Compiled research statistics on the Wealthy and Giving of America.
Ventura Marketing 10.2007
We all know about the forthcoming estimated wealth transfer of $41 trillion from estates to heirs and charity and the impact on professions such as financial planners, brokers and insurance companies. Financial institutions and state and federal governments will also feel reverberations from this event.
The Boston College's Center on Wealth and Philanthropy has identified, studied and analyzed data on wealth transfer and its course alongside charitable giving. They have estimated that $45 to $150 trillion in wealth transfer, both by bequest and inter vivos, is on the horizon for over the next five decades that will produce at least $21 trillion to $55 trillion of charitable giving and that between 52% and 65% of this amount will be contributed by households with $1 million or more in net worth.
The study in detail asks the question "what motivates individuals to give to charity". The study shows that more and more individuals are approaching, achieving and exceeding their financial goals and as they become more financially secure, incentives more powerful than taxes incline them to support charity and limit their bequests to heirs.
The study first measured what financially secure means to 112 individuals, the average consensus ranging from $5 to $20 million. It was found that those who felt they were financially secure gave more to charity, in fact a very large percentage of their net worth
The authors of the study, Paul Schervish and John Havens, found that identification, gratitude and what they call "hyperagency" are 3 main reasons the wealthy give.
Identification is the process the donor uses to connect to the organization they give to. They relate to how that organization assists and its relation to their personal past.
Gratitude, also described as "blessings", was another motivation for giving. Donors felt they somehow were lucky or advantaged in some way and wanted to give back.
Hyperagency, the third motivation, is the desire to be as entrepreneurially productive in the realm of philanthropy as they are in business. It is the ability to be a producer and a creator of the organization rather than simply a supporter and participant. Many hyperagents create foundations so they have a more active role in the organizations they assist.
Most wealthy individuals were not born into wealth; they created their own wealth. The study reported that wealth-holding individuals do not want their children to be affected by the ill effects of large inheritances. They are actively pursuing opportunities to implement their philanthropy while they are alive, rather than largely through their estates.
The researchers determined with this study that there are 3 major reasons for the behavior of the wealthy in terms of giving.
First, the mix of identification and financial security explain the behavior of those at the highest levels of income and wealth.
Second, marginal estate and income tax rates coupled with charitable deductions influence philanthropic behavior.
Third, a new approach to financial planning and what the authors coined the term as the "discernment" approach. The approach helps wealthy individuals gain insight into their finances and their needs with a view to identifying their personal level of financial security and their desires for using their financial resources to express their personal and family values (Schervish and Havens). The goal of the approach is to enable individuals to make wise choices concerning the allocation of their wealth.
The authors hypothesize that these new approaches are having an effect on the timing and magnitude of giving among the wealthy, so much that the wealth holders are moving charitable giving trends toward inter-vivos gifts and away from charitable bequests.
In conclusion, the researchers found that the very wealthy are not interested in charitable bequests only as a way to decrease taxes and increase inheritances. Instead, the wealth-holders make a conscious decision to move their resources away from heirs and toward charity. Those with $1 million estates try to maximize their material legacy, knowing it will probably not sustain a desired living standard for their heirs. In contrast, people with $20 million or more may fear that maximizing their material legacy will accustom their heirs to a higher than desired standard of living. In this case, a legacy of care, both for their heirs' well being and for charity prompts wealth-holders to limit inheritances and to allocate more to charity.