Charitable Bequest Decision-Making

Charitable bequest
decision-
making:
Practical lessons from
research findings

Russell James, J.D., Ph.D.
Associate Professor
Director of Graduate Certificate of Charitable
Financial Planning
Dept. of Personal Financial Planning
Texas Tech University
Presented to the Big 12 Gift Planning Group
June 6, 2012

Neuroimaging

Charitable Giving Theory

Psychology Tax Tips

Demographics

The speaker’s first
job is to establish
credibility

Our next
speaker really
knows what
he is talking
about

Findings published or under review in peer
reviewed academic journals in
economics, sociology, marketing, and
neuroscience
Dr. James is the 2nd most frequently published author all time in ISI-
ranked academic journal articles on the topic of “charitable giving”
James, R. N., III. (2009). The myth of the coming charitable estate
windfall. The American Review of Public Administration, 39(6), 661-
when weighting for co-authorship (3rd in total articles) as of 2012 674.
James, R. N., III & O’Boyle, M. W. (under review). Charitable estate James, R. N., III. (2009). Wills, trusts, and charitable estate planning: A
planning as visualized autobiography: An fMRI study of its neural panel study of document effectiveness. Financial Counseling &
correlates. Available at SSRN: http://ssrn.com/abstract=2000345 Planning, 20(1), 3-14.
Wiepking, P. & James, R. N., III (in press). Why are the oldest old less James, R. N., III. (2009). An econometric analysis of household political
generous? Explanations for the unexpected age-related drop in giving in the USA. Applied Economics Letters, 16(5), 539-543.
charitable giving. Ageing & Society. James, R. N., III., Lauderdale, M. K., & Robb, C. A. (2009). The growth
James, R. N., III, & Baker, C. (2012). Targeting wealthy donors: The of charitable estate planning among Americans nearing retirement.
dichotomous relationship of housing wealth with current and bequest Financial Services Review, 18(2), 141-156.
giving. International Journal of Nonprofit and Voluntary Sector James, R. N., III., & Wiepking, P. (2008). A comparative analysis of
Marketing, 17(1), 25-32. educational donors in the Netherlands. International Journal of
James, R. N., III, & Jones, K. S. (2011). Tithing and religious charitable Educational Advancement, 8(2), 71-79.
giving in America. Applied Economics, 43(19), 2441-2450. James, R. N., III. (2008). Charitable giving and the financial planner:
James, R. N., III. (2011). Cognitive skills in the charitable giving Theories, findings, and implications. Journal of Personal
decisions of the elderly. Educational Gerontology, 37(7), 559-573. Finance, 6(4), 98-117.
James, R. N., III. (2011). Charitable giving and cognitive ability. James, R. N., III. (2008). Distinctive characteristics of educational
International Journal of Nonprofit and Voluntary Sector donors. International Journal of Educational Advancement, 8(1), 3-12.
Marketing, 16(1), 70-83. James, R. N., III., & Sharpe, D. L. (2007). The nature and causes of the
James, R. N., III. (2010). Charitable estate planning and subsequent U-shaped charitable giving profile. Nonprofit and Voluntary Sector
wealth accumulation: Why percentage gifts may be worth more than Quarterly, 36(2), 218-238.
we thought. International Journal of Educational James, R. N., III., & Sharpe, D. L. (2007). The “sect-effect” in charitable
Advancement, 10(1), 24-32. giving: Distinctive realities of exclusively-religious charitable givers. The
James, R. N., III. (2009). Health, wealth, and charitable estate planning: American Journal of Economics and Sociology, 66(4), 697-726.
A longitudinal examination of testamentary charitable giving plans. James, R. N., III. (2006). Multi-family housing, social capital, and
Nonprofit and Voluntary Sector Quarterly, 38(6), 1026-1043. charitable behavior: Does spatial connectedness influence social
connectedness? Housing and Society, 33(2), 91-104.

Background
Ph.D., Consumer & Family Economics, U. of Missouri
Dissertation on religious charitable giving
J.D., U. of Missouri School of Law, cum laude
UMB award for most outstanding work in gift & estate taxation & planning

Director of Planned Giving, Central Christian College &
practicing estate planning attorney, 1994-2000
President, Central Christian College, 2000-2005
Visiting Assistant Professor, University of Missouri, 2005-2006
Assistant Professor, University of Georgia, 2006-2010
Associate Professor & Director of the Graduate Certificate in
Charitable Financial Planning, Texas Tech University, 2010-

Quoted in media outlets including The New York
Times, The Wall Street
Journal, CNN, MSNBC, CNBC, ABC News, U.S. News &
World Report, USA Today, The Associated
Press, Bloomberg News and the Chronicle of
Philanthropy.

The ultimate endorsement from The
Wall Street Journal’s SmartMoney
magazine…

“On a recent day in the basement of a
campus lab, Russell James is working
with a brain-scanning machine that
wouldn’t look out of place in a top-
notch hospital. James isn’t a mad
scientist…” -SmartMoney, February, 2012

=

Charitable bequests financial significance
• US charitable estate gifts
over $22 billion; exceeds
corporate giving of $15
billion (Giving USA, 2011).
• In prior 20 years, charitable
bequests more than
doubled in real dollars
(Giving USA, 2011)
• Future growth from
population aging and
increasing propensity due
to greater education and
childlessness (James, Lauderdale, &
Robb, 2009).

