Minnesota Generational Transfer of Wealth Study

03/01/2011

In Minnesota more than $47.9 billion will transfer from one generation to the next in the next 20 years, 2011-2030

You can download the Transfer of Wealth Trends Data (PDF). This document shows the TOW projection for your county.

Kim Embretson CFRE, funding partners convener
Andrea Lubov, Ph.D., researcher

Purpose
Minnesota is known for its generous citizens and corporations. Still, many people think that philanthropy is only for the very rich. The Minnesota Generational Transfer of Wealth Study (TOW) indicates that people with a wide range of asset levels can support their hometown community foundations and other charities that have been important in their lives.

The study is already expanding philanthropy in regions that first completed the research. People are more willing to consider using estate assets to support their favorite charities once they understand how much wealth is being transferred to the next generation. More nonprofit leaders are encouraging loyal donors to consider bequests and planned gifts as a way to build endowments and dedicated funds. Professional advisors are sharing information with their clients about charities that collaboratively promote the transfer of wealth information.

History
Several Midwestern community foundations and nonprofits in Nebraska, Montana, Iowa, Michigan and North Dakota have conducted statewide studies to help set goals for expanding philanthropy within their states. Their transfer of wealth studies were inspired by the national research article "Millionaires at the Millennium" conducted by Boston College's Center on Wealth and Philanthropy directors John Havens and Paul Schervish. Havens and Schervish found that as much as $41 trillion will pass from one generation to another between 2000 and 2050.

Midwestern philanthropic leaders in Nebraska, Iowa, North Dakota, and Montana are using transfer of wealth economic models to measure state and county levels of wealth transfer. This information is energizing community foundation and nonprofit leaders to work closely with professional advisors and local donors to encourage more people to consider leaving part of their estate to local charities.

Five of the Minnesota Initiative Foundations (MIFs) hoped to replicate this process in Minnesota. The MIFs hired Dr. Andrea Lubov, an economist from Minneapolis, to create an economic model of generational wealth transfer from 2000-2030 in each county of Minnesota. Having data at the county level will help nonprofit leaders have a realistic scope of potential estate gifts.

The Study
Dr. Lubov used state and county demographic information coupled with Federal Reserve wealth studies to estimate the wealth that could be held by the last surviving spouse. Mortality tables established the rate that this wealth could be passed on to the next generation. This wealth transfer number was isolated from all of the other data in the study to create a chart of wealth transfer (see Transfer of Wealth Trends Data (PDF)) over each five-year period from 2011-2030.

The study used data from the 2000 census with projections into the year 2030. The first study was completed in 2005 for nine counties served by West Central Initiative in west central Minnesota. Each year more partners funded studies in their region until the final partners completed the study of all Minnesota counties in July of 2010. The research data goes back to 2000, but the useful information is for future gifts. The study indentifies that in Minnesota over $47.9 billion will transfer from one generation to the next during the next 20 years 2011-30.

Not all of the wealth will go to charities, of course. The Millionaires at the Millennium study indicates that donors have a history of making significant gifts to charity through their estate when their wealth is being transferred to the next generation. The Havens-Schervish study shows that donors with high net worth will donate a higher percentage of their estate than will donors with a relatively small estate. The average rate for all donors is 15 percent of their estate. Following Nebraska Community Foundation's lead, the participating organizations have set a realistic goal of identifying estate or planned gifts equal to five percent of the wealth transferred in each five-year period in each county. This model and goal make several assumptions about the future that may or may not come true. However, when the results were field tested in several counties, professional advisors and bankers agree that the data is realistic and perhaps a bit low.

The Plan
The coalition of funding partners is continuing to work together to roll out the critical information from the study and develop useful tools to help the interested audience encourage planned giving campaigns.

The most critical audiences are professional advisors that develop charitable estate plans for their customers, boards, staff and key volunteers of Minnesota charities, and prospective donors who are interested in legacy gifts. Each audience will require a different communication plan for the TOW study. Professional advisors are interested in communicating the value of charitable estate planning to their clients without exerting undue influence for any one charity. Board members and staff of charities want to know how to economically promote planned giving programs within limited budgets and staff time. Donors are focused on how they can leverage personal assets that they need for retirement and still support their hometown communities and favorite charities.

In Minnesota the funding partners represent all rural and metro regions. They are developing a statewide awareness promotion and a targeted decentralized communication plan. Broad general information about the TOW will pique interest in the usefulness of the study. Targeted regional communication plans can address unique needs for professional advisors, charity board collaborations, and the specific interests of prospective donors. The details of the communications plan are being worked out now by the funding partners.

Funding Partners
The following partners have stepped forward to pay for the studies conducted in their service area counties.

  • Duluth-Superior Area Community Foundation
  • Grand Rapids Community Foundation
  • Initiative Foundation
  • The Minneapolis Foundation
  • Minnesota Council on Foundations
  • Minnesota Planned Giving Council
  • Northwest Minnesota Foundation
  • Minnesota Community Foundation and The Saint Paul Foundation
  • Southwest Initiative Foundation
  • West Central Initiative
  • Initial pilot county study supported by Northland Foundation and Southern Minnesota Initiative Foundation
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PDF icon MCF Transfer of Wealth Study.pdf21.21 KB