Why Cutting Legacy Budgets in a Downturn Backfires

Every charity finance meeting in a tight year follows the same script. Revenue is soft, the appeal is underperforming, and someone is asked to find savings. The eye lands on the lines that feel optional, and the legacy budget is almost always one of them. The cut feels responsible. It is also one of the most expensive decisions a charity can make, because recession-proof legacy giving is exactly what gets sacrificed to cover this quarter’s shortfall.

The logic seems sound on the surface. Protect cash now, defer the income that will not arrive for years. But that reasoning misreads how legacy income actually behaves.

The cut that feels prudent is backwards

A gift in a will is realised years, sometimes decades, after it is promised. It is decoupled from this year’s markets, this year’s appeal numbers, and this year’s donor anxiety. While cash appeals and events rise and fall with the economy, bequest income is the steadiest line on your future balance sheet. So the moment you defund legacy to survive a downturn is the precise moment the evidence says you should be protecting it.

You are selling the orchard to buy this week’s groceries.

The more mature markets make the point plainly. In the United Kingdom, where the sector runs a decade or two ahead of other markets, gifts in wills now raise around 4.5 billion pounds a year and are projected to keep climbing. To put that in context, the public gives UK charities roughly 32 billion pounds a year in donations and legacies combined. That means a single income stream most organisations treat as optional already accounts for about one pound in every seven the public gives. The charities behind that growth do not treat legacy as a line they can pause in a hard year. They treat it as core infrastructure, because that is what it is.

The wave is already breaking here

We are in the midst of the largest intergenerational wealth transfer in history, and Canada is no exception. CPA Canada estimates that roughly one trillion dollars will move from boomers to their heirs between 2023 and 2026, with Canadian women alone expected to inherit close to 900 billion of it. This is not a Canadian quirk. In the United States, Cerulli projects 124 trillion dollars changing hands by 2048, and in Australia the Productivity Commission expects around 3.5 trillion to transfer by 2050. Some of that wealth will reach causes. Almost none of it will reach charities that did not ask and did not make saying yes simple.

Here is the uncomfortable part. Most donors are not ready. Only about half have a will, far fewer have talked it through with the people they love, and many advisers never raise the subject at all. That is not a generosity problem. It is a clarity problem, and it is playing out at the scale of a country. Families are holding the largest pool of transferable wealth in our history without clear plans, clear conversations, or a clear invitation from the causes they care about.

What the evidence says about asking

The research on how legacy gifts happen is clear and a little surprising. Russell James (2016) finds that bequest giving responds above all to two things: being asked, and being helped to picture the legacy itself. His longitudinal work also dismantles the objection boards raise most often. Legacy donors do not cut their lifetime giving. If anything, current giving tends to rise once a charity is named in the estate plan (James, 2020). A legacy programme grows total income rather than cannibalising it. Routley and Sargeant (2015) have shown that these decisions are driven by relationship, identity, and the wish to be remembered, not by tax planning. People do not leave gifts to spreadsheets. They leave them to causes that made them feel part of something larger than one lifetime, basically that symbolic immortality that Routley talks about.

None of this requires a big budget. It requires intention, and intention at this level is a leadership choice.

This belongs on the board agenda

A bequest pledged today may not arrive for two, seven, ten, or fifteen years. That lag is exactly why the decision matters and exactly why it gets made so carelessly. The budget you trim this quarter opens a revenue hole in the future, long after anyone will trace it back to the meeting where the cut was approved. That is not really a fundraising question. It is a governance question about long-term sustainability, and it belongs to the people who own that sustainability.

So the decision hiding in your boardroom is simple to state and hard to dodge. Will your charity still have a reliable, recession-proof income stream in 2035, or will you spend that year wondering where it went?

This is the clarity problem many non-profit boards have.

If your board is shaping next year’s budget right now, the conversation worth having is where your legacy income actually stands, before the cut rather than after it. That clarity is usually closer than leaders expect.

References

James, R.N. (2016) ‘Phrasing the charitable bequest inquiry’, VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 27(2), pp. 998-1011. doi:10.1007/s11266-016-9682-6.

James, R.N. (2020) ‘American charitable bequest transfers across the centuries: empirical findings and implications for policy and practice’, Estate Planning and Community Property Law Journal, 12, pp. 235-285.

Routley, C. and Sargeant, A. (2015) ‘Leaving a bequest: living on through charitable gifts’, Nonprofit and Voluntary Sector Quarterly, 44(5), pp. 869-885. doi:10.1177/0899764014542687.