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South Dakota Wealth Transfer Report

South Dakota Wealth Transfer Report. South Dakota Community Foundation. Imagine holding the key to a better, brighter South Dakota…. Imagine no more. Leaving a Legacy

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South Dakota Wealth Transfer Report

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  1. South Dakota Wealth Transfer Report South Dakota Community Foundation

  2. Imagine holding the key to a better, brighter South Dakota…

  3. Imagine no more. • Leaving a Legacy • Philanthropy’s spark must be ignited in South Dakota now. In the next five decades over $38 billion will be transferred from the current generation from the next, mostly in the form of land. • This transfer, spurred from the economic boom of the 1990s, means South Dakotans can give back to the communities that have supported them. However, the opportunity to give back must be presented in order to capture the results of this exciting transfer.

  4. Impact of Study • Purpose • In looking at current net worth, transfer of wealth and growth rate statistics, it is evident that communities must tap into this knowledge in order to sustain and acquire local asset growth. With resources available to forecast the financial future of South Dakota, communities can set their eyes on favorable outcomes. • Change • SDCF teamed with Citigroup, Presentation College Foundation, Sioux Falls Area Foundation, and Watertown Area Foundation to access the resources needed to conduct this study. In 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.

  5. Achieving Success • Knowledge • The key to an even better South Dakota lies in acquiring knowledge to achieve success. • Improvements • New libraries, healthcare facilities and educational programs for community enhancement are possible with the information obtained from recent studies on national wealth transfer, and, most importantly, wealth transfer in South Dakota. • Results from these studies show the opportunity for local areas to tap into these resources during the transfer.

  6. Inter-generational Wealth • What is it? • Primarily household estate wealth (but can also include investments and insurance) that is transferred from the current generation to the next, spurred by the economic boom of the 1990s. • Millionaires and the Millennium study • Researchers at Boston College conservatively estimated a $41 trillion transfer of wealth (TOW) in America during the next 50 years in a recent study. • This translates into a transfer of $389,000 per household. • This is a lower level estimate which assumes a sustained 2% real growth rate along with low lifecycle savings and high lifecycle dissavings rates. • The trend line for U.S. wealth transfer is projected to expand over time.

  7. South Dakota’s Role • Output • This wealth transfer extends to South Dakota. During the next 50 years, between $38 and $44 billion will be transferred according to the “Wealth in South Dakota: Inter-Generational Wealth Transfer Scenario” draft report compiled by the Nebraska Community Foundation. • -Each year an average of $760 million 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.

  8. What does this mean for SD? • 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 $280 million 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, 5 percent payout rate of the endowment, South Dakota communities would have approximately $14 million for community betterment projects.

  9. Wealth in South Dakota • Forms of wealth cited • Property • Investments • Insurance SD Growth Rate Population .267% Economic .296% Total .563%

  10. Current Net Worth • Current Net Worth • 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

  11. Property Valuations • REAL PROPERTY VALUATIONS • Top 5 Counties: • Minnehaha - $7.78 billion • Pennington - $4.88 billion • Lincoln - $2.05 billion • Brown - $1.79 billion • Codington - $1.23 billion • TOTAL $17.73 BILLION (44% of total) • Bottom 5 Counties: • Shannon - $21.1 million • Buffalo - $64.8 million • Ziebach - $75.2 million • Todd - $81.3 million • Dewey - $99.5 million • TOTAL $341.9 MILLION (8/10ths of 1% of total)

  12. Current Net Worth • CURRENT NET WORTH • Top 5 Counties: • Minnehaha - $5.7 billion • Pennington - $3.5 billion • Brown - $1.5 billion • Lincoln - $1.0 billion • Codington - $987 million • TOTAL $12.7 BILLION (44% of state total) • Bottom 5 Counties: • Buffalo - $32.1 million • Ziebach - $38.5 million • Mellette - $65.7 million • Jones - $66.7 million • Harding - $75.7 million • TOTAL $278.7 MILLION (9/10ths of 1%)

  13. Indications of TOW • Population • Study assumes a proportional share of inter-generational wealth based on state population. • Income • Research shows as income rise, net worth/wealth also rise. 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.

  14. South Dakota’s Wealth Transfer A Likely Scenario

  15. 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.

  16. 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

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