• 70% to 80% of Americans
engage in charitable giving
each year (Giving USA, 2011).
• About 5% of Americans have a
charitable estate plan
(James, 2009a).

Over-50
Donors with
Charitable
Plans, 9.4%

Over-50
Donors With
No Charitable
Plans, 90.6%

* Donors giving $500+ per year, weighted nationally representative 2006 sample

• Unlike current giving, it is
difficult to measure
experimental success in
bequest fundraising
• Ask-to-receipt may take 40+
years
• Identification of distinct
cognitive characteristics could
inform fundraising strategies
sensitive to these differences

Why use fMRI to study
bequest decision-making?
• Not all parts
of decision-
making are
known to the
decision
maker
• Activation
reflects the
type of
cognitive
processes

Previous fMRI studies in giving:
reward/salience
• Moll, et al. (2006) found
giving engaged mesolimbic
reward systems in the same
way as when subjects
received monetary rewards.
• Harbaugh, Mayr, and
Burghart (2007) found giving
elicited neural activity in
reward processing/salience
areas, e.g., ventral striatum.

Previous fMRI in charitable giving:
social cognition
• Izuma, Saito, and Sadato (2009) found greater ventral
striatum activation before a decision to donate when
observers were present v. absent
• Hare, et al.
(2010), found
giving value
calculation was
driven by input
from regions
involved in social
cognition
• Moll, et al. (2006)
found decision to
donate mediated
by activation in
areas which play
key roles in social
attachment and

We place subjects in an MR
scanner where they can
observe a video screen
and make choices
by pressing buttons

We can then associate those
choices with blood
oxygenation levels in
different brain
regions

Subjects spend time in
the scanner working
with the buttons and
screen to acclimate to
the environment

A single image A contrast can
contains much subtract out
unrelated brain the noise
activations
Task A-
Task A Task B Task B

Think of study results in terms of
contrasts

Image Image of
Image task A-
of task of task
A Image of
B task B

The
Experiment
A comparison of
bequest decision
making with giving
and volunteering
decision making

Question
What brain regions
are differentially
activated by
bequest decisions
as compared with
giving and
volunteering
decisions?

Exploratory
expectations

• Increased activation in areas
involved in death-related
contemplation
• Unfortunately, very limited fMRI
research on what these areas are

Death-related words: precuneus
• Gündel, et al (2003) worked
with subjects who had lost a
first-degree relative in the
previous year. The only
region showing significant
activation (at p<.05, FWE) in
response to grief-related (v.
neutral) words was the
precuneus.
• Freed, et al. (2009) examined
subjects who had lost a pet
dog or cat within the
previous 3. Four of twelve
areas showing activity in
response to the deceased
reminder (v. neutral)
words, were in the
precuneus.

Methods
• Sixteen adult male subjects
• Prior to entering the
scanner, subjects reviewed
terms along with the names and
a one sentence description of
each charitable organization.
• Subjects had two right and two
left response buttons for each
hand, for a total of four
response options.

Comparison Questions
1. “If asked in the next 3 months, what is the likelihood
you might GIVE money to ______”
2. “If asked in the next 3 months, what is the likelihood
you might VOLUNTEER time to ____”
3. “If you signed a will in the next 3 months, what is
the likelihood you might leave a BEQUEST gift to
_____”

96 questions: 28 x 3 large charitable organizations and
4 x 3 family member recipient categories.
16 second pairs (2B, 2G, 2V or 2G, 2B, 2V)

Behavioral Responses
(3)
Some (4)
(1) (2) what Highly Missi
Category None Unlikely Likely Likely ng Avg.
Bequest 30.7% 38.9% 16.6% 11.3% 2.5% 2.09
Give 30.5% 28.3% 26.8% 12.7% 1.8% 2.22
Volunteer 24.4% 29.1% 25.8% 19.9% 0.8% 2.42

What areas are
more engaged
during bequest
questions than
during giving/
volunteering
questions?

A flight through
the brain:
http://youtu.be
/NKKKE_7aFqM

Relative Activations Comparing Charitable
Bequest with Giving and/or Volunteering
(reporting only p<.05 FWE corrected cluster-level)
peak-level cluster-level
p Z- p
MNI Co- (FWE- scor (FWE-
Contrast Title ordinates corr) e corr) ke
(1) Bequest>Give Lingual Gyrus -2, -78, -2 0.004 5.44 0.000 1399
Precuneus 26, -66, 42 0.102 4.64 0.009 313
(2) Bequest>Volunteer Lingual Gyrus 2, -80, -4 0.007 5.32 0.000 2254
Precuneus 30, -66, 40 0.180 4.47 0.004 356
Precentral Gyrus -34, -3, 36 0.397 4.19 0.001 433
(3) Bequest> Lingual Gyrus 0, -78, -4 0.001 5.82 0.000 2016
(Give+Volunteer)
Precuneus 26, -66, 42 0.007 5.33 0.001 475

(4) Give>Bequest Cuneus 8, -88, 20 0.157 4.51 0.003 388
(5) Volunteer>Bequest Cuneus 8, -88, 20 0.060 4.79 0.000 1008
Insula -38, -20, 8 0.323 4.27 0.001 462
(6) (Give+Volunteer) Cuneus 6, -90, 22 0.011 5.22 0.000 1014
>Bequest

