[Music] Lakeland Currents, your public affairs program for north central Minnesota.

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Hello, again, everybody.

Welcome to Lakeland Currents.

We always have interesting shows, for every show we have is interesting, but I think you're going to find that the topic that we're talking about today is a little unique, maybe some of us haven't been thinking about what this is going on here, but it's a fascinating subject, and I guess the title is going to be Intergenerational Transfer of Wealth and my guests today are Terri Foster who is the Executive Director of the Brainerd Lakes Foundation and Ben Winchester who is my co-host has been for six or seven years.

So he's a sociologist with the University of Minnesota Extension.

That's right.

Ben maybe we could start with you because you have this wealth of background to sort of set this up.

Sure, yeah, I think one of the biggest concepts we think about is our communities are constantly changing and how are they changing and I think early in my career we hit on this concept around the drain of rural, right.

We know our rural communities are filled with older people relative to the urban places, we know that 75% of our rural homeowners are baby boomers or older, we're just filled with a lot of older people.

So a lot, really a lot of the trends that happen in this country, happen in our rural communities first.

And that's not just Minnesota.

No that's not.

So, you know, even the first days in my career I was inundated with the grain of rural, the grain of rural how do we build services, how do we expand hospital clinic services to ensure we're serving our population, how do we help people age in place.

Well, the reality is today the grain of rural is turned into the dying of rural and there are people passing away every day.

We know that this large generation of baby boomers, we're at the beginning of this influx of what demographers called death, right, we have to talk about end of life here and so this led a number of organizations across the country to be interested in how much wealth they have and so Nebraska Community Foundation early on commissioned these reports that were called transfer of wealth studies, they wanted to better understand how much wealth do we have and how much may be transferring and the bigger idea here is that especially in our rural communities the wealth that was generated here may be passing away to our kids who don't live here anymore.

So really what happens now when we're, you know, all this wealth that was generated with me and my neighbors it doesn't live in town anymore.

So we believe there's an opportunity here, so number one to realize we do have a lot of wealth in our rural communities, it's built up around real estate, our businesses, just the capacity for us to have a small business is a wealth generator.

So for us to look at our small towns in this transfer we want to help ensure that maybe there is a future for our small towns because we do know that our small towns have been repopulated with people, we call it the brain gain research and people in their 30s and 40s literally waiting in line to move in to small towns today.

So they're waiting in line because the people are not necessarily moving out of their homes and this is part of the housing research we do, which we won't get into today, but as the people age out of those homes, this is where the transfers occur.

So now we want to look at what happens in these transfers.

People do have wealth made up not just of like your checking accounts, but your retirement funds, you can have business holdings, life insurance policies have a value to them, your real estate, your home, all of this are equities in our life that we have built up that then at the time of death has an opportunity to be passed somewhere, and so our conversations on the community development side is really how can we ensure that we have a future for our small towns and maybe we can use some of these transitions that are happening every day to talk about where small towns are going to go because many times our seniors may believe that the town doesn't look the same, this town is dead, why would I invest in death and politically why would you put water systems in small towns that are dying, right.

We're not dying, if we are truly dying why can't I find a home to buy.

I mean this is the common answer to that.

So look at how communities transition, it's out with the old in with the new, so I really like to encourage people to look at what are some of the interests that these newcomers have, how are communities changing today, how can we help invest in building the social, economic, and physical infrastructure to ensure that people are going to be successful in the future.

So the same communities that help build the people's wealth today are going to be the same communities that help the next generations build wealth.

But I think generally on the wealth conversation people get distracted because there is a lot of conversation around wealth inequality and there is a ton of wealth inequality in this country but at the same time we can't let the trillion, like the 't' distract us from the 'm' the millions that may exist in our small towns today.

So we've done these studies at the University of Minnesota now, we've done them in a couple states, but we do this for Minnesota, and they're called transfer of wealth studies and it shows that Minnesota has assets, we have a tremendous amount of assets.

