Editors’ note: This article, first published in print during Mar/Apr 2002, has been republished for Nonprofit Quarterly with minor updates.
Much has been written about planned giving: establishing a program, marketing it, identifying potential planned givers, and so forth. But not much has been said about the nitty gritty of planned giving: raising the topic with your donors, becoming comfortable talking about money and death in the same sentence, and what a typical conversation with a planned giving prospect is like. In this article, I will attempt to shed some light on this crucial interaction.
Planned gifts are just that: gifts that require a lot of planning, both by the donor and by the organization wishing to receive these kinds of gifts. The donor will have a variety of personal and financial factors to consider when making a planned gift; the organization will also have many factors to consider when deciding to ask for and receive planned gifts.
There are three categories of planned gifts: Outright Gifts, Bequests, and Life Income Gifts. Outright Gifts include stock, tangible personal property (art works, jewels, rare books, and so on), and real estate when the organization can use the asset immediately. Bequests are gifts made through the donor’s will or trust that are distributed to the organization when the person dies. Life Income Gifts are the most complicated of the three and allow the donor to make a gift to an organization during her or his lifetime while continuing to receive income from it. Of the three, bequests are by far the most common, life income both the least used and the most challenging for an organization to manage.
As you may know, we are in the midst of a great intergenerational transfer of wealth. Simply put, this means that trillions of dollars in assets (mostly stock and real estate) are being passed from one generation to another as our parents, grandparents, aunts, and uncles leave this life. Half of them will die without a will. Of those who have made a will, fewer than ten percent will
have included a bequest to a charitable organization. Realizing the enormous potential of this situation, many organizations are not only encouraging their donors to make a will, but educating them in how they can use planned giving to benefit causes that they believe in. So should you.
STARTING A PLANNED GIVING PROGRAM
Let’s say your organization doesn’t have a planned giving program yet but wants to start one. First, you’ll want to set up a planned giving committee. This should consist of at least three people: the development director or fundraising coordinator, at least one board member, and a volunteer. If your organization already has a fundraising or major gifts committee, this could double as a planned giving committee.
Each committee member should take it upon themselves to develop a basic understanding of planned giving concepts. If one of them is a lawyer, financial planner, insurance agent, or accountant, all the better. But don’t be dissuaded if this is not the case. Donors usually work with their own advisors when deciding what kind of planned gift to designate.
The committee’s job is to develop a framework from which to work with the donor to help them match their goals with the needs of your organization. This includes establishing gift acceptance and investment policies (see “Fundraising Medicine: Creating Gift Acceptance Policies” in Grassroots Fundraising Journal, Vol. 21, No. 1), adopting bequest language, and deciding which planned giving instruments to promote.
CULTIVATING PLANNED GIFTS
How do you raise the issue of planned giving with your donors? Most donors hear about these types of gifts from the organizations that they already support, usually through mailings such as a newsletter, a brochure high-lighting the benefits of making a will, or estate planning seminars organized by one or more nonprofits and given by an expert in the field. It has been my experience that simply asking someone what they thought about a recent significant gift in your community or soliciting their input as you establish your planned giving program can lead to some interesting conversations and ultimately your first planned gift.
For example, let’s say that Ms. Soandso has been a supporter of your organization for some time and you know from information you’ve gathered in developing your relationship with her that she is a good planned giving prospect (she’s well over 50, has no children, dabbles in the stock market, and owns real estate). Call her up and ask her what she thinks about your group’s plans to start a planned giving program. I’m certain that she’ll have some ideas about what your organization needs to do to promote planned gifts to people like her. She may even reveal that she already has a will set up with your organization in it. Believe me, it happens!
But what if there is no Ms. Soandso involved with your organization? How do you get donors interested in making a planned gift? In addition to direct mailings and estate planning seminars, you will want to reach out to the very people that your donors talk to: their lawyers, accountants, financial planners, and insurance agents. Educate them about your organization and its mission. If you have a board member from one of these professions, perhaps they can speak at the local chapter of their organization. Or you can invite a few notable attorneys, accountants, and financial planners to an open house at which you discuss the organization’s mission and desire to receive planned gifts. Be creative.
YOU STILL HAVE TO TALK ABOUT IT
What if, like most of us, you’re uncomfortable with the idea of talking about money and death in the same sentence, especially the money and the death of the donor you’re talking with? I suggest that you start by initiating this conversation with your most difficult audience—yourself.
Let’s pretend that you do not have a will, but you do have some valuable assets, such as a house and a retirement account or stocks. Let’s also assume that you’re aware that if you do not set up a plan for these assets after your death, much of their value will go to the government in estate taxes. What would you do? Here are some questions you might ask yourself:
- What causes or charities would you support?
- What would you ask the charities that you are considering?
- If you gave a large gift to a nonprofit would you like to be anonymous? If not, how would you like your gift to be recognized?
- Would you like your gift to be restricted to a particular program?
- Would you like to set up or contribute to an endowment?
- Would you like to give a large amount of money now and receive payments from the income it generates while leaving the original donation to the organization?
- Would you want to set up a private foundation? Who would you want to run the foundation?
These are just some of the questions that people who make planned gifts must consider. And that is why planned gifts can take a lot more time and energy than most major gifts. Even after a donor has answered these kinds of questions for themselves, it can take at least a year to write up and finalize a planned gift. Some more complicated gifts take even longer than that.
Once you begin talking with donors about making planned gifts to your organization, your relationship with them changes profoundly. You will have more contact with them and learn a lot more about them. Ideally, most of your dealings with them will be face-to-face and in their home. But you may find yourself, as I have, attending their church or another cultural or community event with them. Wherever they are most comfortable hanging out with you is where you will go. This is all a part of the cultivation process.
However, while you are cultivating them for a planned gift and educating them about your organization, they may let you know that they don’t completely trust their attorney or accountant or that they are not happy with a personal or family relationship. This can be your greatest challenge in soliciting planned gifts, as once a donor decides to do some kind of planned gift, they may see you as less of a fundraiser and more of an advocate for them. This is where you must remind yourself of your role as a representative of your organization and their role as a supporter of your organization’s mission.
Once, while I was working with a prospective donor who was setting up a bequest to the organization I was working for at the time, the donor would relate conversations he had had with his attorney and ask me what I thought. I did not think it appropriate to get into this “middleman” position, so I gently reminded him of my role and suggested that the three of us meet when finalizing his trust to be sure that we were all on the same page. This approach not only made both the donor and his attorney more at ease with the situation, it actually helped complete the planned gift.
You don’t have to be a lawyer or an accountant to solicit planned gifts. A basic understanding of the concepts, enthusiasm about your organization and its mission, and good listening skills are all you need to begin. And they are certainly worth the effort! Just imagine if someone left you the proceeds from the sale of their house. In the Bay Area and other high real estate markets this gift could equal a year of operating costs for many nonprofits! That’s a lot of meals for an organization feeding the hungry. But, as the old saying goes, a closed mouth doesn’t get fed. GFJ