Activating with Increasing and Decreasing
Charitable Bequest Agreement
(Linear Parametric Modulation reporting only p<.05 FWE corrected)

peak-level cluster-level
p p
MNI Co- (FWE- Z- (FWE- cluster
Contrast Title ordinates corr) score corr) size
(1) Increasing Lingual 10, -68, -4 0.004 5.46 0.000 671
with agreement Gyrus
Postcentral -40, -22, 52 0.007 5.37 0.000 1200
Gyrus
(2) Increasing Precentral 38, -20, 62 0.000 6.20 0.000 1387
with Gyrus
disagreement
Insula 42, -20, 18 0.171 4.61 0.013 196

Core areas more
engaged for bequest
contemplation
• Precuneus
• Lingual gyrus
– Also increased activation was
significantly associated with
increased projected
likelihood of making a
charitable bequest

Visualized Autobiography
Precuneus and
lingual gyrus
activation occurred
when subjects were
able to vividly relive
events in an photo,
but not where scenes
were only vaguely
familiar.
(Gilboa, et al., 2004)

Visualized “retrieving detailed vivid
autobiographical
Autobiography experiences, as opposed to
personal semantic
information, is a crucial
mediating feature that
determines the
involvement of
hippocampus and two
posterior neocortical
regions, precuneus and
lingual gyrus, in remote
autobiographical
memory.”
(Gilboa, et al., 2004, p. 1221)

Visualized Autobiography
• In Viard, et al. (2007), four of
six regions showing significant
activation when reliving events
by mentally “traveling back in
time”, were in the precuneus
and lingual gyrus.
• In Denkova (2006), three of the
four most statistically
significant regions associated
with recalling autobiographical
personal events were in the
lingual gyrus and precuneus.

Visualized autobiography = visualization +
3rd person perspective on self
• The lingual gyrus is part of the visual system. Damage
can result in losing the ability to dream (Bischof & Bassetti,
2004).
• The precuneus has been called “the mind’s eye” (Fletcher,
et al., 1995), is implicated in visual imagery of memories
(Fletcher, et al., 2005) and in taking a 3rd person perspective on
one’s self.

Precuneus: Taking a 3rd person
perspective on one’s self
• Differentially involved in
observing one’s self from an
outside perspective (Vogeley &
Fink, 2003)
• Greater activation when
subjects described their own
physical and personality traits
as compared to describing
another’s (Kjaer, et al.,2002)
• Activation greatest when
referencing one’s self, lowest
when referencing a neutral
reference person (Lou, et al.; 2004)
• TMS disrupting normal neural circuitry
in precuneus slowed ability to recall
judgments about one’s self more than the ability to recall
judgments about others (Lou, et al., 2004)

Autobiography: The self across time
Inter alia, the In Meulenbroek, et al.
“precuneus may respond (2010), the precuneus
more strongly to familiar was the most
events involving the statistically significant
self and possibly region of
when the self activation for
is projected autobiographical
across time.” memory tasks v.
(Rabin, et al., 2009) semantic true-
false questions

Lingual Gyrus:
Autobiographical
Visualization
“activation of the visual
cortex (in the lingual gyrus)
might also be related to
autobiographical memory
retrieval and in particular
to visual imagery
components, which play a
key role in autobiographical
memory (Greenberg &
Rubin, 2003)” (D’Argembau, et al.
2007, p. 941).

Simultaneous cuneus deactivation:
1st v. 3rd person perspective?
• Jackson, Meltzoff, and Decety (2006)
found both lingual gyrus association
with third person perspective and
cuneus association with first person
perspective.
• Similarly, Wurm, et al. (2011), found
greater activation in the lingual gyrus
for third-person perspective and
simultaneously greater activation in
the cuneus for first-person
perspective.
• Others have also associated cuneus
activity with first-person perspective-
taking as contrasted with third-
person perspective-taking (David, et
al., 2006; Lorey, et al., 2009).

Applications to
practice in
bequest
fundraising

Visual autobiography in practice
Routley (2011) identified
the importance of
autobiographical
connection when
interviewing donors with
planned bequests, writing,
“Indeed, when discussing
which charities they had
chosen to remember, there
was a clear link with the life
narratives of many
respondents”

“‘[In my will] there’s the Youth Hostel Association, first of
all...it’s where my wife and I met....Then there’s the
Ramblers’ Association. We’ve walked a lot with the local
group...Then Help the Aged, I’ve got to help the aged, I am
one...The there’s RNID because I’m hard of hearing...Then
finally, the Cancer Research. My father died of cancer and so
I have supported them ever since he died.’
Male, 89, married
‘The reason I selected Help the Aged...it was after my mother
died...And I just thought – she’d been in a care home for
probably three or four years. And I just wanted to help the
elderly....I’d also support things like Cancer
Research...because people I’ve known have died...An animal
charity as well...I had a couple of cats.’
Female, 63, widowed” (Routley, 2011, p. 220-221)


Fundraisers may consider emphasizing the
autobiographical connections between the
donor and the charity,
rather than
focusing on the
charity’s need
for funds

Death salience
• Bequest decision making
processes differentially
activated areas similar to those
involved in using death-
oriented words to evoke
memories of a recently
deceased loved one (Gündel, et
You
al., 2003; Freed, et al., 2009).
• This association is consistent
with the rather obvious idea
that bequest decisions involve
reminders of mortality.

