More than $1.2 trillion of Baby Boomer wealth will transfer to Millenials and Gen Z over the next 20 years. Photo / 123RF
More than $1.2 trillion in wealth is expected to transfer to Millennials and Gen Z in the next two decades from Baby Boomer parents. However, a portion of that wealth is expected to be left to charities and research, a trend known as willanthropy. Jane Phare reports.
It started nearly 25 years ago when Chelsea and Kady Smith overheard a family friend telling their father and stepmother that he had lost his job. The girls, then at primary school, became concerned that the man’s two children, around their ages, would not receive Christmas presents.
As a family, they hatched a plan. The Smith girls would donate part of their allowance and birthday money, the parents would top up the rest and they would buy vouchers from a supermarket and two department stores. In the dead of night, they dropped the envelope of vouchers into the friend’s letterbox. To this day he’s still puzzled about the source.
The anonymous good deed gave the family so much pleasure it became an annual event. The girls set aside a portion of any money they received and took part in fundraisers with their parents, giving to someone in need every year. Since then the family has given away more than $100,000 to charities. Now the family’s Totara Fund, worth $350,000 and growing, is administered by the Auckland Foundation, a community-based funding organisation that has distributed $15.13 million in grants since its inception in 2012.
The Smith girls’ stepmother Ella*, who does not want to give her real name, says they’re not a wealthy family but they still want to contribute. She was keen for her stepdaughters to learn about social responsibility from a young age. Chelsea and Kady, now 32 and 31, still donate a portion of their income to the fund, as do Ella and her husband.
In addition, the couple plan to leave portions of their estates to the fund after their deaths. Ella will leave 75% of her estate to close family members and part of the remaining 25% will be left to the Totara Fund. Her husband plans to leave his estate in trust for his two daughters but, each time they draw money, a percentage will go to the Totara Fund.
Angela Jackson, from the Public Trust, says “willanthropy” is starting to ramp up. The average bequest currently handled by the trust is $10,000 but Jackson and others in the industry are expecting that to increase as The Great Wealth Transfer – $1.25 trillion of Baby Boomer wealth – gets under way.
Jackson, head of service delivery in the North Island, says there’s a trend of people wanting to contribute not only to charities but to community organisations and sports groups.
“No matter the value, it really matters to the group you’re giving it to.”
As part of Will Week, which runs until Sunday, July 21, the Public Trust wants to educate Kiwis about how to leave a bequest. It can be a fixed amount, a percentage or the residue of the estate, and can include cash, land, buildings and assets such as artwork.
Details of a bequest need to be included in a legal will, not just outlined in a statement of wishes, estate planners say. They advise will-makers to be clear about their wishes with family members and explain why. Family dynamics are important, Jackson says.
“Being very clear about your wishes is one of the best gifts that you can give the people you leave behind. It allows them to focus on the grieving and the celebration of your life without worrying about how to best honour your decisions and your wishes.”
Per capita, Kiwis are among the world’s most generous donors to charities. According to the Charities Services, New Zealand has nearly 29,000 charities (with more registered every year), with an asset base of $81.2 billion. Kiwis donate about $3.8b a year. Last year, registered charities had an income of $24.8b and spent $22.7b.
As well as financial donations, 170,000 volunteers contribute about 1.6 million hours of work every week. New Zealand’s charities are entirely reliant on goodwill, says Rahul Watson Govindan, chief executive of Philanthropy NZ. At the same time, Kiwis are reliant on charities to support areas such as animal welfare, ambulance and rescue services, and mental health.
“But for charities, our country would grind to a halt.”
He’s expecting an increase in bequests as the asset-rich Baby Boomer generation becomes elderly. He predicts that charities with a strong personal connection to that generation – Hato Hone St John, the SPCA, Salvation Army, Plunket, hospices and Blind Low Vision NZ (formerly the Blind Foundation) – will benefit tremendously.