We currently have like $2.2 trillion in assets, and in the next 10 years we're going to see over 61 billion transfer from one generation to the next and so how much of that is going to be retained locally at all, how much do our community foundations have a role in ensuring that we can have a community for the next generation to live in.

So part of what we do at the University of Minnesota is do these studies, we do the studies that kind of provide a numerical data point that says here's a pretty good estimate about how much is really going to transfer and we work closely with community foundations.

We've worked in Iowa, North Carolina, Montana, Nebraska has done this over the years, and they wanted to build upon this messaging and to say you have resources, you have wealth, how can we work with our population to talk about what this means for our community.

So we are the analysts and we like to partner with the engagement specialists on this side because it is people on the ground that have the real conversations and I think I'll end with this, which is, I think one of the biggest things I realized is that we don't unless when you walk into an estate planner's office or you walk into an attorney's office to talk about where your estate is going to go, they're never going to recommend what to do with those funds, you have to have a real good idea of what you want to do with your estate before you walk in that door.

So I'm an advocate for planning, for succession planning, how can we ensure that we have a future that can be somewhat planned for our community, somewhat planned for our people that will transition out as they go into nursing homes or actually pass away.

So for me this is a narrative about hope and opportunity.

Yes we are going to see a lot of transitions occur but at the same time these transitions are going to reinvigorate our small towns and hopefully the people that have helped build these towns for the people today are going to invest in the towns for the next year generation, too.

So Terri what's the connection with the foundation?

Well, thank you for asking.

We are super excited and thankful for Ben and the University for doing this study.

It's really helpful to know where we can go and we can't get there if we don't know where, you know, we're actually heading and some of the tools I think right now one of the biggest tools is charitable giving is like a donor-advised fund and it is a fund where folks can give money or non-cash assets.

You talked a lot about, you know, some of those things like real estate or, you know, stocks, you know, you have your retirement plans and all of those things.

It's actually estimated about 93% of our wealth, personal wealth, is held in non-cash assets and so a community foundation can help take those assets and basically make them liquid and put them into a donor advised fund in which you could receive a potential tax savings, tax deduction, and then do your charitable giving.

It's invested and it grows so you can even do more charitable giving throughout your lifetime and even have successors for your fund, and then kind of complimentary with that is the community funds.

So last year the Brainerd Lakes Area Community Foundation Partner Funds, we have about close to $24 million held in funds, some of those being our nonprofit agency funds and many of those being our donor-advised funds.

What do you mean donor-advised, what does that mean?

Yeah so donor-advised is the charitable fund, so you or Ben can say, maybe you had a larger income year and so you want to get above that standard deduction, you know, for taxes so you can itemize and take advantage of a, you know, better tax savings.

You could give let's say 5 years worth of your charitable giving that you maybe do each year into a donor-advised fund and this fund is kind of like a savings account.

So you get the tax deduction, you put the money or non-cash assets in and then that money is invested and continues to grow but you get to advise it.

You can give to any 501c3 school or unit of government, so like the Nisswa Fire Department the Brainerd Fire Department, any of our schools, any of our nonprofits that are doing critical work around, you know, homeless or housing and healthcare, wellness, mental health, our youth and our seniors, you know, you can give to any of those things.

You get to advise your favorite, your church, and you can do that throughout your life and then have successors and those funds really are filling a need, but allowing our donors to follow their passions and we're seeing a lot more of the gifts that the donors are doing or grants back out to the community happening here, right here locally, and so that's really strengthening our community because many of these nonprofits are really serving some critical needs areas.

And just as I mentioned around, you know, the housing, workforce development and some of those things.

And our funding we're seeing is going down from state and federal government and so donor-advised funds are a great way to support our neighbors who maybe don't have as much opportunity right now with wealth and give a hand up through supporting those nonprofits and then, you know, just coming in complimentary any of those needs that are not met, a community fund, a general community fund can fill those gaps and so we can do that now and into the future where we don't even know what's the next pandemic, you know, or what's the next big thing.

