Slight Miscalculation: Trillions in Wealth Transfer a No Show So Far

Major fundraising plans were based on the 1999 study by John Havens and Paul Schervish, "Millionaires and the Millennium," with subtitle that promised a "Golden Age of Philanthropy."  That study forecast a massive transfer of wealth from the WWII and baby boomer generations that would convert to incredible increases in bequests to charitable institutions.  But now fundraisers are questioning where the money went, because bequests have not shown anything like the expected uptick in the last eight years.  A story about the shortfall in a recent Chronicle of Philanthropy (subscription required) has been republished on the site of the Association of Baltimore Area Grantmakers.

At this point, to reach the projections for the first twenty years of the weath transfer, bequests would have to immediately increase to six times the largest level ever seen.  In fact, bequests as reported by Giving USA peaked in 2002 and have declined slightly since. 

The researchers are sticking to their guns, just as they did after 9/11 and the dot com bust.  (Their 2003 report:  "Why the $41 Trillion Wealth Transfer Estimate is Still Valid.")  They suggest that the projected fund transfer is merely delayed.  However, they also acknowledged that household wealth fell by approximately 5 percent from 1999 to 2002, much different than the study's estimate of 2 percent to 4 percent growth annually. 

Another factor may be larger gifts given while people are still alive, through family foundations, charitable trusts, and donor-advised funds. 

Others note that the long-term projections are suspect as well, as the model probably has not adequately addressed the rising cost of long-term health care for the baby boomers. 

Fundraisers who were planning to sit back and let the money flow in probably will be disappointed. 

Here are the original estimates from "Millionaires and the Millenium:"

Lower Level Estimate
20 years: $12 trillion total transfer; $1.7 trillion in charitable bequests
55 years: $41 trillion total transfer; $6 trillion in charitable bequests

Middle Level Estimate
20 years: $14 trillion total transfer; $2.2 trillion in charitable bequests
55 years: $73 trillion total transfer; $12 trillion in charitable bequests

Upper Level Estimate
20 years: $18 trillion total transfer; $2.7 trillion in charitable bequests
55 years: $136 trillion total transfer; $25 trillion in charitable bequests