of the trust in about half of the cases. One-quarter of the trust donors report no prior direct affiliation with the charity, while over one-fifth are either alumni or members of the organization. Almost 80%of trust donors respond favorably to the likelihood of repeating the gift, whereas only 22% indicate they would not be inclined to repeat such a gift. Half of the charitable trust donors also indicate they have made one or more charitable bequests and 42% indicate that the bequest will benefit the same charity.
There appears to be solid evidence of an increased incidence of bequests and other planned gifts since the 1992 study. A significant number of relatively younger individuals are now willing to consider such gifts as options. This may be an indication that the baby boom generation is now beginning to consider planned gifts as a viable alternative.
Recall that most bequest donors said that published materials from charities such as brochures, booklets, and newsletters were the primary source of information and motivation for their gifts. The same was true for a large percentage of charitable trust donors. Charitable intent continues to provide the most important motivation for making a planned gift. The role of financial advisors and tax planning issues have increased the importance for charitable trusts and the majority of planned givers made multiple gifts and did not inform the charity.
The best programs will continue to encourage their donors to include them as part of their charitable gifts through their wills and other long-range plans. The study underscores the importance of this motivation as well as discovering donors who may have already completed charitable trusts on their own with their advisors.
The final report will include additional information on charitable gift annuities and will be available for purchase from the NCPG. For additional information, check the NCPG Web site at www.ncpg.org or write to the National Committee on Planned Giving, 233 McCrea Street, Suite 400, Indianapolis, IN 46225.