Transfer of Wealth Theory
Posted on January 1, 2008 by Randy Maiers
Perhaps by now you’ve heard the talk about the Transfer of Wealth Theory and its potential to make a dramatic impact on the quality of life in St. Clair County. What you may not realize is that the entire premise, and thus potential, behind this theory is YOU. You will decide if the potential impact of your generation is fully realized or not.
The odds are high that you were either a pre-World War II baby, or you were born during the eighteen year window of the Baby Boom generation. That makes you a member of the wealthiest generation in American History.
Warren Buffet? Pre-WWII baby. Bill Gates? Born in 1955, he’s a Baby Boomer. Oprah Winfrey? She’s also a Baby Boomer. What do they have in common besides their immense wealth? They’re giving much of it back. Chances are good that you will too, even if you’re not quite in their league.
Over the next 50 years as the bulk of this generation’s wealth is passed on, more than $700 million could go to nonprofit organizations in St. Clair County. By just the year 2015 that amount should be over $111 million.
What will happen to that $111 million in gifts? You’ve worked hard your whole life to accumulate your assets. You may not have an “estate” by some people’s measures, but by this point in your life you’ve accumulated enough assets that you’re looking forward to your golden years. What do you want to accomplish with your lifetime of work? What lasting legacy might you leave?
Let me offer a one word suggestion. Endowment. It could be an endowment for just one organization, or set up to support several. It could be an endowment to provide scholarships for kids from your hometown, or a field of interest endowment to support the arts. You might choose to have the endowment named in your honor, or in the name of a loved one. Or, if you’re not looking for self promotion, an anonymous and unrestricted fund at your favorite nonprofit.
Endowments are generally meant to be permanent. You’ve worked your entire adult life to build up a comfortable nest egg and the chances are good that if you choose to leave a portion to a charity you’ll want some assurance that the core principal of your gift will remain untouched.
Having endowed funds should be the goal of every medium to large-sized nonprofit corporation. However, in today’s economy it’s often the most difficult type of fund raising an organization can do. Many nonprofits today are struggling just to meet current operating needs and they look for your annual gifts to sustain their daily work. Yet that’s the very reason for having an endowment. When times are tough endowments can provide a steady and reliable source of income to support programs, projects and daily operations.
This is where you come in. Take a moment to think about your favorite nonprofit. How much is their annual operating budget? Have you ever even asked to see a copy of their annual budget? How much of an endowment would it take to make an impact on that budget? How much better could that organization be if they had the safety net of an endowment with your name on it?
The most effective and beneficial type of endowment from the organization’s perspective are unrestricted, general use endowments. However, there may be individual programs or projects within the budget that have appeal to you and could be endowed. Think of our leading colleges and universities; they can find just about anything, from classrooms to buildings or entire stadiums to put your name on. That same premise can be applied to your favorite nonprofit. Now is the time to start thinking about your role among the Buffet’s, Gates’ and Winfrey’s.
