South Dakota Wealth Transfer Report

1. South Dakota Wealth Transfer Report

2. Leaving a Legacy The progress made through the promotion of philanthropy in South Dakota has been impressive. Now, the opportunities are even greater. In the next five decades over $101 billion will be transferred from the current generation to the next. This transfer means South Dakotans can give back to the communities that have supported them. The opportunity to give back, however, must be properly presented in order to capture the results of this exciting transfer.

3. Impact of Study Purpose In looking at current net worth and future transfer of wealth statistics, it is evident that communities must tap into this knowledge in order to sustain and secure local asset growth. With resources available to forecast the financial future of South Dakota, communities can set their eyes on favorable outcomes. Change By looking at the results, we hope to spark community initiatives to not only capture this transfer of wealth, but to gain insight to the future economic trends of the community.

4. Achieving Success Improvements Results from these studies show the opportunity for local areas to tap into these resources during the transfer. This will result in long term changes in the community. Knowledge New libraries, healthcare facilities, educational programs, and economic development initiatives are possible with the information obtained from recent studies on national wealth transfer and most importantly, wealth transfer in South Dakota.

5. Inter-generational Wealth What is it? Primarily household estate wealth, along with investments and insurance, that is transferred from the current generation to the next. United States Transfer of Wealth Researchers at RUPRI Center for Rural Entrepreneurships estimate a $75 trillion transfer of wealth (TOW) in the United States between 2010 and 2060. - This translates into a transfer of $653,000 per household. - This is a lower level estimate which assumes a sustained 2% real growth rate along with low lifecycle savings rates. - The trend line for U.S. wealth transfer is projected to expand over time.

6. South Dakota’s Role Output This wealth transfer extends to South Dakota. During the next 50 years, between $101 and $112 billion will be transferred according to the “Wealth in South Dakota: Inter-Generational Wealth Transfer Scenario” report compiled by the Nebraska Community Foundation. Each year an average of $2.02 billion will transfer in state from the current generation to the next. These transfer levels will change depending upon the timing of wealth holders transferring their estates.

7. What does this mean? Lower Transfer Levels Projected levels are lower than national numbers due to slower population and growth rates as well as lower household income levels. …Still Great Potential A $1 billion total endowment could be created if just 5 percent of the wealth transferred was pledged to a community based endowment over the next 10 years. At a conservative 4 percent payout rate of the endowment, South Dakota communities would have approximately $40 million for community betterment projects over the ten-year period.

8. Wealth in South Dakota • Forms of wealth cited • Property (see graph) • Investments • Insurance

9. Current Net Worth Transfer of wealth (TOW) levels are based largely on current net worth (CNW) levels cited by the U.S. Census Bureau. Levels depend on: • Income • Age • Historical Populations • Economic Trends

10. South Dakota Wealth Source: ESRI, Chicago – 2010 Data – 2012

11. Wealth by Age Cohort Source: ESRI, Chicago – 2010 Data – 2012

12. Property Valuations

13. Current Net Worth

14. Indications of TOW Population Study assumes a proportional share of inter-generational wealth based on state population. Income Research shows as incomes rise, net worth also rises. SD has more households in lower income groups when compared nationally. Age As household age increases, the net worth follows suit. Overall, SD residents are older when compared nationally. This supports an earlier transfer of wealth.

15. Economic Regions

16. Regional Estimates in billions

17. TOW Opportunity Timing

18. Methodology Dividends, interests, and rent income Provides an estimate of certain kinds of asset holding including stocks, bonds, cash accounts, and rental property. Estimated by the U.S. Bureau of Economic Analysis. Asset holdings by age CNW generally increases by age. National data for wealth holding and specific age information is used in this indicator. Asset holdings by income level CNW also increases with income levels. National data for wealth holding by income level combined with household income level is used in this set. Real property asset holdings State and county information on real property were also used.

19. Wealth Retention Strategy Effort must be made on local level to develop strategy Organization or committee needed to spearhead development Overall strategy would involve development organizations, local nonprofit and charitable service agencies, and local governmental entities Plans for earning expenditures must be in place before development work begins Management of funds to ensure appropriate payout essential to success