Where there's a will, there's a way

It is estimated that collectively, those who died in 2024 passed on as much as $150 billion to the family and friends they left behind.

As baby boomers enter their twilight years, that inheritance figure is expected to balloon to more than $5.4 trillion over the next two decades.

In 2024, just one per cent of that total $150 billion inheritance – $1.5 billion – flowed into charities' coffers.

While it's a substantial sum, the percentage is still lower than the 3.7 per cent ($7.6 billion) left to charity in the UK and 4.4 per cent ($69 billion) in the US.

Analysts such as John McLeod, senior research consultant in family advisory and philanthropic services at JBWere, believe that increasing the size of this piece of the giving pie by encouraging more Australians to leave behind money to do good after they are gone, could help reshape the nation in the years to come.

“If we think of the total charities sector – universities, hospitals, aged care, the arts, welfare, international aid, the whole lot - their total income this year will be about $200 billion,” McLeod, author of The Bequest Report, recently told the Fundraising Institute Australia conference in Sydney.

“So, $150 billion [in inheritance] is right up there with what the whole charity sector spends, and that money is going to continue to be passed on and grow substantially as times goes by.”

A changing nation

One of the reasons for the increase in wealth transfer is the nation’s changing demographics.

Australia’s population growth is slowing and the population is ageing. This will contribute to an acceleration in the annual number of deaths from around 180,000 currently to more than 330,000 within 40 years.

With much of the wealth transfer flowing from older and wealthier citizens, it is vitally important to think ahead and plan for how best to use this enormous redistribution of funds.

McLeod said Australia’s position as a wealthy, but ageing nation provides a strong baseline from which to increase charitable bequests.

Many of the top five per cent of wealthy families who embrace philanthropy, either by leaving a sizeable bequest or via a foundation, are motivated by leaving a legacy for a cause they are passionate about.

For much of the rest of the population, McLeod said, charities need to change the way they talk about planning bequests and why leaving money to charity can make a real difference.

“I think the most significant thing is that we must normalise talking about bequests,” he said.

“When was the last time you went to a dinner party, and someone said, ‘What are you going to do with all your stuff when you die?’”

“We just don’t talk about it. They do overseas. It’s much more common over there.”

McLeod said it’s not that Australians are not generous people.

“About 30 per cent of people claim a tax deduction for giving during their lifetime and 70 per cent give in some other way, such as grabbing a sausage at Bunnings or buying raffle tickets,” he said.

“So, if 70 per cent of people are doing something that aids charities while they’re alive, why are only six per cent putting something for charity in their will?”

McLeod said when he began researching his report on bequests, as an analyst he thought it would be relatively straight forward: how many people are dying, what are they worth and what are they going to do with their money.

“The more we got into it, the more we thought it’s actually about how families make these decisions,” he said.

“What are they thinking about when choosing where all their assets go? How do they make those decisions and how might we try and help them make even better decisions?”

Kim Venter, director of family advisory services at JB Were, works with families who are in the top two per cent to five per cent of wealth holders in Australia.

She said research showed a significant proportion of donor bequests come from these larger estates.

“When looking at the top one per cent specifically, these families are typically very well advised, which means a lot of their wealth is tied up in structures,” said Venter.

“They’ll have businesses, they’ll have discretionary trusts, managed super funds, companies, and often, a giving vehicle.

“So, for them, this generational transfer of wealth is more a chance to control what happens and equipping the next generation and their advisors to steward wealth for future generations.”

Venter acknowledged these are far from average Australian income earners.

“But certainly, for us it’s our purpose to support these families with connecting their capital to do good.”

McLeod said while inequality exists in every country, including Australia, we compare favourably to the rest of the world.

Australia ranks number five globally in average wealth but moves up to number two in the world in terms of median wealth.

In comparison, the US, while it holds the number two spot in the world in terms of average wealth, drops to 14^th place in terms of median wealth.

“So, while our wealth is spread, it's more equal than most countries,” said McLeod.

“That’s good for that share of bequests as well. It’s not all sitting with old rich people. It’s spread out across the country.”

Volunteers are vital

While often undervalued, McCleod said there was a strong connection between volunteering and leaving money to charity.

“Think of a what a volunteer is,” he said.

“Often, they’re people who are giving you their time, perhaps their money, but often they don’t have the money right now, but they’ve got the time to give, so they really care about what you [charity] do.

“When they pass, the correlation between them leaving bequests is very, high.”

Connecting with why donors want to bequeath

McLeod said while bequests are sometimes be taken for granted by charities as an unexpected windfalls, more effort should be invested in understanding why donors have donated in the first place.

“Everyone knows why charities want bequests. What you’ve really got to try and focus on is ‘why is leaving a bequest important to the donor who is not even going to be there to see it.’”

McLeod said animal welfare charities know this relationship well.

“The sector as a whole gets one per cent of its total income [from bequests] but animal charities get 50 per cent from bequests,” he said.

“One of the reasons is they make that link really strongly as to what’s important to the donor. It's that connection with the animals and who’s going to carry that on for them [after they are gone].”

McLeod said that 50 per cent of total charitable income comes from government, followed by non-government sources excluding philanthropy (43 per cent), with philanthropy accounting for the remaining seven per cent.

Of that philanthropy component, McLeod said charitable bequests are highly valued because they are mostly unrestricted in their use and have a return on investment around six times the average for all fundraising, making them a valuable source of income.

Charitable bequests, whether one off or from a past gift to a charitable trust or foundation, regularly make up 20 of the 50 largest annual philanthropic gifts in Australia.

They also present the biggest opportunity for growth.

“Bequests will increase $1.5 billion to $4 billion over the next 20 years if we do nothing at all,” said McLeod.

“That’s pretty significant, but imagine if we could raise what’s coming to charities by another one per cent, or the three or four per cent that we see in the US and the UK.”

The race has already begun

McLeod said Australia has a remarkable window of opportunity in which to take advantage of the intergenerational transfer of wealth to make the country a better place, but there is no time to waste.

About 40 per cent of Australians don't have a will and 10 per cent die intestate, leaving succession laws to dictate where their money goes,

“It takes five to 10 years to really establish a bequest program from the start, so if you only start today, you’re already 10 years into this [trend],” he said.

“I think there is a wonderful opportunity for both the for-purpose sector and importantly, for that increasing number of people who are passing on, to really extend that purpose and legacy during their lives and beyond.”

More information

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Charity begins at home

Where there's a will there's a way to give