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For decades, Sharpe Group consultants have analyzed large numbers of clients’ decedent
estate files to help identify factors that may influence the likelihood of a charitable bequest. Experience has
shown that gender, marital status, wealth, personal values, and other factors can all affect the propensity
to make charitable bequests.
In addition to client data, Sharpe has examined federal estate tax return data, which has long been
one of the best sources of information about the general characteristics of persons who may be inclined to
include provisions for charitable purposes in their estate plans.
The enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 has resulted in a steady
reduction in the number of estate tax returns being filed. The law called for phasing in larger estate exemption
equivalents over time. In 2002, the exemption amount rose from $675,000 to $1 million. In 2004 the filing
threshold rose to $1.5 million before increasing to the current $2 million in 2006. Next year it
is scheduled to increase to $3.5 million. As the filing threshold increases, the number
of estate tax returns filed tends to decrease and the amount of data available concerning
charitable bequests from this source is consequently reduced. Given that fact, it
is more important than ever that we examine the information to be gained from this
source before the volume decreases even further.
Historically, about 18% on average of all federal estate tax returns include charitable
provisions. This has remained true even though the actual number of returns to be filed
is decreasing. Combining the data from multiple years and examining a larger pool of returns helps reveal
trends that may not be evident in data for a single year.
Scope of study
The primary focus of this Sharpe National Bequest Study is the period from 2001 to 2005.
The number of estate tax returns for each year is shown on the chart below.
During this period, the number of estate tax returns fell by almost 60%. It is interesting to note that
the estate tax liability continued to run between $21.7 billion and $23.5 billion in the
same period, a figure close to the amount estimated for total charitable bequests
during that time. In 2005, charitable bequests totaled $23.4 billion according to
Giving USA estimates.
A closer look at the approximately 69,000 charitable federal estate tax returns between 2001
and 2005 may provide some additional “hard” information about the demographics of actual bequest
donors from among the ranks of the well-to-do, as opposed to suspects, prospects, or even expectancies.
Does age matter?
Remarkable as it may seem, there has recently been considerable discussion about whether age is really a
factor in planned giving. Some studies have reported that younger persons in their 40s or 50s are more likely to
consider including charities in their estate plans than older persons.
 Based on the more than 69,000
estate tax returns that included charitable dispositions, a very distinct pattern emerges. Over the five-year
period studied, there were only 343 charitable estates from persons dying under the age of 50. That amounts
to less than ˝ of one percent of the charitable estates. Less than 3% of bequests came from people who died
in their 50s, and 5% from those who died in their in their 60s.
These results are in line with previous Sharpe studies of federal estate tax returns and client files over the
past 45 years. These findings do not contradict studies which conclude that younger people will consider including
charities in their estate plans, but rather are a reflection of mortality experience in the United States.
Nationally, most of the population lives to see at least their 80th birthday. According to U.S. federal government
statistics, of every 100,000 live births, 75% survive to age 70 or older. Almost 20% will survive to age
90. Suffice it to say that age appears to be a significant factor to consider. Given the fact that other studies continually
show that most bequests come from wills completed from two to five years prior to death, it becomes clear
that the key to influencing bequests that will be realized in 10 years or less is to focus efforts primarily on donors
over the age of 70.
What about gender and other factors?
While the dollars generated by charitable bequests were relatively evenly divided between women and
men, women accounted for the vast majority of charitable bequests received from estates where tax
returns were filed. In fact, women accounted for almost 60% of the number of charitable estates. Of the
69,034 charitable decedents, 40,709 were female and 28,325 were male. The average amount left by men for
charitable purposes was larger, at just over $1 million per estate, while the average amount left by women
was just under $640,000.
Other factors to consider include marital status, presence of children, grandchildren, or other
dependents, wealth, and the prevailing tax picture. Those who were single with no
children were most likely to leave money to charity. Not surprisingly, those married
with children were least likely to include a charitable bequest and, when they did so, they generally left
smaller dollar amounts. Inclusion of bequests to charity also increased with a person’s
wealth, with those worth $20 million or more being the most likely to make a charitable bequest.
Can you use this information?
Ultimately, this may be more of a cost benefit, or return on investment, question, instead of a question
of right or wrong. The answer may not be to ignore younger to middle-aged donors, but rather to
appropriately allocate your time and other resources. While it is certainly important to occasionally sweep the
mass of your file for bequest donors and prospects, you should invest most of your efforts in developing
and maintaining planned giving relationships with donors whose gift will actually benefit your cause in
the relatively near future. Plan your activities to first encourage gifts that are statistically more likely to occur
sooner rather than later. Low key, inexpensive marketing such as ads, articles, and web sites can be used
to search the broadest possible audiences. Additional layers of targeted marketing may be added based on a
combination of factors including age, gender, marital status, wealth, and other factors.
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