Eight things you need to know about the future of legacy giving

There is huge potential for Australian legacy giving over the next 20 years, but also significant fundraising challenges ahead.

That is the conclusion of international legacy expert Meg Abdy, from Legacy Foresight, who was commissioned by Include A Charity (IAC) to analyse recent trends in Australian bequest giving, and explore the long-term outlook for the sector over the next two decades. 

Meg Abdy

Australian Gifts in Wills 2040, the inaugural Australian Legacy Foresights report into Australian testamentary giving, was launched to coincide with IAC Week.

The market model was based on 10 years of bequest data from Pareto Fundraising and More Strategic, and used five key drivers – house prices, share prices, numbers of deaths, percentage of deaths from child-free people and the impact of charity marketing activity – to produce three scenarios to 2040.

In Abdy’s words, the main takeaways can be broken down into “four reasons to be cheerful, two reasons to be wary, and two challenges”.

Here we run through the trends and challenges that fundraisers should be paying attention to:

Gifts in wills are a vital source of income

The latest benchmarking analysis from Pareto Fundraising shows bequests accounted for as much as 20 per cent of fundraising income in 2018, growing 10 per cent each year over the previous decade. 

“Which is a really impressive growth rate,” Abdy said.

Given the share of fundraising income has grown over time, it means bequest income has outpaced other forms of individual giving. 

Abdy said they are seeing the same pattern in the UK, which has prompted charities there to recognise bequests as an importance source of income, take it more seriously and invest money into gifts and wills fundraising.

The number of deaths is growing

Admittedly a bit controversial to be listed as a reason to be cheerful, but the number of deaths is going to rise by 60 per cent over the next 20 years, from around 170,000 Australian deaths at the moment to 285,000 by 2040.

“That is very sad for the people who are dying, but it is very good as far as legacies are concerned,” Abdy said.

The main driver of that increase in deaths is the baby boomer generation, a large group, which Abdy describes as affluent and confident but also demanding.

Child-free deaths are also increasing

If you look at the generation born in the 1930s, only 8 per cent of women were childless, compared to 14 per cent of women in 1960. 

Why does that matter? Research shows that childfree people are much more likely to leave a gift in their will than those who have children or grandchildren (30 per cent compared to 4.5 per cent). They also leave significantly larger amounts of money. 

The outlook is good

Overall, the outlook for the Australian gifts in wills sector is very positive.

The central forecast – the one that Abdy thinks is most likely – predicts that by 2040 bequest income will be 2.3 times higher than today, after inflation. The total number of bequests will be 1.9 times higher.

“I think the demographic factors are so much in favour of charities,” Abdy told Pro Bono News.

“There are lots of reasons to believe, if you look at it objectively, that that income should be increasing over the next 20 years.”

But it is not all good news…

The economy is not going to be as buoyant as it has been

The growth in bequests over the last decade has come about thanks to Australia’s strong economic performance, impacting on the value of property and financial assets. Looking ahead, it’s the number of bequests, driven by rising death rates (the boomer generation) and the increase in the number of child-free people dying, which will underpin growth.

There are a number of long-term chronic global uncertainties that are likely to affect Australia.

With this in mind, the report also includes a pessimistic scenario, based on the assumption that the current house price correction is more severe than currently expected and that increased global trade tensions escalate to a full-blown trade-war over the period 2020-2030, accompanied by a less welcoming domestic agenda towards migration that halves net migration to Australia. 

Under this scenario real legacy income will grow by 3.7 per cent a year between 2018 and 2040, with bequest income reaching 2.1 times current levels in 2040. 

The public’s appetite for gifts in wills is not growing

The second reason Abdy gave to be wary was around the number of bequests. 

When you take into account that deaths have been rising, the numbers of bequests have been largely flat. This is a worrying pattern as it suggests that the appetite for gifts in wills has not changed, despite the best efforts of IAC and its members. 

“It’s partly a timing issue because there is that long lag between when you do the advertising and marketing, and when it actually starts to bear fruit,” Abdy said.

But she said the pattern followed the trend in the UK.

While she hesitated to call the Australian market “less sophisticated” than the British market, the report estimated that Australian bequest fundraising was around 10 years behind the UK in terms of scale and impact.

The good news is, if the underlying propensity for people to leave a charitable gift in their will increases in line with trends seen in the UK – the report’s optimistic scenario – real legacy income will grow by 4.5 per cent each year between 2018 and 2040, with bequest income reaching 2.6 times current levels in 2040. 

With all this in mind, Abdy highlighted two challenges for Australian fundraisers.

How do you reach out to a wider group of legacy donors? 

Abdy said fundraisers needed to raise the propensity to leave a bequest across the board. This means reaching out beyond the obvious suspects – people without children and wealthy people – and encourage people with mid-levels of wealth or people with families to recognise it is something that is valuable to do.

With this in mind, the role of IAC is crucial to the long-term future of gifts in wills – working alongside individual charity members to raise public awareness of the potential and value of leaving a charitable gift.

How do you communicate to that new group of potential donors?

The baby boomer generation (now in their 50s and 60s) has different attitudes, life experiences and mindsets, which means fundraisers need to use different messaging and different channels if they want to optimise the opportunity.

Abdy said they were looking for three things from charities: tangibility, “they want to be able to see what that money is going to be spent on”; transparency, “they want to know the money is not going to get lost in the system”; and control, “they want to feel, even though they’re not going to be around, that they have control over where that money is going to go after they are gone”.

She said fundraisers also needed to look at the diversity and secularity of the group.

“Boomers are far more secular, so they tend to give on rational grounds rather than faith-based grounds. So I suspect that those traditional legacy charities are not going to do as well because it’s not a motivation for them. So health charities, environmental charities, development charities will do a lot better,” she said.

A final piece of advice

Overall Abdy encouraged Australian charities to make the most of the opportunities, and invest in the sector while the going was good.

“The underlying facts are all positive, but they really need to harness it now and they need to go with it rather than just trot along and let it happen,” she said.

She said, after 25 years working in the sector, she still believed legacy giving was a moving area.

“At the end of the day, it’s about what people want to leave behind them for the next generation,” she said.