We have all heard various “truisms” about successful planned giving programs and ways to increase endowment assets. These days, some of the old rules hold less merit—and newer strategies are more effective. Here are five trends to keep in mind.
1. Less about wills and bequests. More about beneficiary designations.
When a donor makes a “bequest,” they commit a gift through their will or living trust that takes effect at their death. This is the most common way that people make a gift to charity at the time of death. In 2017, bequests accounted for 9% of all giving. Because of the new tax law passed in 2017, a person can transfer up to $11 million to friends and family without paying federal estate tax. So, if you have less than $11 million upon your death, you don’t need a charitable estate-tax deduction to avoid federal estate tax.
Today, we see increasing numbers of people making planned charitable gifts through beneficiary designations of individual retirement accounts (IRAs). As a general rule, withdrawals from a traditional IRA account are subject to ordinary income-tax rates. This rule applies to withdrawals made by heirs who inherit IRAs, as well as for the original account owner. However, leaving a gift to charity out of an IRA eliminates the income tax and provides the full amount to the charity. Other beneficiary designation gifts include life insurance and Payable on Death accounts.
2. Less about “remaining viable.” More about mission and impact.
In the 20th century, generations of family members supported a specific university, hospital, arts organization, or other institution to honor tradition or family history. We see much less of that today. Rather, people are more likely to be loyal to an organization’s cause and the impact it works to achieve.
Donors want to be engaged with the work of an organization. They want to be informed about achievements and the stories of people who have benefitted. Increasingly, donors play a vital partnership role with organizations they give to, which reinforces their engagement. Thus, authentic donor engagement and stewardship are increasingly important. The most likely person to make a planned gift is the donor who consistently gives to the annual appeal year after year.
3. Less about old, white men. More about hugely diverse donors—gender, age, race, sexual orientation, culture, ethnicity.
Smart development officers cultivate both husbands and wives; women, increasingly in executive positions, make substantial incomes in today’s economy. And women (on average) outlive men by 3.7 years, so the wife may be the member of the couple making planned giving decisions.
Age is also a key factor in planned giving. Many people do not consider planned gifts until faced with major life decisions—marriage, birth of a child, death of a loved one, divorce, selling a business, retirement, etc. When such an event occurs, people are faced with many decisions; the opportunity to make a significant investment in an important cause can be overlooked. Do not wait until a passionate donor is ready to retire to begin to talk about a planned gift. (For too long, fundraisers believed it was ineffective to spend time cultivating planned gifts from donors younger than 65. That has changed! We miss 62% of the population of adults aged 18 to 65. We now know that each generation is a planned gift target audience. Effective cultivation begins with educating millennial donors.)
Even more significant than age is the changing demographics of Americans. A person’s cultural and ethnic background can affect their interests, comfort in discussing money, family values, and even willingness to consider their eventual death.
4. Less about a few enormous gifts. More about encouraging everyone to invest various amounts for future impact.
Of course, major planned gifts can significantly augment an organization’s ability to serve its constituents, and leadership should continue to cultivate donors with sizable assets. For these prospective major donors, use terms associated with financial investments— “prospectus,” “impact,” “return on investment,” etc.
For loyal, long-term donors, spread the message that everyone can participate in planned giving. Consider setting up “field of interest” endowment funds that represent the core programs needed to achieve your mission: Diversity, Equity, and Inclusion Endowment; Facilities Endowment; Staff Training Endowment; Child Care Endowment; and so on. These funds represent important opportunities for the organization and can accept gifts of any size.
Also, establish criteria for endowment funds where the donor can name the fund in honor or memory of someone, or for his or her own family. This is popular with people who want the legacy of the family or loved one to be commemorated in perpetuity.
5. Less about endowment only. More about blended gifts and reserve funds as well.
Increasingly, nonprofit organizations combine endowment building initiatives with reserve funds and major gift discussions. I used to say that there are two kinds of donors: those who only want to give for current opportunities and those who only want to give to endowment funds. Now, I see many people who want to do both: give a current gift and commit to a deferred endowment—to ensure that program will continue in the future.
Train your development officers in both major gift and planned gift cultivation, so they are comfortable in any conversations that occur. Then, staff members can focus on finding the intersection between the donor’s interests, the organization’s mission, and the potential impact.
Benefactor Group has recently worked with a church, social service organization, community foundation, and healthcare institution to develop and implement plans to substantially increase endowment assets and develop ongoing planned giving programs. Give us a call if you are interested in discussing how we might help your organization broaden your base of support and become more sustainable in the future.
Diana Newman, Executive Vice President of Benefactor Group, is the author of Nonprofit Essentials: Endowment Building, published by John Wiley & Sons in 2005 and Opening Doors: Pathways to Diverse Donors, published by Jossey-Bass in 2002 and the winner of the 2003 AFP/Skystone Ryan Prize for Research. She was also Benefactor Group’s lead consultant with the Licking County Foundation’s Endowment Building Institute. With the leaders of the Licking County Foundation, Diana will present a workshop at Philanthropy Ohio’s statewide conference on Oct. 23rd at the Hilton Columbus on “Starting an Endowment Building Institute.”
 Giving USA 2018