Terror-management
theory Suggests two levels of “defenses”
to mortality salience (Pyszczynski, et al.,
1999).
Proximal defenses: avoid death
reminders (Hirschberger, 2010), e.g.,
deny one’s vulnerability, distract
oneself, avoiding self-reflective
thoughts (Pyszczynski, et al., 1999).
Distal defenses: attempt to
achieve literal (i.e., religious) or
symbolic death transcendence
through support of one’s
worldview or self-esteem
(Hirschberger, 2010, p. 205). Some part of
one’s self – one’s family,
achievements, community – will
continue to exist after death.

Proximal • the most common initial reaction
will be to avoid or postpone the
defenses in topic
practice – Even among older adults, most
have no will or trust (James, Lauderdale,
& Robb, 2009)
– For fundraisers, the enemy of the
planned gift often isn’t “no”; the
enemy is “later”
• create deadlines, make
appointments, or promote time-
limited campaigns
– Rosen (2011) pointed to the
example of a challenge gift where a
donor agreed to match 10% of
bequests, up to $10,000 per donor,
signed prior to a deadline

U.S. Over 50 Population
Charitable
Plans, 5.7%

Plans Without
No Planning Charity, 38.2%
Documents, 56
.10%

* Weighted nationally
representative 2006 sample

Distal defenses in practice
• Symbolic immortality requires
something, identified with the
decedent, which will live beyond
them, typically descendants.
Hence, childlessness is most significant
predictor of charitable bequest
(James, 2009a).
• Large share of charitable bequest dollars
go to permanent private
foundations, typically bearing the
deceased’s name (James, 2009b).
• Donors may be particularly interested in
lasting gifts (endowments, named
buildings, scholarship funds, etc.) to
stable organizations.

Previous studies

One time survey After death
• Non-response bias if the whole survey
was about charitable giving distributions
• Only for taxable estates
• Rare single county probate studies

Current study

Longitudinal Distributions
Same people asked every two years After death nearest relatives are
asked about final distributions

New Questions

Changes Intentions v.
Not just who has charitable plans but
when do they add and drop them Outcomes
Did during life plans result in after
death distributions

Details

• Nationally representative of • Started in 1992
over 50 population since 1998. • Questions within
• Over 20,000 people per survey. larger Health &
• In person interviews, some Retirement Study
follow up by phone. • Respondents paid

What share of people
over 50 in the U.S. have
“made provisions for
any charities in [their]
will or trust?”

U.S. Over 50 Population
Charitable
Plans, 5.7
No %
Charitable
Plans, 94.3
%

* Weighted nationally
representative 2006 sample

What share of over-50 charitable donors
giving over $500 per year indicate that they
have a charitable estate plan?

Can that be right?
• Maybe a lot of donors will eventually get around to
making a charitable plan?

Will
donors
ever get
around to
making a
charitable
plan?

Projecting based on
age, gender and
mortality or tracking
actual post-death
distributions

88%-90% of donors
($500+/year) over age
50 will die with no
charitable estate plan.

You mean 90% of our You mean we could generate
donors will die without 9 times more estate gifts from
leaving a gift? our current donors?

Among donors ($500+)
over 50 with an estate
plan, what is the single
most significant factor
associated with having a
charitable estate plan?

Age? Education?
Wealth? Income?

Among Donors ($500+) with an Estate Plan

% indicating a
charitable estate
Family Status plan
No Offspring 50.0%
Children Only 17.1%
Grandchildren 9.8%

Regression: Compare only otherwise
identical people

Example: The effect of differences in education among those making the
same income, with the same wealth, same family structure, etc.

Likelihood of having a charitable plan
(comparing otherwise identical individuals)
• Graduate degree (v. high school) +4.2 % points
• Gives $500+ per year to charity +3.1 % points
• Volunteers regularly +2.0 % points
• College degree (v. high school) +1.7 % points
• Has been diagnosed with a stroke +1.7 % points
• Is ten years older +1.2 % points
• Has been diagnosed with cancer +0.8 % points
• Is married (v. unmarried) +0.7 % points
• Diagnosed with a heart condition +0.4 % points
• Attends church 1+ times per month +0.2 % points
• Has $1,000,000 more in assets +0.1 % points
• Has $100,000 per year more income not significant
• Is male (v. female) not significant
• Has only children (v. no offspring) -2.8 % points
• Has grandchildren (v. no offspring) -10.5 % points

Find your estate donor…

A B
makes substantial doesn’t give to
charitable charity, doesn’t
gifts, volunteers volunteer,
regularly, and has and has no children

From an Australian study by Christopher
Baker including 1729 wills:

“Australian will-makers without surviving children are
ten times more likely to make a charitable gift from
their estate”

How did giving during life compare
with post death transfers?

$ $ $ $

Estate giving and annual giving for
6,342 deceased panel members

Average
Last Annual Annual Average Estate Gift
Offspring Volunteer Hours Giving Estate Giving Multiple
No Children 32.6 (6.6) $3,576 $44,849 12.6
Children Only 25.4 (7.1) $1,316 $6,147 4.7
Grandchildren 23.2 (2.1) $1,497 $4,320 2.9
Total 24.3 (1.8) $1,691 $8,582 5.1

When did people drop charitable plans?

Yes! Yes! No.

What
happened
here?

