Latest Gifts in Wills Research

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Latest Gifts in Wills Research What can we learn? SPEAKERS Dr Christopher Baker MFIA Asia-Pacific Centre for Social Investment & Philanthropy, Swinburne University of Technology Ross Anderson MFIA National Stroke Foundation / Include a Charity Proudly Sponsored by

Overview of this session Why is Bequest Gift Research Needed? Introduction to the Latest Gifts in Wills Research Contextual Observations Quick Probate 101 How the Research was Conducted Seven Key Findings and their Implications for Donor Stewardship Advantages and Limitations of Using Probate Data Summary and Discussion

Why is Bequest Gift Researching Needed? Bequests make a significant contribution to charity sector Opportunity for 20 years + of increased charitable bequest gifts Growth in charities conducting gifts in wills fundraising programs Lots of anecdotal assumptions and self-reported evidence Lack of accurate, timely lived evidence and bequest donor insights Poorly understood and often poorly applied in practice Risk of mis-directing donor stewardship resources over time Context of targeting limited resources, increasing efficiencies and improving donor accountability

Introduction to the Latest Gifts in Wills Research Encouraging Charitable Bequests by Australians National research project using 2012 probate data Provides evidence for development of policy and best practice Research undertaken by: Asia-Pacific Centre for Social Investment & Philanthropy Swinburne Business School Research made possible by: The Trust Company (via the Fred P Archer Charitable Trust) Include a Charity

Encouraging Charitable Bequests by Australians Draws on Giving Australia report (2005) 58% of Australians have a will of which 7.5% include a charitable bequest Follows up an analysis of probate files processed in Victoria in 2006 (Baker & Gilding 2012) Examines lived as opposed to reported behaviour Different to relying on self-reporting, which is prone to socially desirable responding bias Giving Australia 2005, Giving Australia: Research on Philanthropy in Australia Baker, C & Gilding, M 2012, 'Not much charity in Australian wills', Fundraising and Philanthropy, Australasia, vol. Aug/Sept, pp. 26-27

Context Age and Life Experience Average life expectancy of an Australian in 2011: 81.4 years Ranks in the top 10 countries for both male and females (ABS 2012) Expected to continue to increase (Intergenerational Report) Australians dying in 2012 were born around 1930: Experienced the great depression Married after WWII Brought up in religious households Lived as part of a traditional nuclear family Australian Bureau of Statistics 2012, 3202.0 - Deaths Australia, 2011 Australian Treasury 2010, Australia to 2050: future challenges

Context Dependents or Independents? Australians have an average life expectancy of 80 years + Therefore the children they leave behind are likely to: be in their 50s, 60s and even 70s have already established their own home and family be economically independent no longer dependents be supporting charitable causes themselves have been approached to include a charitable bequest in their will

Context Australian s Wealth Average Australian household net wealth in 2011/12: $728,000 [a 24% increase on net wealth in 2003-04] Median household net wealth in 2011/12: $434,000 Uneven distribution of wealth: Top 20% of households held >60% of total net wealth Bottom 20% of households held <1% Australian Bureau of Statistics 2013, 6554.0 Household Wealth and Wealth Distribution, Australia, 2011 12

Probate What is it? Grant of Probate is a (Supreme) Court order confirming the validity of a will and division of an estate A grant is also made by the Court on application, where an individual dies without leaving a will (dying intestate) Probate files provide a record of the personal wealth ( estate ) of an individual at the time of their death details the size an estate details all distributions and who receives those distributions (beneficiaries) includes all assets, other than Superannuation includes final will & death certificate (where available)

Probate When is it Needed / Not Needed? A Grant of Probate is needed: when material assets are held in the name of the deceased for due process to establish: what assets were owned how they are to be distributed (intestacy rules / last will) A Grant of Probate is not needed: when assets are held in joint names when there are insufficient assets (impecunious estate)

Accessing Probate Files for this Research While held by the Probate Office probate files are searchable court records accessible by the public at a fee-per-file fee waivers granted by all states (except QLD) majority of probate files were processed in 2012 When released to public records facility probate files become public records accessible by the public free of charge files accessed in QLD were processed in 2010

How the Research was Conducted First ever National sample of probate records analysed for charitable giving Random sample collected on-site from individual, paper-based probate files 5% of probate files processed in 2012 (2010 for QLD) Results are statistically significant based on sample size

How the Research was Conducted 3793 total valid probated files analysed 373 intestate estates (no valid will) 738 first estates (willed estate, with surviving spouse / partner) 2661 final estates (willed estate, without surviving spouse / partner) Majority of research analysis undertaken at National level, not at State / Territory level focused on final estates

Key Finding #1 : Final Estates count most Final estates are estates without a surviving spouse / partner Provided 97% of the $ value of all charitable bequests in this study 7.6% final estates included a charitable bequest 1.3% final estates included a contingent bequest (unrealised)

Implication #1 : Final Estates count most Are we aware of the circumstances of our donors? Is the gift that has been included reflected in the final will that is going to distribute the final estate? Are assets jointly-owned and will they form part of the final estate? Will our donor be responsible for making decisions about the distribution of the final estate? If not, do we have a relationship with the final decision-maker? Is the gift contingent on particular conditions being fulfilled?

