Tompkins County Transfer of Wealth Opportunities for your Clients Turning a One-time Opportunity into Long-term Good for Tompkins County

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1 Estate Planning Council of Tompkins County Thursday, October 13, 2011 Tompkins County Transfer of Wealth Opportunities for your Clients Turning a One-time Opportunity into Long-term Good for Tompkins County

2 George Ferrari Executive Director 309 N. Aurora Street

3 Surprising wealth transfer in next 50 years $53 trillion in United States $2.07 trillion in New York State $38.63 billion total in Tompkins County

4 WEALTH RELEASED 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% NY US Wealth Transfer A likely scenario for New York and the U.S.

5 Population: 101,564 Current Net Worth Tompkins County, New York as of 2010 $7.4 billion total $190,200 per household Estimate 2,900 High Net Worth Households Assets of >$500,000

6 LOOKING AHEAD A possibility for the next 10 to 50 years Opportunity to retain some portion of Tompkins County s generational transfer of wealth for future generations through planned giving into charitable endowments 5%

7 COMMUNITY WEALTH Yesterday For generations, people lived entire lives close to their birthplace Tompkins County wealth generally passed from generation to generation, but primarily stayed in Tompkins County

8 COMMUNITY WEALTH Today Many of the next generation no longer live in our county Once the wealth leaves our community, it will never return

9 LOOKING AHEAD Two possible scenarios Tompkins County has a robust community endowment and a secure future; or, Much of Tompkins County wealth has been transferred to communities in California, Arizona, Florida and beyond.

10 PASSING WEALTH FROM ONE GENERATION TO THE NEXT Three beneficiaries Heirs Taxes Community

11 YEAR 1 YEAR 15 YEAR 25 YEAR 50 Establish an endowment $100,000 in cumulative grants and services $200,000 in cumulative grants and services $625,000 in cumulative grants and services $100,000 gift $158,000 balance $213,000 balance $455,000 balance INITIAL GIFT INVESTED 1 TIME 2 TIMES 6+ TIMES LOOKING AHEAD One gift, many generations assumes 5% annual payout and 8.5% rate of return

12 Impact if only 5% of Tompkins County wealth was given as charitable gifts designated for community endowments $ million in 10 years $1.93 billion in 50 years

13 If people make a charitable gift of 5% of their estate to community endowments YEAR 10 $126.5 million charitable gifts Range from $6.33 to $33.5 million in total grants $145.5 million community endowments YEAR 50 $1.93 billion charitable gifts Range from $96.58 million to $3.5 billion in total grants $3.94 billion community endowments LOOKING AHEAD Many gifts, many generations

14 HISTORY & BACKGROUND o Millionaires in the Millennium (1999) o Boston College o $41 Trillion TOW opportunity o period o Transfer of Wealth in Nebraska (2002) o RUPRI Center for Rural Entrepreneurship o Completed over 38 studies in 1,100 communities

15 TOW Studies in the United States

16 in billions of real 2010 dollars U.S. Household Net Worth $40,000 $37,500 $35,000 $32,500 $30,000 $27,500 $25,000 $22,500 $20,000 $17,500 $15,000 $12,500 $10,000 $7,500 $5,000 $2,500 $ Source: Board of Governors of the Federal Reserve Syste, Statistical Releases, Flow of Funds - Z.1

17 Events of the Last Decade Dot Com & 9-11 Crisis The Post 9-11 Recession Housing Bubble Financial Crisis The Great Recession of 2008

18 in billions of real 2010 dollars U.S. Household Net Worth Q2 $80,000 $75,000 $70,000 $65,000 $60,000 $55,000 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Bubble 1 Dot Com & 9-11 Recession Bubble 2 Historic Trend Line Great Recession Q1 Q2 Q3 Q4 Q1 Q Source: Board of Governors of the Federal Reserve System, Statistical Releases, Flow of Funds - Z.1

19 Participating community foundations: Central New York Community Foundation Community Foundation of Herkimer & Oneida Counties Community Foundation of the Hudson Valley Community Foundation of Tompkins County

20 Methodology Scenario Forecast NOT a Prediction Forecast Base year 2010, for 50 year period Real NOT Constant Dollars

21 Estimating Net Worth Step I Survey of Consumer Finance, The Federal Reserve Board Triennial Current Release: 2007 Flow of Funds, The Federal Reserve Board Current Release: December 9, 2010 Next Release: March 10, 2011