Factors that triggered dropping the charitable plan
1. Becoming a grandparent 0.7226* (0.2997)
2. Becoming a parent 0.6111† (0.3200)
3. Stopping current charitable giving 0.1198* (0.0934)
4. A drop in self-rated health 0.0768† (0.0461)

Some factors that didn’t seem to matter:
Change in income
Change in assets
Change in marital status

*Fixed effects analysis including 1,306 people who reported a charitable plan and later reported

When did people add
charitable plans?

Factors that triggered adding a new charitable plan
• Starting to make charitable gifts .1531† (.0882)
• An improvement in self-reported health .0927* (0.0446)
• A $100k increase in assets .0061** (.0023)

One factor dramatically reduced the likelihood that a
new charitable plan would be added:
• The addition of the first grandchild -.4641† (.2732)

Do the estates of people
who make charitable
estate plans grow
differently than the
general population?

After making their plan, charitable estate donors grew
their estates 50%-100% faster than did others with
same initial wealth

2000000
2500000
3000000
3500000
4000000
4500000
1912 (Age 100)
1915 (Age 97)
1918 (Age 94)
1921 (Age 91)
1924 (Age 88)
1927 (Age 85)
1930 (Age 82)
1933 (Age 79)
1936 (Age 76)
1939 (Age 73)
1942 (Age 70)
1945 (Age 67)
1948 (Age 64)
1951 (Age 61)
1954 (Age 58)
1957 (Age 55)
1960 (Age 52)
1963 (Age 49)
1966 (Age 46)
1969 (Age 43)
1972 (Age 40)
The Fall and Rise in Live Births - US

1975 (Age 37)
1978 (Age 34)
1981 (Age 31)

25,000,000
Total Resident Population by 5-Year Age Groups [(NP-T3-B) U.S. Census]
Dramatic increases on
20,000,000 the horizon 2001
Temporary drop in
key demographic 2002
population 2003
15,000,000 2004
2005
2006
10,000,000 2007
2008
2009
5,000,000 2010
2011
2012
0
50 to 55 to 60 to 65 to 70 to 75 to 80 to 85 to 90 to 95 to 100+
54 59 64 69 74 79 84 89 94 99

Drop in this key demographic combined with
health care improvements
Deaths in the U.S. (Red is Actual; Black is Trendline)
2550000

2450000

2350000

2250000

2150000

2050000

1950000

1850000

1750000
1990
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988

1992
1994
1996
1998
2000
2002
2004
2006
2008

Projecting future
bequest giving
Frequency of future
bequest gifts
• Change in population
• Change in tendency to
make bequest gifts

Charitable Estate Planning among US
Adults Aged 55-65
6.0%

5.5%

5.0%

4.5%

4.0%

3.5%

3.0%
1996 1998 2000 2002 2004 2006

Increases in charitable planning are driven by
increases in childlessness and education
Time trend
disappears
Time trend when including
exists childlessness
and education

Estimate Estimate Estimate
Variable (s.e.) p-value (s.e.) p-value (s.e.) p-value
Year 0.0138 <.0001 0.0033 0.3298 0.0015 0.664
(0.0032) (0.0034) (0.0036)
Any children -0.6251 <.0001 -0.6224 <.0001
(0.0345) (0.0479)
Years of 0.1412 <.0001 …. ….
Education (0.0048) full set of
control variables
Probit analysis of all respondents age 55-65 in 1996-2006 HRS. Outcome variable is the
presence of charitable estate planning.

Charitable estate planning among adults aged 55-65

40%

35%

30% No Children - No
College Degree
25%
No Children -
College Degree
20%
Children - No
College Degree
15%
Children - College
Degree
10%

5%

0%
1996 1998 2000 2002 2004 2006

Basic relationship
• The trend of increased charitable estate
planning is driven by changes in childlessness
and education.
• This allows us to predict charitable estate
planning levels in the future.

Upcoming cohorts and
childlessness
• Childlessness among women who will be entering
the 55-65 age group over the next decade will be
substantially higher than those in the 55-65 age
group during 2006 (the year of the HRS data).
• Women in the 56-61 age group during 2006
reported a childlessness rate of 16.0% in 1990
when they were aged 40-44 (Dye, 2005). In
comparison, women in the 40-44 age range in
2004 (i.e., those who will begin entering the 55-
65 near retirement age group in 2015) reported a
childlessness rate of 19.3% (Dye, 2005).

Upcoming cohorts and
education
• Similarly, a college education is much more
common among the upcoming cohorts of
individuals nearing retirement age than among
the current 55-65 group (Stoops, 2004).
• In 1996, less than 27% of those in the 35-54 age
group had at least a bachelor’s degree.
• By 2007, over 31% of those in the 35-54 age
group had at least a bachelor’s degree (Current
Population Survey, 2007).
• Thus, one can expect the upcoming cohorts of
individuals nearing retirement to be more
educated than individuals currently in the 55-65
age group.

Big take-aways
• Don’t just recruit estate givers by giving level, also
know your donors without children
• After making their intention, charitable estate
donors grew their estates 50%-100% faster than
did others.
• Future demographics are generally positive based
on population, childlessness, and education

New Ideas for legacy promotion
from a theoretical framework
Applying “The Generosity Code”

Why theory instead of just a list of
techniques?
• Limitations of “war stories” research
– So called best practices may just be practices
• Theory based strategies are more flexible
– New techniques can emerge as circumstances
change
• Guides practice even where, as in bequest
giving, interim measurement is difficult.

