Study Points to Substantial Opportunities in Imminent Transfer of Wealth

November 15, 2011 (Syracuse, NY) – With a current combined individual net worth of $57 billion, Central New York’s five-county region is poised to experience an unprecedented 39 percent transfer of wealth between generations totaling $22 billion over the next 10 years. This could lead to a significant positive impact on the region, according to research commissioned by the Central New York Community Foundation.

The Community Foundation hopes that the nonprofit community will successfully secure at least 5 percent of the wealth transferring from one generation to another over the next ten years – $1.1 billion — for charitable giving in Onondaga, Oswego, Cayuga, Cortland and Madison Counties. If this amount were added to the Community Foundation’s endowment, an additional $55 million would be available for community grants annually for the benefit of local nonprofit organizations.

Peter Dunn, President and CEO of the Community Foundation, sees tremendous potential in these numbers. “Just this year, a $10,000 grant helped establish Syracuse’s first inner-city youth orchestra and another $22,000 helped refugees access local healthcare services,” he said. “Hundreds of stories similar to these can be found all over the region thanks, in part, to the $5.6 million in grants that the Community Foundation distributed over the course of its 2010-2011 fiscal year. Now imagine ten times as many similar accomplishments and improvements occurring each year here in Central New York. That is exactly the amazing potential this study highlights.”

The research, conducted by the RUPRI Center for Rural Entrepreneurship, also found similar results for the entire state and country. New York can expect to see $2.07 trillion transfer from one generation to the next between 2005 and 2055, similarly leading to a grantmaking potential of nearly $6.8 billion. During that same timeframe, an estimated $75 trillion is expected to change hands throughout the country which could lead to nearly $200 billion in new annual grantmaking in the United States.

If Nothing is Done, Transfer Could Lead to Local Loss
The vast majority of estate transfers made by individuals involve gifts to heirs by inheritance. According to the U.S. Department of Commerce’s Regional Economic Analysis, the five county Central New York region experienced a 2.5% population decline between 1990 and 2008, at least 22% of that loss due to residents migrating out of the area. Although the most recent 2010 Census report shows that our population is stabilizing, RUPRI estimates that Central New York’s population could fall further over the next 50 years. This, combined with an aging baby boomer population, may result in a significant portion of Central New York wealth passing to heirs now residing in other counties and states. Dunn says that families with deep roots in this community can look at a charitable gift from their estate as one way to ensure that a portion of their assets stay in the region.

“A prominent local conversation over the past ten years has been about the ‘brain drain,’ referring to our talented next-generation leaving the community to work elsewhere after college,” he said. “The conversation of the next decade could very well be about an ‘asset drain.’ If we can retain a portion of the money made here to  support, sustain and enhance our local community, the future impact on our region could be exponential.”

Local Growth Potential
The Central New York Community Foundation is using National Philanthropy Day – November 15 – to launch its 5forCNY campaign to inspire individuals and families to set aside a portion of their assets for the long-term benefit of the region. RUPRI’s research analyzed what would happen if 5% of the value of assets processed through Central New York’s probated estates were invested in permanent endowments for the charitable benefit of the community, the primary purpose of the Community Foundation. Charitable endowments are invested to grow over time and last in perpetuity. A portion of the earnings from these funds are paid out in grants to address the most pressing community needs.

Following that logic, if 5% of the wealth transferring in the five county region over the next ten years, an estimated $1.1 billion, was captured through charitable bequests to an endowment, a potential $55 million in annual grantmaking could result. That community investment could grow to $1 billion per year in twenty years and to nearly $4 billion per year within fifty years.

“Irrespective of the level of someone’s assets or family situation, we hope that this report challenges notions about the amount of wealth in the community and inspires people who love this region to consider ways in which they might support it, whether now or through their estate plans,” noted Dunn.

Giving options to the Community Foundation can include designating a portion of an estate through a will or directing beneficiary designations for retirement accounts or life insurance policies as well as crafting endowment funds with broad or more specific charitable goals.

“If the community gets behind the importance of charitable bequests, generous donors could build funds that would exponentially increase the current amount of foundation grants available to enhance our community,” says Dunn. “That number would grow even more in the decades to come, thanks to the power of investment compounding and the discipline of endowment grant spending policies. Think about what a dramatic expansion of the amount of charitable capital available each year could do for our community. It could mean improved health and human services, more initiatives to care for children and teens, new arts and cultural endeavors that drive economic development, and increased attention to our neighborhoods and educational attainment – resulting in a better quality of life for everyone.”

About the Research
The RUPRI Center for Rural Entrepreneurship analyzed historical trends and current data to develop likely scenarios of current net worth in households across the region and estimated values of net worth over the next 10 to 50 years. RUPRI’s methodology included using the Federal Reserve Bank of the United States’ Survey of Consumer Finances (2007) to gain an understanding of the relationships between household demographics and asset formation and wealth holding. The point for determining transfer of wealth is to start with a base year, in this case 2010, and estimate current net worth, which is based on a sampling of householders. To localize current net worth, RUPRI uses the following indicators:
–   Dividends, interest and rent income
–   Income characteristics
–   Age characteristics
–   Concentrations of creative class employment
–   Concentrations of business ownership
–   Market valuation of real property by class
RUPRI has completed more than 40 major transfer of wealth studies since the 1990s. Each report takes into account local characteristics, industry concentrations and residential patterns. Where appropriate, many financial valuations are substantially discounted to account for variations among communities. More information can be found on the Center’s website at http://www.energizingentrepreneurs.org.

About the Central New York Community Foundation
The Central New York Community Foundation has served Central New York for 85 years, receiving, managing and distributing charitable funds for the benefit of nonprofit organizations. Grants are awarded for programs in the areas of human services, arts and culture, education, environment, health, economic development and civic affairs. The region’s largest endowed philanthropic foundation, the Central New York Community Foundation awards more than $5 million in grants to nonprofit organizations annually. Since its founding in 1927, the Central New York Community Foundation has distributed more than $100 million in grants to improve the region’s communities. Additional information can be found at http://www.5forcny.org.

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