Transfer of wealth in our nation:

Many of you have heard about the significant amount of wealth that is about to transfer from one generation to the next in our nation due to the baby boomer population.  Here are some facts to back that up!

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    $30,000,000,000 (that’s 30 Trillion) of wealth is forecasted to transfer from baby boomers to heirs over the next 30-40 years.   The source is Investment News, July 2015

  • $41,000,000,000 by the year 2052 is estimated to transfer
  • People over age 50 hold 80 percent of America’s Household Wealth (AARP, 2017)

If you added up the value of every house on every street in every town in the United States, you would come up with a number very close to $30 Trillion. (Reuters, January 5, 2017)

If you spent $1 million an hour, nonstop 24 hours a day, you wouldn’t run out of $1 Trillion for 411 years.

What are the stats on current gifting in the United States?

According to the Annual Report on Philanthropy for 2017 published by the Giving Institute.  $410.02 Billion dollars was gifted in 2017.  Of this: 70% were from individuals, 16% from Foundations, 9% were Bequests (in a will or beneficiary designation at death) and 5% from Corporations.

Americans are and continue to be a very GIVING population. In Fact, the only time in our history where giving has gone down when comparing year over year, was in 1987, 2008 and 2009.  The annualized average rate of change in total giving in current dollars since 1977 has been 6.3%. Since 2009, the last year of the Great Recession, giving has been on the increase at a rate of 30.6%.   Click Here to view the data from Giving USA 2018 report.

What impact will the Tax Reform Act have on Charitable Gifting?

The verdict is still out on this.  Early estimates were that charitable gifting would be significantly impacted because of the higher standard deduction and less motivation for giving from a tax perspective.   However, let’s look at what motivates a person to give in the first place.

# 1 reason for giving – address a need in a community or a passion for a cause, something that is near and dear to a person’s heart!

#2 reason for giving – Share one’s blessing

#3 reason for giving – Tax benefits

Where do people give? 31% of giving is to support a faith-based organization.  Education comes in second at 14% followed by Human Services, Foundations, Healthcare, and Arts/Culture,

Before the Tax Reform Act of 2017, look at standard deduction vs itemization on the tax returns.  75% of the tax payers used a standard deduction before reform, only 25% of us itemized.  Among those who did itemize only 24% included charitable gifts (according to 2013 IRS statistics),76% did not.

I am not suggesting that the Tax Reform will not have any impact on charitable gifting.  But, history tells us people gift to organizations they care about and most people never bothered to itemize their charitable gifts anyway!

Post Tax Reform Act of 2017: Charitable deductions are still in place. In fact, the Act increased deductibility of cash gifts from 50% of AGI to 60%, a 20% overall increase.  Gifts of 30% long term appreciated assets remain at the 50% deduction limit.

No changes were made to Donor Advised Funds, Gift Annuities, Charitable Remainder Trusts or Qualified Charitable Distributions.  This is very good news for our local foundations and gift planning in general.

Yes, the standard deduction went up so less people might be itemizing. But this does give way to “Stacking” charitable gifting in one year, to take care of your gifting for the next couple years.

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