What does a fundraiser do?
• Bring in money?
• This description is “true”, but not very
informative. Applies to essentially all private
sector jobs.
• What does a Lawyer do? Makes money. What
does a grocer do? Makes money. What does an
artist do? Makes money.
• You could bring money to your organization from
government contracts, operation of a charitable
business, or other means, but it wouldn’t be as a
fundraiser.

A fundraiser …

A fundraiser …

Encourages Generosity

Encouraging generosity
• An issue of fundamental human significance
• An independently valuable mission separate
from (although complementary to) your
organization’s mission

Understanding
generosity
Giving occurs when
the “potential
energy” of a gift’s
potential value is
unlocked by the
“catalyst” of a
request

Potential Value Quality of Gift
of Gift Request (Energy
(Potential Energy) (Catalyst) Released)

x =
Interdependent 1. Definitiveness
Utility 2. Observers
(Recipient’s experience)

Self-Identity Self-Efficacy
(Donor as giver) (Donor as change
agent)

Reciprocity Social Exchange Cultural Norms
(Response of Recipient (Response of Others to (Response of Others to
to Donor) Donor) Others)

Interdependent Utility
• I am happy because you were
benefitted
• Empathyi X Change in well-beingi

Act of
Receiving Interdependent
Utility

Act of Self-Identity Self-Efficacy
Giving (Donor as giver) (Donor as change
agent)

Others’ (Response of Recipient (Response of Others to (Response of Others to
Responses to Donor) Donor) Others)

Self-Identity
(Donor as giver)
• I am happy because I am
generous, faithful, concerned,
etc.
• Importance of value and felt
adherence to it

Act of
Utility

agent)


Self-Efficacy
(Donor as change agent)
• I am happy because I was the one
who benefitted you
• My actions were the cause of the
change that I selected

Act of
Utility

agent)


Reciprocity
(Response of Recipient to Donor)
I receive benefits from the
recipient or representative charity

Act of
Utility

agent)


Social Exchange
(Response of Others to Donor)
I receive benefits from others
because of my giving

Act of
Utility

agent)


Cultural Norms
(Response of Others to Others)
I influence others in the way they
behave towards others

Act of
Utility

agent)


Theoretical background
These value channels exists for
reasons rooted in social psychology
(proximate causes) and natural
selection (ultimate causes)

Act of
Utility

agent)


Theoretical background
We can rearrange by their value
type including both material and
psychological value sources

Psychological Self-Identity Self-Efficacy
benefits to donor (Donor as giver) (Donor as change
agent)

Material benefits to Interdependent Cultural Norms
similar others Utility
(Response of Others to
Others)

Material benefits Reciprocity Social Exchange
to donor (Response of Recipient
to Donor)
(Response of Others to
Donor)

Quality of request
Definitiveness
• How clearly is a decision required?

Observers
• Who observes the decision?

Quality of a request: Definitiveness

General General Indefinitely Requires a
issue support deferrable definite
awareness concept response “no”
No request General request Specific request

• Definitiveness: The degree to which a request
demands a definitive “yes” or “no”
• The enemy isn’t “no”, it is “no response”



“100,000 children have died in West
Africa’s current food crisis.”



“100,000 children have died in West
Africa’s current food crisis. Please help
one of the relief agencies if you can.”



“Please give $50 to Oxfam to support
relief efforts for children caught in
West Africa’s current food crisis.”


“We are sending an office gift to Oxfam
on Friday. Put in whatever you like and I
will stop by to pick up your envelope in
the morning.”

Quality of a request: Observers
Observation of a decision point adds a social
cost to saying “no” and a social benefit to saying
“yes” based upon:
1. Perceived likelihood
of observance
2. Observer’s social
significance and
level of commitment
to beneficiaries

Office beverages
available with
payment on an
“honor” system.
Picture above
payment
instructions
rotated weekly.
Payments were
higher when
picture of eyes
was posted.

M. Bateson, D. Nettle & G. Roberts (2006). Cues
of being watched enhance cooperation in a real-
world setting. Biology Letters 2, 412–414.

Two groups with two computer backgrounds. Each
person receives $10. Computer question: Do you want to
share any of it with another (anonymous) participant?

A B

K. J. Haley (UCLA), D.M.T. Fessler (UCLA). 2005. Nobody’s watching? Subtle cues affect generosity
in an anonymous economic game. Evolution and Human Behavior, 26, 245–256

Normal Eyes Screen
Screen
Not
Sharing
12%

Not
Sharing
45%
Sharing
55%
Sharing
88%

K. J. Haley (UCLA), D.M.T. Fessler (UCLA). 2005. Nobody’s watching? Subtle cues affect generosity
in an anonymous economic game. Evolution and Human Behavior, 26, 245–256

Applications to legacy giving
Potential Value of Gift Quality of Gift (Energy
(Potential Energy) Request (Catalyst) Released)

x =

agent)


Unfortunate reality of legacy giving
“74% of the UK population support charities and
when asked, 35% of people say they'd happily
leave a gift in their will once family and friends
had been provided for. The problem is only 7%
actually do.”

From www.rememberacharity.org

So, why is legacy giving so low?
What is missing?

x =

agent)


People may not consider charity during
document creation (practice of advisors and
mistiming of communications from charity).

x =

agent)


Will drafting and legacy planning is easy to
postpone (avoid facing mortality).

x =

agent)


Will drafting is not public, and not an
acceptable forum for peer observation.

x =

agent)


Most legacy giving benefits can only be
anticipated, not actually experienced.

x =

agent)


Reciprocity or social exchange is limited.
Prior to the gift, the intention is revocable.
After the gift, the donor is gone.

x =

agent)


Charitable bequests may be viewed as
competitive with transfers to offspring

x =

agent)


What strategies within
this framework might
improve participation
in charitable bequest
making?

