An Unprecedented Transfer of Wealth Could Mean Millions for Communities in Our Region
With a current net worth of more than $80 billion, greater Rochester's nine-county region is poised to experience an unprecedented 42 percent transfer of wealth totaling $33.5 billion over the next 20 years, according to research commissioned by Rochester Area Community Foundation.
The transfer of assets from the World War II generation to its baby boomer children and then from the affluent baby boomers to the next generation will greatly affect the wealth of individual households and potentially could secure the future of our communities through charitable giving.
“If only a small fraction of that net worth, say 5 percent, transfers to the community, we will dramatically improve our ability to address changing needs and shape a vibrant future,” says Community Foundation President and Executive Director Jennifer Leonard.
The research, conducted by the RUPRI Center for Rural Entrepreneurship, looks even further ahead and calculates that the cumulative transfer of the region’s estates by 2060 could total $134.79 billion. That would mean an inheritance averaging $295,000 for every household in Genesee, Livingston, Monroe, Ontario, Orleans, Seneca, Wayne, Wyoming and Yates counties.
This unprecedented transfer of wealth also will be felt across New York state and the United States.
In separate research, RUPRI found that New York can expect to see $2.07 trillion transfer from one generation to the next between 2005 and 2055. During the next five decades, an estimated $53 trillion is expected to change hands throughout our country. This astounding growth of personal estates is credited to Americans who have created, invested and multiplied unprecedented private wealth since the Great Depression and World War II.
In the Community Foundation-commissioned report, Wealth in the Rochester Region: A Transfer of Wealth Opportunity, RUPRI 
analyzed the region’s historical trends and current data to determine how many assets exist in households, and then used conservative estimates of economic growth to project scenarios for wealth in each of the nine counties after 10, 20 and 50 years. The significance of our region’s current net wealth is the potential impact it has for our community when passed along to future generations.
In Monroe County, the wealthiest in our region, the current collective net worth of residents is $56.98 billion of the region’s $80.07 billion net worth. Ontario County’s current net wealth was second highest with $7.83 billion. Net worth includes assets such as houses and investments, minus debt.
With most estates, the vast majority of assets go to heirs. For generations, people lived their entire lives close to their birthplace and as wealth passed from one generation to the next, most stayed in the same county. This is no longer true with today’s mobile society — and once the wealth leaves our communities, it may never return.
“The goal of this transfer of wealth study is to make a broader base of charitably inclined residents aware of how they can give back, improve our communities, and build an endowment to secure the future of the region and the people who live and work here,” says Leonard. “When the time comes for grandparents and parents to transfer their estates to children or grandchildren, they have an incredible opportunity to set aside a small portion to support the communities we love.”
The late Joe U. Posner, an insurance broker and one of the Community Foundation’s founders, frequently shared his philosophy that individuals could care for both their heirs and their community. He suggested that when drafting your will, you should consider your community one of your children. Designating a portion of your assets to go to your favorite local charities then helps support and improve the community in which your children — or other children — will reside.
RUPRI’s research analyzed what would happen if 5% of the value of estates processed through our region’s probate courts over the next 10, 20 and 50 years was designated to philanthropic causes. By 2020, that amount would be nearly $695 million and by 2030, the gifts to charitable institutions would reach an estimated $1.7 billion. By 2060, the region could receive $6.7 billion in charitable gifts, including $4.68 billion just in Monroe County.
The research also projected what would happen if the charitable giving were invested in permanent endowments for the community, the primary purpose of Rochester Area Community Foundation. By designating a portion of an estate or directing beneficiary designations for 401(k)s, IRAs or life insurance policies to the Community Foundation, the Rochester region will continue to enjoy the benefits of this one-time, transfer-of-wealth opportunity for generations to come.
It was gifts such as these, in addition to cash and other contributions, which helped to start the Community Foundation in 1972 and build the community’s endowment for the future over the past 39 years. Today, the Community Foundation is among the 60 largest in the United States of 770 similar organizations, and holds $235 million in assets of which 73% is permanently endowed.
Charitable endowments are carefully invested to grow over time and last forever. The principal is never spent. A portion of the earnings from the fund is paid out in grants to address the most pressing community needs.
“If the community gets behind this, generous donors could build funds that would award $35 million a year in grants starting in 2020 and more in the decades to come,” says Leonard. “Think about what millions of dollars each year could do for our community. Within a decade, 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 town and village centers — resulting in a better quality of life for everyone.”
Since its founding, the Community Foundation has distributed more than $285 million in grants to improve the communities in our region. As a nonprofit, it provides donors with a simple, powerful and highly personal approach to giving — so their gifts do good works within the community now and in the future.
The Transfer of Wealth Methodology
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 transfer of wealth model produces conservative scenarios — not predictions — driven by key assumptions about the future that result in realistic estimates. The methodology includes 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 (2010 in this case) and estimate current net worth, which is based on a sampling of U.S. households. To localize current net worth, RUPRI uses a variety of indicators. Some of these indicators include:
- Dividends, interest, and rent income;
- Income characteristics;
- Age characteristics;
- Concentrations of creative class employment;
- Concentrations of business ownership; and
- Market valuation of real property by class.
The current net worth also is discounted because some assets will not be available to transfer to heirs, charities or communities, or are hard to value. These may include assets that depreciate quickly (vehicles or household goods) or where a future value may be difficult to estimate (jewelry, art collections); closely held assets (farms, ranches, family businesses); and those of lower-income households. The transfer of wealth study also is based on population and economic forecasting models.
RUPRI has completed more than 40 major transfer-of-wealth studies since the early 1990s. Most of those reports can be found on the center’s website.
Many thanks to the 10-member Technical Advisory Committee that assisted the Community Foundation and RUPRI in this research.