Will Retiring Boomers Sever Ties with Minnesota?

Nonprofits fret that tax changes are driving away donors

Originally published in the December Twin Cities Business Magazine.

A lot of civic attention is being paid to the Twin Cities region’s appeal to millennials. Will they choose the area as a place to live, work and raise their families? There’s evidence that millennials’ choices are based on the place as much as the job; they want to live somewhere vibrant and cool.

For boomers and seniors, the question of what makes a place attractive is altogether different. Cool takes on another meaning—winter gets old, it’s harder to drive in the dark and the same lively restaurant you enjoyed at 30 requires earplugs at 65. But beyond that lies an increasingly discussed question among more affluent boomers. Can they afford to die here? With changes in Minnesota’s income and estate taxes laws, more boomers are weighing their choices, too. Why choose Minnesota? A recent Wall Street Journal article detailed “Where Not to Die,” and put the state near the top.

For generations, snowbird Minnesotans have spent a few weeks each winter in Southern states—with lower taxes—and returned in time to get the cabin ready for summer and the grandchildren. These folks still consider themselves Minnesotans: They vote, own property and pay their taxes here. Many remain active in the nonprofit sector, flying back for board meetings or participating by phone. It’s common for Minnesota’s major nonprofits to hold winter parties and fund-raising events in Florida and Arizona. The Minnesota Club in Naples, Fla., boasts several hundred members and is an active forum for nonprofit leaders.

After a series of changes to Minnesota’s tax rates that include lowering the income floor for the highest tax bracket, raising taxes on gifts, and changes in capital gains and estate tax rules, some think legislators have hit the upper limit. The result? The wealthy and their advisors are weighing tax-relief scenarios through relocation to lower-tax states.

What’s more, nonprofit leaders are hearing from major donors about this, and in a big way. Older donors have more discretionary time and money to spend volunteering and contributing. Large gifts often are built into estate plans and come in the form of long-cultivated bequests. And some nonprofits say their donors’ advisors suggest curtailing Minnesota donations and resigning from board membership to make clear that their residency is indeed their new home state.

Are nonprofits’ worries misplaced or is an exodus underway? Having heard the concern, I asked two financial advisors for a reality check. Ted Contag, wealth advisor at Thrivent, had this to say: “Many clients have brought this up; yes, everyone is talking about it. Generally it’s not only a tax question but also a weather question.” With respect to taxes, he added, “if the state continues to be punitive in comparison to other states, then people will consider moving more seriously.”

However, he doesn’t see as many people pulling the plug on Minnesota as there are people worried about it. “Ties to family are the most important factor,” he says. Many seniors want to live near grandchildren and extended family. “I think weather is a much bigger deal,” Contag continues. “Yes, seniors can and do leave. But many of my clients love it here and are committed to the state.”

Minnesota defines a person as a resident if they spend 183 days or more here, and also considers factors such as home ownership and car registration. “The commissioner [of revenue] has said that charitable donations will not be a factor in determining residency in disputed cases,” Contag says, but, he cautioned, donors should get clarity from their tax advisors if they think their residency may be questioned.

Ross Levin, president of Accredited Advisors, concurred that the subject of where to live looms large for his older clients. He sees another angle: Even when seniors leave for a portion of the year and retain their Minnesota residence, they’re likely to get involved in their new home-away-from-home and begin to split their energy and money between locations. “Charitable, engaged people want to be charitable and engaged in the communities where they live, even when it’s part time.”

How clients weigh the residency decision works differently depending on circumstance and outlook. Many clients “are disillusioned with what they consider Minnesota’s culture of taxation,” Levin says. Others weigh the tax benefit of living elsewhere against Minnesota’s strong health care system and other civic infrastructure, and decide to stay. And Ross concurs that family ties are important. Children and grandchildren are hard to leave behind, even for the minimum 183 days. “And people do count the days,” Levin says.

All this puts more pressure on wealthy individuals who stay in Minnesota to give more and do more for Minnesota’s nonprofits. “Wealthy clients who stay in Minnesota are inundated with funding requests,” Levin says. He also added that the loss of seniors is not just a financial loss, “it’s a worrisome brain drain.”

One thing is certain. It’s more important than ever for nonprofits to keep older donors and volunteers engaged. If your organization doesn’t have a strategy for that, better get busy. More than just millennials have a choice.