Spend more efforts with those donors who
do not have offspring (and thus lower
competing interdependent utility).

x =

agent)


Promote self-identify of the planned legacy
donor as a current identity of social worth.

x =

agent)


[Legacy club] members have
Identify an important a love for animals that lasts
value. more than a lifetime.

Associate current
planned giving status
with that value.

Create experienced
gift value today, rather
than only anticipated
post-mortem value.
Become a [legacy club]
member today.

Death creates a natural self-efficacy void.
Emphasize giving opportunities with
permanence.

x =

agent)


Self-efficacy in legacy gifts
With death we “disappear”, a serious imposition
on self-efficacy.
– The desire to overcome this is natural.
– Humankind develops memorials emphasizing
permanence.

Self-efficacy in legacy gifts
It is easier for the wealthy to imagine charitable
gifts with permanent impact.
Buildings, large charitable foundations, parks, art
Consider developing permanent giving
opportunities for mid-level donors.
• Named giving opportunities limited to legacy
donors (so as not to pull from current giving)
• Permanent memorial trusts for legacy donors only
• Scholarships, lectureships, sponsor a child, sponsor a
rescued pet, annual performances, etc.

Develop small permanent giving
opportunities exclusively for legacy gifts.

x =

agent)


Emphasize data on how quickly inheritances
are spent by family members as compared to
longevity of a “permanent gift”

x =

agent)


Legacy societies to publicly recognize
planned donors and create functioning donor
communities through social events.

x =

agent)


Always reminding so that the option is “top
of the mind” whenever planning happens to
occur.

x =

agent)


Creating planned giving campaign deadlines
to interfere with ease of postponement.

x =

agent)


A small organization’s two-year campaign
to reach 100 planned legacies

http://www.fcs.uga.edu/alumni/legacies.html

Encourage will making in donor population.

x =

agent)


Provide free planning services to donors with
high potential.

x =

agent)


Create immediate commitment pledge
devices with follow up verification.

x =

agent)


Targeting advisors to include charitable
questions in their document creation process
through information and recognition.

x =

agent)


Why not recognize the intermediaries?
• Intermediaries, such as a will drafting
lawyer, are essential to the process.
• Often the simple act of specifically asking
about a gift to charity by an advisor is key.
• A “new” idea?

Magdalen Hospital
List of Contributors, 1760
From: Sarah Lloyd, ‘A Person Unknown’? Female supporters of
English subscription charities during the long 18th
century, Voluntary Action History Society Research
Conference, Canterbury, UK, July 14-16, 2010

Recognizing intermediaries
• Friends of charity solicitors society
• Sponsoring free CPD (continuing professional
development) charitable planning related
education opportunities
– Advertising those who have completed the CPD
program.
• Publishing recognition of active solicitors
authoring charitable wills probated in most
recent 6 months in particular county, town.
– Shows frequency of professional activity.

Consider legacy arrangements that involve
children in charitable decisions.

x =

agent)


Public
notice of
founding
of the
Bible
Society
(1804)
and listing
of donors
The Morning Post
(London, England), Monda
y, March 19, 1804; pg. [1];
Issue 11061. 19th Century
British Library
Newspapers: Part II.

Executors
become
voting
Governors
for life

The framework doesn’t provide automatic
answers, but may help generate ideas about
value creation and realization in your context.

x =

agent)


2012 special tax
considerations
• IRA qualified charitable
distributions (QCDs) – not
available
• Roth IRA conversions
• Low interest rates resulting
in high valuations of future
gifts

Roth
Conversion

$1MM in standard $1MM in Roth
IRA (withdraws IRA (withdraws
are taxable) are tax free)

Roth conversions and charitable planning
can work together to match

Income Deductions

Where can I find offsetting deductions?

Where can I find offsetting deductions?
• Direct charitable gift
• Charitable remainder trust
• Charitable lead trust
(grantor)
• Charitable gift annuity
• Donor advised fund
• Private foundation
Or give a remainder interest
in a residence or farmland to
a charity

Charitable deductions may
be limited (with five year
carryover) to 20%, 30%, or
50% of income depending
on gift and recipient

If I have unused
deductions, how can I
pull future income into
current year?

If I have unused
deductions, how can I
pull future income into
current year?

With a Roth conversion

Charitable gift of remainder
interests in homes
and farms

A remainder
interest gives
the right to own
the property
after a set time
or after the
death of a
person

Deduction for remainder interest
in $100,000 of farm land by
age 59 donor

11.6% (May 89) 1.4% (April 12)

$15,684 $74,033

Unlike a will, a remainder interest is not
revocable, and can even be sold

A deductible
remainder
interest in
farmland or a
home must be
transferred by
deed, not by
trust or contract

A farm is any land and
improvements used
(even by a tenant)
to raise crops or livestock

A remainder interest in any
part of a farm may be gifted
(Rev. Rul. 78-303)

12.5%

25%

Can I give a remainder interest
of an undivided share in
farmland?