So do you find, and Ben you work across other states, the people in the age groups that are getting to the point of doing this are they willing participants or are they resisting it a little bit?

I'll say both.

Of course you got some people are like this is my wealth right, this is my wealth I'm not going to share it with anybody, but at the same time there's a recognition that we like to put forward that your wealth isn't generated in isolation, I mean it's in a community with the residents, with the people, with the leadership, that leadership that you've got in your community.

So more broadly we do see a theme of service.

I mean rural people generally have a theme of service and especially in the Upper Midwest we've got high levels of social capital, concern and caring, high number of nonprofits.

The number of nonprofits in Crow Wing County I think I had looked here the revenue of the nonprofit sector alone in just Crow Wing County is $348 million a year.

They currently hold almost a a billion dollars in assets so when we talk about the nonprofit sector it's not a small thing here, so, and when we do talk about being able to reinvest in these pieces like, I do talk about like it's almost impossible for me to walk in and invest in a business on Main Street but I can invest in our parks, I can invest in our new bike trails that we're developing in the St Cloud area, like I'm building the assets based upon needs and desires that the residents have.

So I think every state is a little bit different, they all take on kind of different nuances of this.

Some work with directly with community foundations to develop restricted and unrestricted funds for communities to do this work, others are just trying to obtain, you know, legislative tax credits to continue this and incentivize this at the local level.

So there are a lot of very good conversations to be had around where your community goes through this, because ultimately this is about the future of our towns because nobody, why would we invest again in death, we want to invest in what we believe is a characterization of where our community has been and where it's going to be going, so we want to support that in whatever way we can, but we do know that it's a hard conversation for people to have.

It's at the end of your life, it is sometimes in emergency mode that you're doing this, but our advocation is just do some planning.

I think the best, you know, we talk about the best time to plan was yesterday, same with planting trees like do it yesterday is the best time.

So now we cannot continue to live in a world of best intentions which is I'm going to do that someday, right.

Same with our homes, same with our businesses.

Center for Rural Policy and Development just released a study that looked at the, you know, 55% of our business owners are over the age of 55 they're going to be moving out of these businesses, these are local wealth creation opportunities how do you ensure that you retain those businesses, do we have a real plan.

But we know that business owners don't, just one in five actually have a plan.

So these are the kinds of, you know, intentional aspects of community that we need to build.

We can't hope they're going to show up, we need to be intentional about advancing the conversation across our community.

We had recently a program on farming and how do young people get into farming and had a person who passed it down to his son and his son is doing very well but that's really becoming the minority, very few young people have the wherewithal to get into farming, and one of the things I've noticed in the Brainerd area, been in Rotary a long time, the number of people in these service groups keeps dwindling and we're seeing fewer and fewer young people, and I know one time you talked about that Ben on our show, that you saw this coming, that more and more people don't see the value if there's not something for them personally, is that still?

Yeah it's still people are not as engaged in our place- based groups, they're involved in their interest group.

So when I say the mountain bike club like that's pretty regional, that is statewide, it might be 12 counties for our mountain bike club, so the biggest tension we see on the engagement side is people are not coming to our Eagles, our Lions, our Sertoma groups, you know, but they're more than engaged in these regional development groups, they're more than engaged in their interests and their activities.

So for us social life just looks different, so we need to recognize where people are spending their time and then bring them back into the loop.

So we talk about these concepts called bridging, we want to bridge our local groups with these regional groups that people actually are involved in.

So that gets back to this brain gain research, you have people in their 30s and 40s moving in and they're not coming to our Eagles clubs, they're engaged in these different types of groups, and we find out that these newcomers they volunteer more, they lead more, they donate more, so really for us it's linking these two groups, distinct groups together that tend not to overlap and that gets back to more stereotypical things about rural that, you know everybody when you really don't.

