Bequest gifts to nonprofit organizations have grown significantly in recent years, perhaps partly reflecting the start of the much talked about intergenerational wealth transfer.  If nonprofit organizations proactively develop and enhance relationships with donors, this growth trend will continue.

During the five-year period of 2000-04, the amount of money donated through bequest gifts to charities increased by 27.1 percent over the previous five-year period of 1995-99, according to inflation-adjusted figures in Giving USA 2005.  From the five-year period of 1990-94 to 1995-99, bequest dollars rose by 37.5 percent.  In 2004, bequest gifts totaled $19.8 billion representing eight percent of all charitable giving in the United States.  This represents a 241.9% increase over the 1964 inflation-adjusted total of $5.79 billion.

The strong growth rate in bequest giving could be a result of the start of the massive intergenerational transfer of wealth predicted by John J. Havens and Paul G. Schervish of Boston College.  They predict that at least $41 trillion in wealth will transfer from one generation to the next by 2052.

The intergenerational transfer of wealth represents a tremendous opportunity for nonprofit organizations.  As one generation passes wealth to the next, nonprofit organizations have an opportunity to secure some of that wealth for their own charitable purposes.  Havens and Schervish have predicted that $6 trillion or more could go to the nonprofit sector as a direct result of the wealth transfer.  However, for the most part, only those charities that are proactive today will reap the rewards of the wealth transfer tomorrow.  To receive bequest gifts 20 years from now, nonprofit organizations must cultivate and solicit those gifts now.

“The most common types of planned gifts closed by charities in the past four years were bequests and charitable gift annuities, which suggests a ‘back-to-basics’ movement,” according to a report cited by Giving USA 2005.  The report was based on a survey of 29 leading national planned giving professionals conducted by Cynthia Krause, a planned gift consultant, and Betsy Mangone of the Denver Foundation.  Half of those surveyed saw an increase in the number of planned gift closures since 2000 while the other half held steady.

Those organizations that “get back to basics” to cultivate and solicit gift annuities and bequests will reap rewards in the coming years.  Those that do not take action will not secure their fair share of the wealth transfer.  With an annual fund campaign, you can always count on donors supporting several organizations and even rotating their support from year to year, from organization to organization.  However, with bequest giving, donors typically will include at most a few organizations in their wills and will almost never take a charity out of a will once it is included.  Therefore, the charities that cement the planned giving relationship with the donor first will be the ones to benefit in the future.

As an increasing number of nonprofit organizations recognize this new situation, the competition for new planned gifts will become increasingly fierce.  Successful nonprofit organizations will communicate with their donors the case for support, in particular the need for future support.  These organizations will also show donors how they can continue to care, even after death, for the cause for which they have already demonstrated a passion.  Moreover, successful organizations will do more than passively market planned giving; they will actually solicit bequest commitments and annuity gifts.

In case you think that recent changes to the estate tax will significantly hamper efforts to secure bequest gifts as some studies have predicted, Giving USA 2005 states, “Despite predictions, there has been no observed impact on charitable giving from the gradual change in estate tax filing requirements.”  When making gifts, donors primarily have philanthropic intent.  According to a report issued by the National Committee on Planned Giving, 97% of donors who arranged a charitable bequest stated that their motivation for giving was the charitable cause itself.  Getting back to basics still works and involves identifying the right prospects, cultivating them properly, and asking for the gift.

Giving USA 2005 reports that 42.8 % of bequest gifts fall into the “Philanthropy/ Volunteerism” category that includes private foundations.  Education is the second largest beneficiary of bequest gifts with 17.9 % followed by Religion and Health, which are tied for third with 8.8 %.  From there, bequest giving follows a similar distribution pattern to overall giving.