“These are brands and organisations that have been around since that Baby Boomer generation were children themselves, so as a result there is a life-long connection and empathy towards those brands.”
In addition, the larger, more recognised charities have invested in legacy-giving fundraising using dedicated staff in the past 10 to 15 years, Watson Govindan says.
However, thousands of smaller, niche or localised charities, without marketing or comms teams, also deserve attention.
“They won’t have sophisticated forms of fundraising or dedicated legacy fundraisers.”
Many of these “tier three and four″ charities are doing innovative work in creative ways, and Philanthropy NZ members are keen to engage with them, he says.
For Ella and her family, fundraising and donating to the Totara Fund has become a way of life. During Covid, the fund supported Care Waitākere, helping struggling families. More recently the family has become more involved with Te Whakaora Tangata in Manurewa, which puts parents who have lost their children to drugs or domestic abuse through a life-restoration course.
Ella has been to a couple of “graduations”, witnessing firsthand the changes those in the programme have made.
“They’ve got their children back, they’ve got a job, drugs and alcohol are not allowed in the home. They’re making some real progress, which benefits the children right away.”
Those successes are reward enough for the family. Ella tries to engage others in philanthropy along the way but often hears “I might need that money in the future” as an excuse. It surprises her that people don’t know how much money they will need.
“People are really nervous about letting any money go.”
She’d like to see younger people thinking about donating a percentage of their income to charity, much like some tithe their income to churches. She’s a fan of the community foundation model, which administers endowment funds and distributes grants each year from the interest. It means Kiwis can contribute even small amounts to existing funds or causes administered by the foundation.
“They [the Auckland Foundation] do all the research, all the work and we just put the money in every year.”
Community foundations were introduced to New Zealand more than 20 years ago. Now there are 17 throughout the country, with more than $240m invested in endowment funds. In the past five years, the foundations have granted $60m to chosen charities. In the coming years, they are expecting many millions more to arrive in funds from more than 650 committed bequests in wills.
Melody Mobsby, the Auckland Foundation’s chief executive, says people tend to support causes with a strong emotional connection.
One example is Joy Whitley, whose son Clinton died of cancer in 1978 when he was 4. Nearly 40 years later, Joy was diagnosed with an aggressive form of cancer so, before she died, she set up the Clinton and Joy Whitley Fund. The Auckland Foundation administers it, giving grants to organisations working with paediatric oncology to support children with cancer and their families.
Other popular causes administered by the foundation include restoring the Hauraki Gulf, supporting people in hardship, children who are sick, educational scholarships, youth programmes and animal welfare organisations.
Watson Govindan says now more than ever charitable organisations will be relying on goodwill as the country goes through what he describes as “the perfect storm”: diminished returns on investment, high demand from the community, including complex needs, and ever-increasing climate-change disaster taking “big chunks” of money out of the charitable purse.
Watson Govindan, who joined Philanthropy NZ after a career in the commercial world, says he is “blown away” by the charitable work being done by everyday New Zealanders. He reels off examples – volunteers cleaning up beaches, laying predator traps in the bush, handing out food parcels, picking up unused food from supermarkets and cafes to deliver to soup kitchens. It’s amazing work taking place every day up and down the country.
It’s “game-changing” work he’s witnessed since joining Philanthropy NZ late last year, a side of life he wants to hear talked about as a way of changing the way Kiwis view the country. He worries about the “doom-and-gloom” messages young people hear, the talk of “deficits and the broken bits”, which fuels mental health issues and anxiety. Instead, let’s talk about the great work being done by neighbours and people in our communities, he says.
“It will really make a difference to the national psyche of who we are and how we think of ourselves and the agency that we have to create change in society. ”
* Name has been changed to protect identity.
Jane Phare is a senior Auckland-based business, features and investigations journalist, former assistant editor of NZ Herald and former editor of the Weekend Herald and Viva.
The family-owned business has been the company of colour for 78 years.