$707 billion to change hands

The unprecedented “transfer of wealth” from one generation to another that has been the subject of many national stories has terrific implications for “poor” Kentucky, too.

Though the facts may change how we define Kentucky’s opportunities

An independent study commissioned by the Kentucky Philanthropy Initiative, conducted by the RUPRI Center for Rural Entrepreneurship, reveals that Kentucky will see an intergenerational transfer of wealth – estates of a generation of wealth-builders to its heirs – will likely be more than $707 billion over the next 50 years.
 
The Blue Grass region’s share:  Nearly $60 billion.
 
The Blue Grass region is 17 different counties, including the cities of Lexington, its urban hub, and Frankfort, the state Capital. Today, half the region’s wealth is in Fayette County, according to the report, but that will change over the next 50 years as Fayette County matures. Greatest growth and transfer of wealth opportunity is in Clark, Jessamine, Fayette, Scott and Woodford Counties. Strongest long-term growth will be in Scott, Jessamine and Anderson Counties while Estill, Nicholas and Franklin Counties will have stagnating or declining growth.
 
The Transfer of Wealth Kentucky report can be downloaded in full by clicking the link on this page.  The report gives a region-by-region breakdown of the wealth transfer phenomenon as well as a county-by-county breakdown for each region, including the Blue Grass region.
 
Funding for the study was provided by private foundations and corporation dedicated to Kentucky’s future.
 
Don Macke, RUPRI project leader for the project, said, “Although significant differences exist in wealth-holding and transfer of wealth opportunity, all regions and counties in Kentucky do have resources and opportunities.”
 
RUPRI’s studies in other states have led to initiatives aimed at capturing philanthropic investments in local communities. Campaigns to encourage wealth-builders to name their communities among their heirs have resulted in considerable endowments in many states – particularly important to rural states – that assure legacy funding for economical renewal and quality of life.
 
In Kentucky, if wealth-transferers committed just 5 percent of their transferring wealth to the communities in which the wealth was made, endowments of more than $35 billion would be created across the state.  That would mean $3 billion in the Blue Grass region alone.
 
Judith G. Clabes is editor and publisher of KyForward and founder of the Kentucky Philanthropy Initiative.

What Can You Do?

• Think “local” first. Support your community’s economy, build entrepreneurship in youth by connecting them with local business mentors and use local products for school fundraising campaigns.

• Make contributions to established endowments at community foundations (they qualify for new Endow Kentucky tax credits) or to your favorite charity or institution – college, school, hospital, museum, theater, land trust.

• Volunteer.  Time and talent are critical contributions.  Civic organizations and schools make our communities great places to live.

• Be a leader in your community. Bring together those who want to invest in your community’s assets. Individual citizens can organize and implement a local movement – and make a big difference.

• Count your community as your heir. Consult your financial advisor or estate planner to understand how you can use tax laws to maximize legacy gifts while seeing that your family is provided for.

• Contract your legislators to encourage public policy initiatives that incentivize private philanthropic investments in your community.  Assure that your representatives are aware of theses issues.

What Drives Wealth?

Important wealth-drivers include:

• Current Net Worth (CNW) which represents wealth created over time. States with larger CNWs have a stronger starting point for future wealth creation.

• Demographics. Places with strong population growth tend to have stronger economic performance which creates more opportunity for wealth formations.

Key factors:

Education — People with college degrees have estates six times larger than those with no high school degree, and

Age of households — As we get older our estates grow.

• Economic Performance.  Above average and strong economies create more and better employment, generate greater business performance and enable wealth-creation.

• Business Ownership.

• Behavior and Customs:  Those who spend less and invest more can create significant wealth.

What Are the Wealth Trends?

Current net worth for America’s households is estimated at $36 trillion.
Research strongly supports the view that wealth is becoming more concentrated.

America’s poor and low-income households are struggling to maintain income and wealth levels, and American’s middle-income households are pulled in two directions. The bottom half is losing ground, and the upper end is making progress and growing more wealthy.
 

What Were RUPRI’S Observations about Kentucky?

1. Kentucky is a complex state physically, economically and socially.

2. All regions and counties in Kentucky have wealth and opportunities, although significant differences exist from one region to another.

3. Kentucky can be organized into five (three major and two minor) metropolitan regions, several regions that are part of Appalachia and three non-metro and non-Appalachian regions. There are clear demographic, social economic and wealth characteristics associated with each of these groupings.

4. The three primary metropolitan regions anchored by Louisville, Cincinnati and Lexington represent 65 percent of Kentucky’s current net worth and roughly 65 percent of the 50-year Transfer of Wealth.

By Judith G. Clabes

judy@kyforward.com