A volunteer with a small shelter organization for individuals learned from other volunteers and staff that the organization needed some creative fundraising to build an endowment. A trust lawyer in professional life, she had to help. She invited volunteers, past staff, and donors to an informational session on planned giving—particularly bequests. She got an accountant friend to help with the session. The shelter staff prepared information packets and brought food. About 15 people showed up and several wrote wills adding the organization as a beneficiary. The shelter is expanding this ad hoc initiative into a formal planned giving program.
Success stories aside, raising funds and asking for money cause many a dedicated nonprofit staff and board member to roll her eyes or tremble—but there is nothing like bequests or planned giving to bring about sheer terror. Is it the combination of asking for money and thinking about death? Or, is it the dread of not understanding the legal and financial mumbo jumbo? Or, is the reality that there is no one to staff it? Or, does next year’s funding seem more important than a more distant future?
Probably a mixture of all the above keeps most organizations from using planned giving and raising big bucks for the future health of their organizations.
Simply put, it is the many ways in which people can support a nonprofit beyond what they are able to give in a check or in cash. It includes a number of financial mechanisms that allow donors to give assets or cash to a nonprofit organization while strengthening their financial position. A planned gift can reduce taxes; it can even give the donor income throughout their lifetime before the gift is passed on to the organization. Planning refers to the donor’s consideration of estate, financial and tax planning as part of making the gift. The results are bigger gifts for the organization and bigger tax benefits for the donor.
There are four main types of planned giving:
- A donor can make outright gifts. This can include stock; personal property such as antiques, jewelry and art; real estate such as a residence or vacation home; or life insurance policy designated to your group.
- A donor can give; yet retain income for life. Through a gift annuity a donor contributes assets to your group in exchange for an income over a fixed period of time. With a deferred payment gift annuity the fixed income can be deferred for retirement or college tuition. Or the donor may choose a variety of charitable remainder trusts where large gifts of property or cash are given to a trust where they are invested to produce income for the donor or another beneficiary, either for a fixed period of time or until the donor dies. Your group keeps the remaining assets. (For a bit more on charitable remainder trusts see T. Raffa’s article in previous issue (Vol. 7, Iss.1. p56))
- With a charitable lead trust your group receives income from the donor’s assets for a set period of time indicated by the donor, after which the assets are transferred to the donor’s heirs.
- A bequest is a gift that is made through the donor’s will. This classic planned gift is the easiest to understand and set up. Some 80 percent of planned giving is done through bequests.
According to Giving USA, in 1999, bequests accounted for 8.2 percent of charitable giving nationally, for a total of $15.61 billion. This figure has doubled in ten years and annually surpasses corporate giving. However, although 70 percent of American households contribute to charity annually, fewer than 6 percent of households plan a charitable bequest. According to IRS statistics, 82 percent of America’s wealthiest individuals (those with estates in excess of $600,000) left nothing to charity. Only 50 percent of Americans have a will.
Add to this scenario the multi-trillion dollars of net worth that will be transferred between generations by 2052. Initially Cornell economists estimated it would be $10.4 trillion. More recently, Boston College researchers have estimated it will be closer to $41 trillion. The beneficiaries will be younger and are already proving to be more generous. More people with more assets are living longer. Millionaires are not as rare as they used to be. More middleclass people have invested in the stock market and are getting wealthier than they ever imagined. Word is out on planned giving. Not only are financial advisors, CPAs, trust lawyers and bankers more knowledgeable, but so is the public.
Does it make sense for us when we don’t know any millionaires? Absolutely. Planned gifts to nonprofit organizations can come from anyone. Like everything in nonprofit fundraising, planned giving can be done on a smaller or larger scale—it can be done with a fully sophisticated planned giving department or as simply as placing an ad in your agency newsletter.
When considering a planned giving program, remember:
- Planned giving is like all other fundraising; personal relationships are of primary importance.
- Don’t worry about understanding all the technical aspects. An introductory course will give you enough to start with the simplest program.
- Use volunteers with the technical expertise for advice. However, it is critical that the donor’s own financial and legal advisors help with the final arrangements.
- People at all income levels often have things of value. Do not make assumptions about what your donors can and cannot do.
- Some planned giving methods may be too complicated for your organization—if you can’t do it, do not try. Start with ideas you can handle.
- Your mission should reach into the future.
- You must have loyal supporters who are over 50 years old. If you have donors who are aging and have given regularly over the years, no matter what the size of their gift, they should be prospects for planned giving.
- Your organization must be healthy and enduring. Donors do not want to leave a lot of money to an organization that is barely making it. Stability and endurance are more critical than the size of the agency’s budget and the giving capability of the donors.
- Don’t forget the young professionals who give to you. More and more are looking at various methods of planned giving to reduce their tax burden and help them plan for retirement — in other words, the non-bequest options of planned giving.
Bequests can be done with the least expertise and no staff and have the most potential. And, they cost the donor nothing.
- Get your board, volunteers and staff to consider a bequest. Many of them would jump at the chance to make a major gift—especially when they find it costs them nothing.
- Write up a little article for your newsletter with a clip out coupon for more information.
- Have a return envelop stapled to newsletter to encourage more returns of the coupon. (Don’t forget to ask them for their phone numbers.)
- Do a simple brochure and mail it in your thank-you letter to donors.
- Do a special mailing on bequests.
- Send a staff and board member to a planned giving seminar to learn the basic concepts.
- Pull together an advisory committee of people with expertise in planned gifts.
- Get volunteers to provide sessions to donors about how to write up a will.
- Run a column in your newsletter on planned giving. Highlight a donor who has made a planned gift, interview and quote the donor. Use stories of real donors.
- Educate accountants, trust lawyers and other professional who advise individuals on planned gifts about your organization and the giving opportunities.
- Get your donors who have made planned gifts to talk to other donors or sign letters to others about what motivated them.
- Once you know the donors who have made planned gifts to your organization, have an annual luncheon for them to meet people who are affected by their gifts.
- Form a society or club for planned gift donors to your organization.
I have seen dozens of small organizations begin their planned giving programs in simple ways, like the small shelter described above, with surprising results.
Remember…planned gifts may take longer than other fundraising techniques to pay off, but the pay off is enormous. Those who put charities in their wills usually list up to five organizations. Start now, build relationships and make sure you are one of those five.
- Try your community foundation. Many have workshops and other types of support for organizations wanting to develop planned giving programs.
- Planned Giving experts who work for large organizations like universities are often very generous with their time and information and could help you frame a simple planned giving program.
- Surf the Internet for information and workshops. To find beginning information and good links on the subject, try www.helping.org and www.plannedgiving.com.
- For a look at sample articles n planned giving and a bibliography of books on the subject try www.pgtoday.com. Try www.mcpg.org to locate the National Committee of Planned Giving. Try www.pgcalc.com for planned giving articles and links to other sites. Try www.pgresources.com for state and federal regulations
Encouraging your donors to leave your agency a bequest can be as simple as telling people to add to their wills the following language, “I give and bequeath to (legal name of your nonprofit), a nonprofit organization located in (City, State), a sum of $ —— (or x percent of my estate).”
Sue Karant has been working for nonprofit organizations as a manager, development director, trainer, and consultant since 1973. Through her consulting business, Karant & Associates, established in 1986, she has helped a wide variety of nonprofit organizations design new and successful ways to sustain their organizations, rebuild their boards, and plan for the future. She has taught fundraising, marketing, board development and strategic planning at the New Hampshire College/CED program, Tufts University/Lincoln Filene Center, and Lesley College.