Key Finding #2: Australians Do Have Wills Estates of insufficient value to require probate are not included Of the total sample of estates in this study 90% had a will 10% were intestate (without a will) Intestate estates accounted for only 6% of total net value of all estates Compared to those with wills, distinctive features of intestate estates consistent with earlier Victorian findings (Gilding & Baker 2012): Younger Less wealthy More likely not to have children More likely to be male

Implication #2 : Australians Do Have Wills Most older Australians have a valid will (90%) before they die Should we be using charity resources to promote will-writing? Focus our conversations with donors on updating or re-writing their wills How can we make charities front-of-mind when a will is written or updated? Ensure messages about bequest gifts are on constant drip so that they coincide with our donors will-writing triggers.

Key Finding #3 : There is a Will Gap Will Gap = the number of years between the date of a final will and a person s date of death Average Will Gap = 10 years The Will Gap is significantly less for those who left a charitable bequest: Over 10 year gap if no charitable bequest left to charities 5.6 year gap if final will included a charitable bequest

Implication #3 : There is a Will Gap On average, wills don t change in the very final years of our donors lives Given that the average age at death is 81.4 years old, on average people including charitable bequests change their will for the last time when they are nearly 76 years old Many people s wills remain unchanged for the last 10 years of their life What are the challenges of us keeping in touch / engaging with our donors in the final years of their lives? How can we engage with donors at the point they are writing / updating their wills for the final time?

Key Finding #4 : It s Older Australians The average age at death in this study = 81.4 years 78.2 years for men 83.8 years for women 30% were aged 90 years + Only 8% were aged younger that 60

Implication #4 : It s Older Australians Year of birth for average Australian passing away in 2014 = 1933 Their experiences, values and attitudes towards charities will be quite different from younger Australians Their behaviour is shaped by a different set of cultural norms, religious & economic landscape and a society long gone Need to maintain relationships with donors for a LONG time Many older Australians will: require high care or move into a nursing home before passing away loose the capacity to change / update their wills in their final years be living on limited, fixed-income pensions and benefits stop donating cash gifts to appeals in the final years of their lives not have significant superannuation

Key Finding #5 : Children Make a Difference From all final estates, charitable bequests were included - In 4.5% of instances with a surviving child or children In over 30% of instances without a surviving child Also childless Australians are more likely to name charities as one of their primary beneficiaries alongside leaving a 10x larger gift size

Implication #5 : Children Make a Difference Opportunity: 70% of childless Australians are not leaving charities a bequest gift or naming charities as one of their primary beneficiaries Are we gathering information about our donors family circumstance? Are we focusing attention on inspiring childless Australians to consider including charities in their estate plans? Family and friends come first, but please think about your favourite charities after that should be the mantra of bequest fundraising for donors with children / dependents Are donors aware of their legal obligations under family provision legislation? Have they sought legal advice about reducing the risk of their will being contested after they ve gone?

Key Finding #6 : Residuals Rule Data gathering recorded whether charitable bequest gifts were: A specified $ value = Pecuniary bequest A proportion of estate residue = Residual bequest Residual Bequests deliver much greater $ value

Implication #6 : Residuals Rule Are we gathering information about the type of bequest gift that has been included? Is the gift contingent on other factors? Are we educating donors about just how powerful a residual gift can be? Are we inspiring donors to consider leaving 90% to their families & friends and leaving 10% to charities? Are we suggesting that donors include a residual gift and providing appropriate wording to donors? Are we using donor stewardship contacts to illustrate to the potentially huge difference between pecuniary and residuary gifts?

Key Finding #7 : Solicitors not influencing Data gathered included how wills were prepared: 5% Will Kit 12% Self-prepared 83% Adviser / Lawyer / Trustee Company Analysis indicated there is no statistical relationship between 1 the form of a will (self-prepared, Will Kit or advised) 2 the likelihood of including a charitable bequest In this sample advisers did not positively influence the inclusion of a charitable bequest in a will

Implication #7 : Solicitors not influencing Opportunities to inspire donors irrespective of how they prepare their wills Opportunities for advisers to remind clients of their charitable intentions, but not to influence UK Research demonstrates the power of nudging and using social norming techniques Is stewardship of relationships with solicitors best use of our resources?

Advantages & Limitations of Probate Data The Advantages Probate data does provide insights into the: Practices of a particular generation a snap-shot Prevailing social norms in bequest gifting Estate transfer practices that are being role-modelled The Limitations Probate data does not provide insights into: Where, why or how individuals give during their lives Motivations for bequeathing The most wealthy households (where probability is that not all assets held in an individual s name)

Summary of the Latest Research Findings Key Findings 1 7.6% of final estates made a charitable bequest (97% of total $ value) 2 90% of estates with capacity to leave a bequest gift had a will (only 10% were intestate) 3 There is a will gap between date of final will and date of death (5.6 years for those who left a gift 10 years for those who did not) Implications 1 Is our relationship with the donor who will distribute the final estate? 2 Is our conversation with older supporters about updating or revising a will? 3 How do we maintain relationships with older Australians in the later part of their lives?

Summary of the Latest Research Findings Key Findings 4 81.4 years average age at death (30% were aged 90 years +) Implications 4 Are we prepared to have very long-term relationships with donors, well into their old age? 5 30% of final estates without children included a bequest (4.3% of those with child/ren) 6 $200K median residual bequest ($7K median for pecuniary) 7 Solicitors aren t influencing donors bequest choices 5 Are we focusing attention and resources on inspiring childless Australians to remember their favourite charities? 6 Are we focusing on educating donors about the difference that 10% of their estate can make? 7 Are we focusing on our relationships with solicitors rather than our donors?

Encouraging Charitable Bequests by Australians The full research report and executive summary is available to download here www.swinburne.edu.au/business/philanthropy/research/reports.htm

Any Questions or Reflections on the Research Findings?