You know we live in these huge regions now.

So just as life has shifted so dramatically for our rural residents we need to recognize that and try to build some of these avenues to connect these changes so we do have some continuity between the past, present and future.

So when you folks sit down and work with groups, what are the kind of groups that you're usually working with, are you working with seniors who have retired or what is it?

You're talking about individuals or people that are starting charitable funds?

So we really have something for everyone and I do agree that, you know, there are some phenomenal young professional groups.

In fact, you know, the Brainerd Chamber has started this WAVE professional group that.

They've been on this show.

Just I think, you know, as you mentioned we just need to figure out how to connect and work with them, right, and side by side because change is happening and we have to adapt to that.

But as far as who we're working with, we can work with young people, anyone, in fact we did give some philanthropy dollars for those WAVE honorees, for the Four under 40 Gala that they had and so those honorees had an opportunity to direct some of those dollars to their favorite charities and so that was really neat.

We got a chance to go out to each of the four charities that they selected and present a big check with them and just have them see kind of the impact and the work of those nonprofits and just trying to uplift all of them.

But so as far as older people, yes, I think the main thing is education, like trust, building relationships, you know, so why do you want my money, you know.

Especially if they have children, I mean I could see where there's some conflicts there.

And we want it to feel good, right, like giving shouldn't hurt, and we don't want it to be, you know, something that you're scared to do or you don't want to do and we want to build that relationship so that you know that you can trust us.

And the Community Foundation really is for everyone, it's our community and it should represent everything in our community and that includes young and old.

And our youth, you know, who maybe don't have opportunities to excel in the workforce or, you know, maybe at home and also our seniors.

Right now, you know, we have more senior population here and less, you know as far as I guess, that population is bigger than even those that are in school, so 0 to 18.

And so again, you know, I guess my eyes were kind of opened.

We started working on this age-friendly community type thing and really again that benefits all of us right because whether we like it or not we're all aging, so I mean when we want it to work for all of us.

But it really is everyone and I guess estate planning, you know just like you said, we make lists, we plan for everything, that's just something that we don't really like to talk about and you know plan for, but estate planning, we have done some workshops with some attorneys and accountants and things that they've sometimes recommended is if you're going to do charitable giving maybe through your estate maybe don't do it through your will or your trust as far as addressing individual charities but if you have a donor-advised fund everything can just go whatever percentage or you know what's left over after you give to your kids and you know the other priorities that you have.

But then you can use a donor-advised fund at the Community Foundation to just transfer the remaining part and you can tell us and for free we can make addendums or changes to your fund agreements and we can maybe do some of it where it's a designated fund where it would go out to your church and the top three charities and maybe you would have your children succeed on part of that fund.

We've seen some of the older folks are not sure if their children are going to take care of the church or you know our other favorite things as much as they maybe would, and so that allows a lot more flexibility.

And then people are also recognizing the importance of being able to have those unrestricted dollars for the Community Foundation to just meet the needs of tomorrow that we don't even know about yet.

I had a very good friend in Brainerd, who's no longer here, but he used to always say you don't give until it hurts, you give until it feels good, and I thought that was a really cute saying.

How much money does the foundation give out on an average year, I know it fluctuates, but what are you dealing with?

So we started about 26 years ago in 1998 and did not have a full-time executive director until 2016 and that is really when we started seeing the growth, but we've given out about 11 million to date to nonprofits through the foundation and of course our partners, the community members who hold those charitable funds, and so we're trying to keep much more of that going local here and I think it is working.

As we build those relationships and people learn of the great projects and work that's being done here to support our neighbors they want to see it go here and so that's really encouraging.

But last three years we've given out over a million dollars each year.

Each year, wow, that's a significant amount.

And so we talk about this transfer of wealth in, you know, over 10 years if we can capture some of that wealth we could be giving out 7 to 8 million dollars a year forever through endowed funds to make sure that tomorrow's needs are met.

