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Use of Wills and Trusts Down Sharply. Cause for Alarm?

January 18th, 2013 Posted in Fundraising, Planned Giving

The percentage of older Americans with a will or trust has plummeted in just a dozen years. If people do not have a will, they cannot include a charitable bequest commitment in it. So, should the latest findings from Texas Tech researcher Russell James, JD, PhD set off alarm bells for planned gift fundraisers?

In his newest book, American Charitable Bequest Demographics (1992-2012), James observes that 61.2 percent of those age 55 and over had a will or trust in 1998. By 2010, that figure had fallen to just 40.8 percent. For 2012, the projection is 40.0 percent.

Decline of Will & Trust Use - Russell James copy

There are two possible reasons for the sharp decline.

In many jurisdictions, individuals can use non-probate transfers such as transfer-on-death or pay-on-death designations. While traditionally used for financial accounts, such designations are increasingly available for automobiles and real estate. Designations can, in many cases, allow for the complete transfer of an estate without the use of either a trust or probate process.

Another factor might be the substantial increase of the estate tax credit over the period examined. In 1998, the estate tax credit exempted $625,000 of assets while by 2010 the (at that point optional) exemption equivalent had risen to $5,000,000. James points out, “In addition to the direct impact on planning for those no longer subject to estate taxation, there may have been a spillover impact as estate tax planning issues gradually became less discussed in popular press venues.”

James explored how the sharp decline in the use of wills and trusts has affected charitable estate giving. While significantly fewer people had a will or trust during the period examined, those that did were more charitable. In 1998, 8.28 percent of wills or trusts, among those 55 and older, had a charitable provision. By 2010, that had increased to 10.12 percent. James believes the increase could be due to “growing levels of education and childlessness among this age group as both have been associated with increased likelihood of charitable estate planning.”

Fortunately, for the nation’s nonprofit organizations, these two different trends have offset each other. The percentage of all Americans age 55 and over who have made a charitable estate commitment has remained consistently between five and six percent since 1998.

There might also be another positive dimension that has not been examined. The study did not include an analysis of the charitable component of transfer-on-death designations. It could be that this represents a significant source of charitable giving. At the very least, it’s certainly a great source of potential giving.

While there is no cause for panic, the nonprofit sector should be concerned and must re-examine how it markets planned giving. Talking with a prospective donor about including the charity in her will might not be appropriate. She might not have a will or want a will. Therefore, focusing on a gift in a will would result in no gift.

Instead, here is what we need to do:

1. Recognize that wills and trusts are being used significantly less than they were;

2. Understand that individuals are using designations more often;

3. Educate our constituents about the value, for their loved ones, of using a will, trust, or beneficiary designation. Designations are a particularly attractive option for people since they can handle it themselves without the need for a lawyer and at no cost;

4. Encourage our prospects to include a charitable provision in their wills, trusts, or beneficiary designations. An organization is not likely to secure more estate gifts without educating and cultivating folks and then asking for the commitment.

Michael J. Rosen, CFRE

October 18, 2013


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