22 Age Characteristics Estimating Net Worth Step II Market Valuation of Property by Class Concentration of Creative Class Employment & Income Dividends, Interest & Rent (DIR) Income Proprietors Employment & Income Residential Real Estate, Owned Businesses, Investments

23 Scenario Building Step I Population projections Economic growth scenario Step II Wealth Release Step III Review & Verification

24 Discounting assets Estimating Net Worth Step III Motor vehicles, art, jewelry Immigrants Group quarters population High amenities, vacation homes, retirees Economic development projects Other special cases

25 Tompkins County Technical Advisory Committee Suzanne Aigen, Aigen Agency Martha Armstrong, Tompkins County Area Development Fred Ballantyne, TIAA-CREF and former Community Foundation Board Mary Berens, Cornell (ret.) and Community Foundation Board Phyllisa DeSarno, Economic Planning, City of Ithaca David Kay, CARDI, Cornell University Paula Peter, The Solstice Group Ed Marx, Tompkins County Jean McPheeters, Tompkins County Chamber of Commerce Ed Morton, Chemung Canal Trust Company and Community Foundation Board Karen Sharkey, Audrey Edelman USA Realty David Squires, Tompkins County, Director of Finance, and Community Foundation Board Frost Travis, Travis & Travis Development and Ithaca Rentals and Renovations Bryan Warren, Warren Realty

26 Mean net worth in thousands of real 2007 dollars Average U.S. Net Worth by Age $1,200 $1,000 $936 $1,015 $800 $661 $638 $600 $400 $326 $200 $106 $0 Less than or more Age Cohort 26

27 Mean net worth in thousands of real 2007 dollars Average U.S. Net Worth by Work Status $2,500 $2,000 $1,961 $1,500 $1,000 $500 $350 $543 $124 $0 Working for someone else Self-employed Retired Other not working Work Status 27

28 Mean net worth in thousands of real 2007 dollars Average U.S. Net Worth by Education Level $1,200 $1,098 $1,000 $800 $600 $400 $366 $252 $200 $143 $0 No high school diploma High school diploma Some college College degree Education Level 28

29 Years Median Age, Herkimer 41.8 Ulster 40.8 Putnam 40.7 Oneida 40.7 Cayuga 40.0 Madison 38.6 Onondaga 38.5 Dutchess 38.4 New York 37.7 Oswego 37.2 U.S Cortland 35.3 Tompkins

30 Percent of Group Quarters Population, % Tompkins 12.9% 12% 10% 8% 6% Madison 7.5% Cortland 7.2% Oneida 6.4% Ulster 6.3% Dutchess 6.3% Cayuga 5.7% 4% 2% Oswego 4.1% New York 3.1% Onondaga 3.0% U.S. 2.7% Putnam 2.2% Herkimer 1.7% 0%

31 Percent of Dividends, Interest and Rent Income, % 20% 15% Tompkins 20.08% U.S % Ulster 17.99% New York 17.81% Dutchess 16.92% Madison 16.18% Putnam 16.17% Onondaga 15.93% Oneida 15.88% Cortland 14.37% Cayuga 14.03% Herkimer 13.66% Oswego 12.05% 10% 5% 0%

32 Population Growth (Annual) 1.2% U.S. 1.1% 1.0% 0.8% 0.6% 0.4% Tompkins 0.6% Dutchess 0.6% Putnam 0.5% Ulster 0.4% New York 0.3% 0.2% Madison 0.1% 0.0% -0.2% Onondaga 0.0% Cortland -0.1% Oswego -0.1% Oneida -0.1% -0.4% Herkimer -0.3% Cayuga -0.3%

33 Per Capita Income Growth (Annual) 4.0% 3.5% 3.0% 2.5% Putnam 3.4% Tompkins 3.3% Dutchess 3.0% Ulster 2.8% Onondaga 2.7% Madison 2.7% New York 2.6% Cortland 2.5% Herkimer 2.5% Oneida 2.4% U.S. 2.4% Oswego 2.4% Cayuga 2.4% 2.0% 1.5% 1.0% 0.5% 0.0%

34 If people make a charitable gift of 5% of their estate to community endowments YEAR 10 $126.5 million charitable gifts Range from $6.33 to $33.5 million in total grants $145.5 million community endowments YEAR 50 $1.93 billion charitable gifts Range from $96.58 million to $3.5 billion in total grants $3.94 billion community endowments LOOKING AHEAD Many gifts, many generations

35 Everyone can be a philanthropist, with the help of professional estate planners