The Changing Face of Bequest Demographics

One of the more interesting studies I have seen in recent years was one done by Russell N James III, J.D., Ph.D.  who currently is a professor at Texas Tech University in Lubbock.

He did a thorough study on American Charitable Bequest Demographics (1992-2012) using primarily information from the Health and Retirement Study (HRS) sponsored by the National Institute on Aging and administered by the University of Michigan. Some of the findings of interest are noted below:

—Approximately 83.5% of realized bequests come from donors dying at age 80 or over so this is the key population demographic to watch.  With people living longer, this trend should continue or even move into the nineties. Everybody knows about the baby boom commencing in 1946, peaking with the highest number of births in 1957, and continuing until 1964. What is less known, is that there was a pronounced baby bust in the US between around 1924 to 1940. Those are the people who are now between 76 and 92. The first boomers will hit 80 in 2026 so the dramatic boom in charitable giving expected, based on this demographic anyway, is probably 10 or more years in the future.

—Childlessness is the single strongest demographic predictor of including a charitable bequest in one’s estate plan. The percentage of childless women between the ages of 40 and 44 has dramatically grown from around 10% of the population in 1976 to 18% – 20%.

In the 2006 to 2010 time frame, there is a consistently greater tendency for those without children to leave a charitable bequest. The data reviewed showed 17% to 21% of  those with no offspring included a charitable recipient in their planning, compared to 5% – 7% of those with children only and only 4% of those with grandchildren. This is very intuitive and bodes well for bequest planning but again is probably 10 to 20 years away for the maximum effect.

—Higher levels of education are also associated with higher levels of charitable bequest giving – this is apparently true even after controlling for differences in wealth and income. The share of the US population with a bachelor’s degree and above is increasing rapidly. In 2012, for example, about 25% of the population 55 years of age and older had a college degree compared to approximately 35% of the 35 to 54 age group.

—The number of US adults over 55 years old who are  giving $500 or more to charity is rising as is the number of charitable volunteers. Higher levels of charitable engagement are also positive indicators for future charitable bequests.

The complete study is available at http://www.encouragegenerosity.com/ACBD.pdf

There are many positive factors pointing towards increased bequest giving in the future but demographically some of the largest increases are probably 10 to 20 years off. One sobering factor he pointed out was that among those who reported having a charitable estate plan completed prior to death, only 41% actually generated a charitable transfer at death. One explanation is that assets may have passed to a spouse and the bequest will come with the passing of the surviving spouse, however, in about 30% of those with charitable plans no post-mortem gift was made and there was no surviving spouse. One issue may be that the will designated a charitable gift but the will controlled no assets. If all the assets had a beneficiary designation there may not have been anything left to distribute.

Got questions? Connect with an experienced Aprio advisor today.
Schedule a Consultation