Minnesota nonprofits hope to tap into next-door wealthA first-of-its-kind study indicates there may be more millionaires next door than we think. An estimated $48 billion will transfer from Minnesota's elderly to the next generation in the coming 20 years, according to the new "Minnesota Generational Transfer of Wealth Study" sponsored by several state foundations.
By: Jean Hopfensperger, Star Tribune (Minneapolis) / MCT
When a retired farmer in LeRoy, Minn., left $3 million to his community last year, neighbors were stunned. Ditto after a bachelor farmer in Luverne, Minn., bequeathed $3 million for local scholarships a year earlier.
But a first-of-its-kind study indicates there may be more millionaires next door than we think. An estimated $48 billion will transfer from Minnesota's elderly to the next generation in the coming 20 years, according to the new "Minnesota Generational Transfer of Wealth Study" sponsored by several state foundations.
While some money belongs to the suburban rich, much will come from plain-living rural folks whose wealth lies in their land. How to tap part of that wealth, and keep it invested in hometown communities, is what motivated the research here and similar studies nationally. "We were pretty sure there was significant wealth in the metro area, but we weren't sure about rural Minnesota," said Kim Embretson, a vice president at the West Central Initiative foundation in Fergus Falls, which spearheaded the study. "In rural areas, [giving] has taken the form of checkbook philanthropy, writing a check for something or going to someone's house and helping out.
"Now the question is, how do we encourage people to use their estates to give back to their communities or to charities that are important to them?"
The report shows that a whopping amount of money could change hands in agricultural areas: $468 million in Blue Earth County and $397 million in Freeborn County.
While surprisingly high, those figures still lag behind the metro area where about $2 billion is projected to move in Washington County, $5 billion in Ramsey and $10 billion in Hennepin County.
What happens to this money is of acute importance to Minnesota nonprofits, charities, churches, schools and other cash-strapped community institutions, said Bill King, president of the Minnesota Council on Foundations.
A half-dozen Midwestern states, including Nebraska, Iowa and North Dakota, have conducted similar research, King said, inspired by a 2003 national study by Boston College. Minnesota's research was based on demographic and income data from the U.S. Census Bureau, the Minnesota State Demographic Center and the Federal Reserve's consumer finance survey, said Andrea Lubov, the Twin Cities economist who authored the study.
Lubov stressed that the numbers are projections, and that the projections reveal both unexpected wealth in parts of the state as well as obvious poverty in others. In other words, the opportunities for community groups to tap this wealth will vary by county, she said.
Inheriting vs. sharing
Mike Matz, of Breckenridge, Minn., has a front-row seat to the phenomenon. An agriculture business banker for 30 years in west-central Minnesota, he has sat with many families as they sort through their inheritances. If the children live nearby, the cash and assets stay nearby, too, he said.
But if they don't, "the children can liquidate [the assets] and the money is disbursed across the country," said Matz.
That wealth can be substantial in places such as Wilkin County, where Matz lives. The price of an acre of tillable farmland in the county, typically planted with wheat, soybeans, corn and sugar beets, jumped from $900 in 1991 to about $3,000 today, Matz said. Farms in the area tend to be big.
Plus that wealth is spread relatively thin. Only about 6,500 people live in Wilkin County. But an estimated $98 million will change hands by 2030, the study says. Capturing just a fraction for community projects could strengthen communities in the region, foundation leaders said.
Caroline Bye, 80, is among the Minnesota seniors already taking to heart the message behind the research. The retired special education teacher in Duluth recently bequeathed money to the Duluth-Superior Area Community Foundation to create scholarships for area medical students likely to work in clinics or hospitals in northern Minnesota.
"I think we've all appreciated our lives in this area," said Bye, who grew up in Hibbing.
"We want to see as much assistance and services to people who stay here. By providing education and health care, it's certainly making it a more fulfilling place to live."
But retirees such as Bye are in a minority, nonprofit leaders acknowledge. Most Minnesotans simply divide their assets equally among their heirs. Changing that tradition will be a gradual process, they say.
The Nebraska Community Foundation, for example, has worked closely with roughly 1,800 staff and board members at more than 200 community funds around the state, transforming them into walking emissaries for the wisdom of willing money to their communities, said Jeff Yost, foundation president.
They speak informally with friends and neighbors, as well as estate planners, accountants and others, said Yost, whose foundation conducted its study back in 2002. Said Yost: "We've done an enormous amount of publicity and education."
Yost points to some promising figures. In June of 2002, the foundation had 18 "planned gifts" benefiting 14 communities totaling $6.2 million. In December 2011, the foundation had 159 planned gifts benefiting 61 communities totaling $26.6 million.
"In college we learned that goals need to be conceivable, believable and achievable," said Yost. "The [transfer of wealth] information makes goals real."
The timing of Minnesota's study, and any follow-up strategies, is opportune, said King. The council on foundations recently decided that increasing rural philanthropy would be a priority.
But don't expect change overnight, foundation leaders stress.
"It's taken a long time for rural communities to get in the plight they're in," said Yost. "It will take a long time to get out. But you can use the transfer-of-wealth analysis to change the conversation from what we don't have to what we can do."
Distributed by McClatchy-Tribune Information Services.