Charitable Giving to Grow in the Long Term
© 2002, Dow Jones & Company, Inc.
December 23, 2002
By David Bank
Charities pessimistic about year-end fund-raising results can be optimistic about long-term prospects, according to Boston College researchers who say their predictions of a philanthropic windfall over the next 50 years remain valid despite the economic downturn.
In 1999, the researchers' forecast of a $41 trillion "intergenerational transfer of wealth" by 2052 contributed to a surge of activity among estate planners, financial advisers and fund-raising professionals eager to participate in what was quickly dubbed a "golden age of philanthropy." But the subsequent stock-market slide and declines in personal wealth have raised doubts about the validity of the estimates by Paul Schervish and John Havens of the college's Social Welfare Research Institute.
In an article to be published next month, Messrs. Schervish and Havens say they have re-examined their economic models and remain confident that $41 trillion represents a low estimate for the amount to be transferred eventually from the estates of people who wer adults in 1998. Of that figure, they estimate $24.6 trillion will go to heirs, $10.1 trillion to taxes and fees and $6 trillion to charitable bequests. The charitable portion represents an average of about $120 billion a year on top of current total giving of about $212 billion a year.
"Charities that had built up their development offices and charted their capital campaigns are honestly wondering whether those prospects are no longer holding up," Mr. Schervish said in an interview. "We can assure them that whether or not there is a short-term decline in charitable giving, the long-term trend remains intact."
The researchers found that total personal wealth, in constant dollars, has returned to 1998 levels of about $32 trillion, after peaking at about $36 trillion in 1999. Thus, they said, their original forecast can be reached even with a 2% average annual growth rate, low by historical standards.
The forecast should do little, however, to assuage the insecurity about retirement finances among members of the baby-boom generation. The researchers forecast that boomers as a group will inherit only about $7.2 trillion. By 2052, boomers themselves will be passing on their wealth, meaning they are more likely to be benefactors than beneficiaries in the intergenerational wealth transfer.
The wealth transfer, not surprisingly, will be concentrated in the nation's richest families, with two-thirds of the transfer likely to come from the wealthiest 7% of estates, the researchers said. The remaining $14 trillion will be disbursed from a range of smaller estates.
Messrs. Schervish and Havens prepared their new report in part to counter prevailing pessimism among charities. The Center on Philanthropy at Indiana University this month found fund-raisers less optimistic than they have been at any time since the surveys began in 1998.
But long-term optimism won't make up for the current tight times that most charities are experiencing. The center's "philanthropic giving index," modeled on the consumer confidence index, stood at 78 on a scale of 100, down from 84 last year.