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Community Concerns

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by Jan Horton

Heads up, baby boomers! You are the subject of a predicted phenomenon that will occur between now and the year 2040, peaking in the year 2015.

That phenomenon is the "inheritance boom" the $11 trillion transfer of wealth between one generation and the next. And many charitable organizations are scrambling to benefit from it.

In 1993, Foundation News, a publication of the Council on Foundations, printed an article titled "Philanthropy's Inheritance," which reported the astounding figure. It quickly became the most widely read article in the magazine's history.

"The Coming Transfer of Wealth," as it was subtitled, galvanized the foundation world, as well as the nonprofit and estate-planning fields.

Adding fuel to the fire were such quotes from the article as: "Presumably this will be the largest transfer of wealth in our nation's history," and "Never again is a future generation likely to amass such great wealth (to pass on)," and "The transfer should be good for all charitable organizations."

Where did this information come from, and is it true?

The article was based on a survey done by Robert Avery, a Cornell University economist. Avery had put together a wealth estimate for a Fortune magazine article on how much baby boomers will inherit, based on work he had done at the Federal Reserve Bank.

His statement in the report, "Ultimately, charities and foundations may get a significant cut of the wealth that will change hands," was enough to cause more sophisticated planned giving programs to be put in place for many nonprofits.

In the two years following the publication of this article, it was the hottest topic at conferences and meetings, but holes were beginning to appear in the theory.

A September 1996 article in the Journal of the American Society of CLU and ChFC (Certified Life Underwriter and Chartered Financial Counselor) stated that the effect of the "inheritance boom" on baby boomers might more appropriately be referred to as an "inheritance ripple" for these reasons: the effect is spread over too many years to make an impact; the bequests are divided up among so many recipients as to render the amount received insubstantial ($100,000 on average); and because the pattern of unequal distribution of wealth in the USA will hold firm and the rich will get richer while the poor get poorer.

A futurist at a Community Foundation fall conference issued the caveat that the $11 trillion may be substantially reduced by a number of factors. What if inheritance taxes go up? And what if the amassed resources are consumed by such social factors as increased life expectancy, early retirements, increasing joblessness and advances in medical science?

Add to this the option for older Americans to address their fears about outliving their savings by putting portions of their wealth into annuities.

These financial instruments, while guaranteeing that one will not outlive his or her resources, do so by issuing lifetime annuities which typically end with the life of the annuitant, increasing the possibility that they will "die broke" and leave no inheritance to their children.

My opinion? The final effect will be a ripple, not a boom, because retirees will use a healthy portion of their amassed wealth before it gets to the baby boomers. But there will always be an interest, for both populations, in thoughtfully considered philanthropy. It is the task of the nonprofit sector to present the best case possible for its cause.

'Tis a privilege to give in the Ozarks.

I hope the great local newspaperman Dale Freeman won't mind my play on his favorite phrase, but I want to use it to recognize notable philanthropies:

Johnny Morris unsolicited gave most of a remaining $112,000.00 needed to purchase and save an unspoiled 360-acre tract of scenic beauty comprising the headwaters of the Bryant Creek at Cedar Gap. The area will be named for Johnny's father, John A. Morris, who passed his love of nature along to his son, and be managed by the Missouri Department of Conservation.

NationsBank-Bank of America gave $10,000 to Kiddie Kove Day Care Center, commemorating the final merger of these two banking entities. The gift was made as part of a same-day nationwide gift of 100 gifts of $10,000 each to childrens' charities for a total of $1 million. Brian Fogle and Steve Burch of the bank presented the gift and paid special tribute to the historic Calhoun Center building in which KKDC is housed, which once was the Springfield Colored Hospital.

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