How Nonprofits Can Navigate the Challenges of the Great Wealth Transfer

The great wealth transfer was originally pegged to happen between 1999 and 2015, but it never did. 

“The folks who are the largest generation and have the money, baby boomers, they weren’t old enough to die,” Tracy Malloy-Curtis, vice president of legacy giving at Mal Warwick Donordigital, said. “Sorry, I’m [in] planned giving. We’re very blunt about this stuff.”

Now we are officially in this long-awaited period of baby boomers passing along their wealth to their Generation X and millennial children, but nonprofits continue to struggle to tap into this type of giving that was estimated at $90 trillion last month. 

However, despite 40% of those older than 50 indicating they are considering giving legacy gifts, they never end up making those gifts, Malloy-Curtis shared in the session, “Future-Proofing for a Historic Transfer of Wealth,” at the Nonprofit Fundraisers Symposium, a conference The Nonprofit Alliance and Direct Marketing Association of Washington held in the nation’s capital last week for advanced fundraisers. 

“The biggest reason they give is because ‘No one asked me.’ [and] ‘I didn’t think about it,’” she said. “Organizations aren’t differentiating themselves from each other. So there is a gap I think between both the assets that are available to give, the willingness of people to give them, and our ability on the charity side to effectively communicate, steward, and tap those funds.” 

Here’s what Malloy-Curtis and the session’s panelists discussed to prepare nonprofit fundraisers to tap into the great wealth transfer by overcoming the associated obstacles.

The Next Generation of Major Donors

It’s a misconception that all baby boomers will be transferring their wealth to the next generation. Malloy-Curtis clarified that only wealthy baby boomers are transferring wealth.

Alison Morse, vice president of philanthropic consulting at National Philanthropic Trust, has worked with many clients in their 70s and 80s who are now including their adult children in the conversations to pass along the same philanthropic values when it comes to giving through donor-advised funds (DAFs). This highlights how important it is for nonprofits to show the next generation why their parents have been loyal supporters of the organization. Site visits are a great way to do that.

“I know these are incredibly burdensome things on a nonprofit organization, but how do you continue to coax that next generation because we know and we're seeing that the next generation isn't always following what their parents were doing. And so how do you get them early in that conversation?”

Evan Linhardt, principal at Bernstein Private Wealth Management, advises wealthy individuals to maximize their wealth and shares the four places their money can go: the government, spending, family and charity. To unlock that charitable piece, he suggested nonprofits ask important questions to their older donors who will be leaving their wealth, perhaps even a foundation to the next generation. The worst that could happen when you inquire about their children’s future involvement and if you can include them in your conversations is they’ll decline. 

“It's just like the question of ‘how do you give?’ Worst answer you're gonna get is, ‘I don't really feel like sharing,’ Linhardt said. “The best answer you're gonna get is a various amount of things that can help you from a data perspective.”

The Younger Donor

Regardless of whether younger donors are inheriting wealth or building it on their own, it’s important to begin to establish relationships with them now. With a larger number of younger donors on nonprofits’ house files since the pandemic, it’s important for nonprofits to remain relevant to these newer donors, Kimberley Blease, executive vice president of strategic solutions and consultancy at Blakely Fundraising, said. 

Blease, who self-identified as a baby boomer, sees this as the biggest opportunity and biggest challenge but warns nonprofits to be aware there is a vast difference between donors aged 60-plus compared to those in their late-30s or 40s. She noted the younger the donor, the more values seem to influence their giving, so it’s important for nonprofits to recognize these differences to appeal to the next generation. 

“At the end of the day, we still as charities need to be relevant and be delivering relevant content and be engaging them with a value exchange and within ways that are actually meaningful or we're going to lose them because they may only be 40 years old,” she said. “And so, they've got lots of decision-making ahead of them.”

However, that decision-making may shift as they age, Linhardt, who is a millennial, said. He believes today’s 30-year-olds will look a lot like their parents do now in 20 years.  

“We might give to different causes or [there] might be things that are more important to us, but that’s different [for] every generation because the world is different in every generation,” he said. “So I think it’s just acknowledging that [and] acknowledging that when the 25-year-old becomes 50, they’re probably going to give a lot like their parents from a percentage of, but it might be to other causes. And we see that all the time — even my clients as they mature either in their philanthropy or just in their lives and how the world’s evolved, they’re shifting to try to capture that.”

The Anonymous Donor

Most DAF grants list the granting organization as well as the donor’s name and information, however a small percentage are anonymous, Morse said. There’s also an additional obscure way a DAF can be set up that makes it difficult to attribute gifts to donors in your file. 

“There's then this intermediary gray area of funds; like it's not named the ‘Allison Morse Fund,’ she said. “It's named the ‘Zeke and Liza Fund’ because those are the names of my dogs. It’s that hard to track because the name that's on the fund is not related to a contact, but I don't know who that person is either because that account has been set up on their behalf and there's enough of a firewall that I'm not going in to really look at that.”

In some cases, having a conversation with your wealthy donors helps connect the dots on some of the anonymous DAF gifts to help. These gifts could be coming from your next-generation donors and having that knowledge could help with stewardship efforts. 

“Many donors we work with have a foundation, they might have a DAF, they have multiple vehicles that they're working in as their kids come into philanthropy,” Morse said. “That's when we see some more of those anonymous accounts because they want to protect their kids' identity in terms of if they have an 18-year-old, 22-year-old who's starting to give.”

The Role of Women

Women shouldn’t be overlooked when it comes to planned giving, as women tend to live six years longer than men and have more input into legacy planning. 

“Traditionally women weren’t the decision-makers in their finances,” Linhardt said. “They’re going to receive a lot of that when their husbands or partners pass. They might not be as educated, but the next generation of women — there’s more professionals, more college degrees, they’re building wealth more quickly — is going to come with much more information and sophistication when it comes to that.” 

The Uncertainty of Legacy Gifts

Legacy gifts often fall under the radar and come as a surprise to many nonprofits. Blease forecasts these unknown gifts will become much more frequent occurrences in the future. For example, a legacy gift may come in at $30 million when a donor hasn’t even given a gift larger than $100 in the past. She’s seen organizations experience 20% to 50% unknown legacy gifts.

“And so when we look at those numbers, sometimes that's all I need to do is put that as a business case in front of a [chief financial officer] and say, ‘You need to invest much wider in legacy giving because actually your own numbers tell you that a lot of people are coming into the system, connecting through values through a whole bunch of other things, making really significant gifts to you and you know nothing. You have no eyes on them at all from stewardship, engagement, marketing or otherwise.’”