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It is a well-established fact that the majority of
adults have not taken steps to draft even the most
basic last will and testament. A number of factors,
including wealth, education, religion, age, and marital
status, can help determine whether or not an individual
is likely to have a will or other estate plan in place. To
a certain extent, the likelihood of having a will and the
probability of having a provision for charity follow a
relatively predictable timeline.
This is their life
While it is a matter of state law, in most cases persons
under the age of 18 may not create a will. To have
a will, an individual must legally be an adult with sufficient
mental capacity as determined under state law.
Drafting a will is not a high priority for those in
their late teens or early twenties unless they are in
the military and are required to do so prior to going
overseas. Even then, whatever assets they own—most
often employer-sponsored life insurance and retirement
plan funds—are likely to pass by beneficiary designation.
If the individual is unmarried, parents or siblings
are likely to be the primary beneficiaries of the estate.
The number of deaths per thousand is very low in this
younger age range.
At this early stage of life, charitable bequests, if any,
are relatively rare and likely to be small because few
persons at this young age have accumulated much net
worth. A small specific bequest, typically a few thousand
dollars at most, may be considered. Occasionally,
a charity may receive all or a portion of a small retirement
plan balance or life insurance policy.
Many young people in their twenties and thirties
choose to marry and trade apartment life for a home or
condominium. It is not uncommon at this point for net
worth to become “negative” because of mortgages, automobile
loans, and consumer debt.
Very few individuals at this age have wills because
asset transfer in the event of premature death has
already been arranged by joint ownership, beneficiary
designation, and state laws that would typically favor
a surviving spouse. Any charitable estate gifts are still
most likely to stem from contingent beneficiary designations
on life insurance policies or retirement plans.
Married with children
Once a couple has children, things get more complicated.
Estate plans must now resolve issues such as
guardianship of minor children, potential distribution of
assets under state law (a surviving spouse might end up
receiving only a fraction of the decedent’s estate if there
are children), and other considerations. Often additional
life insurance is purchased to provide for a spouse or
children in the event of the death of one or more of the
family’s breadwinners. Most charitable gifts take the form of smaller current gifts out of income because
asset accumulation is still in its early stages.
People in this age range may seriously consider
the need for a will or trust to provide for a surviving
spouse or children. Those who are single may still
rely on joint ownership or beneficiary designation. If
a will is drafted, any charitable provision is likely to
be either a relatively small specific bequest or a gift contingent
upon some remote occurrence such as a disaster
that may affect the entire family.
Worth more dead than alive?
During their thirties and forties, many adults are
earning more than ever before. As children grow older,
it becomes more common for families to have multiple
wage earners. Average net worth is still relatively low,
but may begin to grow as savings and investments accumulate
and debts are paid off.
The composition of wills done at this stage of life
normally continues to focus on the needs of a surviving
spouse or children. Those who are single or childless
may shift the focus to parents, siblings, or nieces and
nephews. For the most part, any charitable provision is
still likely to be a relatively small specific bequest or one
that is contingent on the premature death of one or more
persons.
Mid-life priorities
In one’s mid-forties, fifties, and sixties, most people
are likely to be at the peak of their careers and may be
earning more than at any other point in their life. Those
who have managed to accumulate any significant wealth
are faced with multiple estate, gift, and financial planning
considerations, most notably the need to provide
for oneself and one’s family. A
small group may have sufficient
income and assets to feel comfortable
making or considering
larger gifts now or in the future.
A smaller subset of this group
may even be in a position to
consider a relatively larger specific
bequest of $25,000 or more.
Those in this age range who
have a will or other estate plan
in place are still in the minority,
and charitable provisions for
the most part remain contingent on the prior death of
one or more parties. For example, a couple without children
may have wills leaving everything to one another but then to charity upon the death of the survivor or in
the case of a common disaster. The number of people
that would at least consider a charitable bequest may
be large, but most decide against making a gift because
they feel there are not yet enough assets to provide for
family, friends, and charity.
The later years
Most people retire in their sixties or early seventies.
For many, their net worth has never been higher. Even
though their net worth is at a peak or may continue to
grow, after retirement the loss of earned income may
affect an individual’s ability to give the same amount to
charity as before. In addition to the loss of discretionary
income, family assets may need to last for two or three
decades longer given today’s life expectancies. Estate
planning begins to take on a greater importance, and the
number of persons who have a will, trust, durable power
of attorney, and healthcare directives grows with each
additional birthday.
Those who have adequately provided for their loved
ones can now seriously consider including charities in
their estate plans. As parents, grandparents, perhaps
older siblings, spouses, or even children begin to pass
away, the number of potential heirs decreases, which
increases the chance that provisions will be made for
friends and charities. IRS data and other studies show
that the likelihood of a charitable
bequest and the percentage
of the estate left to charity both increase as
people age into their seventies,
eighties, and nineties.
The most common candidates
for charitable bequests
are older persons who never
married or had children.
Couples without children or
those whose children are well
off are also good prospects. In
the case of a couple, the operative
last will and testament for
charitable purposes is usually
drafted only after the death of a spouse. This final will is
increasingly being drafted relatively late in life.
Fool’s gold or the real thing?
In an ideal world with unlimited resources, charities
should make their entire constituency aware of all of the
various ways donors can support their work. However, in
today’s world of limited funds, those devoting significant
human or financial resources to encouraging estate gifts
from younger and middle-aged donors are likely to be
greatly disappointed.
One national charity that has aggressively pursued
such a strategy over the past decade while reducing
the emphasis on older donors recently revealed that it
had identified over $1 billion in pending planned giving
expectancies. While that figure sounds impressive, the
charity’s actual planned giving revenue has declined
almost every year from the level reached in 2000. Had
the charity focused limited resources on targeting their
older donors first, it may have been able to simply
maintain its previous level and would have received significantly
more in actual planned giving revenue.
Know your donors
By limiting the marketing of bequests to older
donors who have both the incentive and the means to
make a substantial estate gift in the short term, charities
can feel secure they are making the best use of
limited time and resources for maximum impact. For
this reason, fundraisers should make an effort to discover
relevant information about their donors, including
age, marital status, and other important statistics. Without
this information, it can be difficult to segment your
donor base so that you know you are sending the most
appropriate material to each potential donor.
Time is money. Make sure you are a good steward of
your organization’s time and money by making informed
decisions.
Note: This article was excerpted from the popular
Sharpe seminar “An Introduction to Planned Giving.”
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