12.5%

25%

Yes, donor may deduct a
remainder interest shared by
charity and others as tenants in
common (Rev. Rule 87-37)

12.5%

25%

However, IRS may deduct cost
of partitioning (of forcing a sale
or division)

• No deduction for
mineral rights remainder just in
mineral rights because it
is not a “farm” Reg. 1.170A-7(b)(4)

• Can gift remainder in
entire “fee simple” farm
(even if land and mineral
rights go to separate
charities)
PLR 8316037

• Can gift remainder in
farm without mineral
rights if you don’t
owned them

How do you calculate the deduction for a
remainder interest in farmland?
1. Find the 7520 interest rate
(http://www.irs.gov/businesses/small/article/0,,id=112482,00.html)

2. Multiply value of land by
remainder percentage in IRS
Pub. 1457 (one or two lives
or specific term)
(http://www.irs.gov/retirement/article/0,,id=206601,00.html)

Ex: A remainder interest in $100,000 of farmland
given by a 59 year old donor 5/12
1. Find the 7520 interest rate 1.4%
http://www.irs.gov/businesses/small/article/0,,id=112482,00.html

Ex: A remainder interest in $100,000 of farmland
given by a 59 year old donor 5/12
1. Find the 7520 interest rate 1.4%
(http://www.irs.gov/businesses/small/article/0,,id=112482,00.html)

2. Multiply value of land by
remainder percentage in IRS $100,000
Pub. 1457 (one or two lives X 0.74033
or specific term) = $74,033
(http://www.irs.gov/retirement/article/0,,id=206601,00.html)

Table S - Based on Life Table 2000CM
Interest at 1.4 Percent
Age Annuity Life Estate Remainder
55 20.8206 0.29149 0.70851
56 20.2495 0.28349 0.71651
57 19.6800 0.27552 0.72448
58 19.1129 0.26758 0.73242
59 18.5479 0.25967 0.74033

Leaving land to charity Leaving land to charity
by will by remainder interest
• Revocable • Irrevocable
• $0 income tax deduction • $74,033 immediate income
tax deduction
• Impacts charity after death • Impacts charity after death
or immediately if charity
sells remainder interest

Because farmland can be gifted
in parts, a donor could annually
give remainder interests up to
income limits or desired
marginal tax rate

• Allows for increasing
valuation each year
• Avoids risk of losing carryover
deduction at death
• Could use value of annual deductions to pay for
ILIT life insurance passing tax free to heirs

Donor can use
money from
remainder tax
deduction to buy
tax free life
insurance (ILIT)
for children’s
inheritance

Age 59 wealthy donor with $100,000 farmland on 5/12

remainder interest in will divides farmland 10%
farmland given to charity to charity 90% to children
$74,033 tax deduction x 35%
combined tax rate = $25,911

$25,911 buys est. $70,000
paid up ILIT life insurance
farmland worth $125,000 at death
charity children children charity
receives receive receive receives
$125,000 $70,000 $50,625 $12,500
farmland (tax free from (90% x 125,000 = (10% x $125,000)
ILIT) 112,500, less 55% for
post ‘12 estate taxes)

Gifts of remainder interests in personal
residences can also be deducted

Includes second
homes, vacation homes, even
a boat with
bathroom, cooking, and
sleeping facilities, if used by
the donor as a residence

Deduction for a house is reduced because,
unlike land, it is depreciable (it wears out)

Rules in IRS Pub. 1459 http://www.irs.gov/pub/irs-pdf/p1459.pdf

59 year old donor giving on 9/6/10
Remainder interest in Remainder interest in
$100,000 farm $100,000 home
.68233 x $20,000 (land)
.68233 x $10,000 (salvage)
.68233 x $100,000 .41412 x $70,000
*

$68,233 Deduction $49,458 Deduction

*.68233 less .26821
depreciation
reduction
calculated
on next
slide

Depreciation reduction factor

R factor age now – R factor age after useful life of house
D factor age now X Useful life of house
Appraiser can estimate.
IRS examples use 45 years.
Table C(2.4)
Factors for Reducing Assurances - Based on Table 2000CM
Interest at 2.4 Percent

Age Remainder R-Factors D-Factors Age Remainder R-Factors D-Factors
Rx-0.5Mx Dx Rx-0.5Mx Dx
x Factors x Factors
0 .17830 1202916 100000.0 55 .56322 317860.0 24748.54
1 .17677 1185429 96977.54 56 .57383 304002.2 24008.45
2 .18060 1168311 94656.94 57 .58449 290311.8 23274.97
3 .18466 1151231 92407.69 58 .59517 276800.1 22547.02
4 .18888 1134179 90219.15 59 .60589 263478.6 21825.10
… … …… … … … … … … …… … … …
48 .49158 418809.2 30218.64 103 .95802 60.91156 35.63595
49 .50143 404011.4 29397.77 104 .96077 33.72948 21.05020
263478.6-60.91156
Table C at http://www.irs.gov/retirement/article/0,,id=206601,00.html 21825.1-45 =.26821

What if the donor
leaves?

What if the donor
Give life
leaves?
estate to
charity

Agree with Give life
the charity to estate to
a joint sale charity in
and divide exchange for
proceeds a gift annuity

Rent Sell life
property estate

What if I make
improvements
to the
property after
giving a
remainder
interest?

You can deduct
the remainder
value of major
improvements as
additional gifts
PLR 9329017; PLR 8529014

EncourageGenerosity.com

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Charitable Financial Planning
at Texas Tech University
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