Veterans' Voices: challenging stereotypes and building new narratives

Originally published in Twin Cities Business Magazine, November 2014

When you think of veterans, does your thinking go directly to stereotypes? Do you think “heroes” or “people with mental and physical health challenges”? That’s the experience of Trista Matascastillo, program officer at the Veterans’ Voices project of the Minnesota Humanities Center (MHC), herself a veteran. Her personal goal, shared by the center’s robust new program, is nothing short of changing the dominant narratives around the ways U.S. society views veterans. The Veterans’ Voices project is working to create a new narrative, one that puts veterans in a position to speak to their own experiences and authenticity. In doing so, Veterans’ Voices wants to change media images and public perceptions of veterans, highlighting vets’ post-service contributions to the community as leaders, managers and entrepreneurs.

How did the project evolve? MHC executive director David O’Fallon explains that a large part of the centers’s work is to foster deeper connections among Minnesotans through the humanities. The center already has long-standing programs that draw on the humanities to build a “broader, deeper and more complete understanding” among diverse people, reflecting MHC’s mission “to bring the unique resources of the humanities to the challenges and opportunities of our time.” An example is the Absent Narratives project, which provides books, videos and other resources for teachers so that the literature, art, economics and history of many races, faiths and cultures can be incorporated into the humanities curricula in Minnesota schools.

O’Fallon describes Veterans’ Voices as a natural outgrowth of the commission’s work. Matascastillo, a former Marine who also chairs the Minnesota Women Veterans Initiative Working Group, has helped the center shape Veterans’ Voices since its inception, guided by an advisory group of area veterans. There are more than 387,000 veterans in Minnesota, from every county in the state; 80,000 have served since 9/11. Post-9/11 veterans include many who have served in Iraq and Afghanistan, wars that have involved less than 1 percent of the population overall, despite their duration—each lasting more than a decade. Now, returning veterans find fewer people among the general populace who share their experiences, and as a result many have trouble reconnecting to employment, family and community. Veterans’ Voices focuses directly on this disconnect by sharing stories of veterans as capable, highly trained, multitalented individuals with a strong desire for and capacity to accept responsibility in new roles at work and in community.

A highlight of the program thus far is the annual awards program, which recognizes 30 veterans, nominated by peers, for their outstanding community service. Twenty of the honorees are “On the Rise,” veterans younger than 40, while 10 are “Legacy” veterans of earlier wars. An annual awards ceremony publicizes the achievements of the recipients. The 2014 cohort, celebrated in a reception on Sept. 11, included Brockton Hunter, a veteran, attorney, founder of the Veterans’ Defense Project and a nationally recognized expert in veterans law and affairs; Dina Lubben, a veteran deeply involved in 4-H programs for youth in Nobles County; and Alex Scheuller, a veteran who serves as an AmeriCorps member of Habitat for Humanity, where he provides outreach to other veterans who can benefit from that organization’s services.

The center also crafted and encouraged passage of last year’s state law declaring October Veterans’ Voices Month (HF 2812). We’re the first state in what the center hopes will be a national movement to honor, listen to and learn from those who have served. Their vision is that Veterans’ Voices Month will eventually grow in recognition and importance, comparable to Black History Month, and will provide the impetus for broad community participation. In the coming months and years, you will see more evidence of the work of this new effort. A statewide tour of the exhibition Always Lost: A Meditation on War began in October in Fergus Falls and will tour several cities, with accompanying public programming. The exhibition looks at service members who have died in combat since 9/11, including photographs by Pulitzer Prize winners and literary work from veterans’ creative writing classes. In February, the exhibition will be displayed in the State Capitol rotunda.

“We need to get beyond ‘Thank you for your service’ and have a real conversation about what it means to have served and to be proud of it,” says Richard Leonard, a 2014 Veterans’ Voices awardee and Purple Heart recipient. “How do we tell the rest of our story?” He has especially benefitted from the opportunity to talk to children in depth about military service. But he also sees an important role for employers—people like those of you reading this magazine. “For a lot of vets, being unemployed when they return is about a lot more than that. It’s about being disconnected and closed off from the community. Having a job is a lot more than having a paycheck.” In his role at Minnesota’s Department of Employment and Economic Development, he counsels veterans who are seeking to return to the workforce. He wishes more businesses would give returning veterans a chance to use their considerable skills and reconnect with society at large.

O’Fallon says the center wants not only to foster sharing veterans’ stories, but also to create opportunities so that the public will take the time to hear them. What have you done to welcome home Minnesota’s veterans? And what do you have to say beyond “Thank you for your service”? Ask a veteran for his or her story. You’ll learn a lot.