So do you have someone in your office, if I came into your office and I said I need some help, do you have someone that could work with that?

Absolutely, yes, we would love to meet with you and just hear your thoughts and what your goals are about your giving.

And you know many people think oh I don't really have that much wealth and we are seeing though too that I think especially this baby boomer generation you worked really hard, and they have generated wealth, and we've seen, you know, the you know capital gains it's going to be enormous for some of them because some of the people I've talked with oh I bought that piece of property for $15,000 back in 1960 and now it's worth, you know, like $2 million and so I think there's a lot more wealth than what people realize, too, when they sit down and look at their non-cash, you know, means and also like retirement plans and life insurance policies you can even name the Community Foundation or a charity for your insurance policies and, you know, there's a lot of things that we can do to help and even do gift annuities so if you want to have income throughout your life for the rest of your life, you know, we could set up something like that, a charitable gift annuity, so there's a lot of options and we can help you.

We have staff and we also partner with a great organization called Community Giving and they have an expertise in many areas but they are kind of our backend office as far as the investing too.

All of our community foundations locally here, we have about $250 million in assets under funds and so those are all invested and all growing and they can also help us with transferring those non-cash assets into assets into your donor-advised fund or the Community Foundation.

We just have a couple minutes left.

Ben you've always amazed me where you've been able to predict some of these trends that are coming, I mean really I sincerely mean that, it's just amazing, you are walking encyclopedia.

What do you see after this trend when people pass away and start giving their money away, what do you think is the next wave of things coming?

Well, there is a peak that we're going to see in about 2035, and that is the baby boomer peak and then after the baby boomers get done passing away then it's Gen X like me that nobody generally cares about because we're a smaller cohort, not as big, but then after me are the Millennials and they're even bigger so in many ways and we had shared this earlier like just talking about like we need to practice how to do this right now, we're on this uphill climb of all of these people potentially passing away, so we can get good at this conversation and get good at like seeing how to build community around these efforts but really it is around there's new people moving in too and we're going to see a lot of homes turn over.

So right now when 75% of your homeowners are baby boomers and older and imagine they turn over in the next 20 years and it's out with one and two people households and in with three to five.

Like for me, and we know half of the newcomer households have kids, so really, you know, what do we look like in the next 20 years.

It's going to be a lot of passing away but also a lot of reinvigoration.

I'm gonna hold off if you don't mind.

I would like you to hold off on that end, please.

But really it is a lot of change where there's going to be a lot of heartache, a lot of joy, a lot of healing to occur in and across our small towns as we go through the next 20 years here.

That's really interesting.

Well, we're just about out of time.

Terri how do people get a hold of you?

You can just contact the Brainerd Lakes Area Community Foundation or also ask your professional advisers, ask your accountants and your attorneys.

We would love to sit down free of charge and meet with all of you together is kind of the best way to do it so.

And Ben how about you, how do people get a hold of you, and I should say that you do a lot of public speaking, a lot of training, maybe just briefly tell us what you do.

Yeah, so number one I just like to share research I do, but really the goal in my career has been making it all consumable because sometimes that research that comes out of higher education or you know economic research service isn't highly understandable, so really I'm thankful to have a job with Extension, it's our responsibility to bring this knowledge back out to the countryside.

So if people want to get a hold of me you can Google Ben Winchester, University Extension.

My email is benw@umn.edu and if you'd like to see any of our transfer of wealth reports our website will be up in the next month we'll say.

But if you go to, Z like Zulu, z.umn.edu/mntow, you can find a copy of all of our transfer of wealth studies.

Great and he's very, very good, very entertaining speaker.

Thank you both for jumping on with us today, it's a very interesting topic, and I'm going to follow it closely, really.

Good thanks.

Thanks.

You've been watching Lakeland Currents, I'm Ray Gildow, so long until next time.