What the heck are “planned gifts?”
For some reason, this term remains largely mysterious for many nonprofits. There’s a feeling planned giving is complicated. Not for the faint of heart or the small of budget.
This couldn’t be more wrong.
- Are they deferred (i.e., you won’t receive them until after the donor dies)?
- Are they outright (i.e., you’ll receive money now)?
- Are they only for building an organizational endowment?
- Are they just another term for major gifts?
- Are they gifts where donors receive benefits like life income and tax avoidance?
- Are they legacy gifts?
The Truth about “Planned Gifts”
They’re all of the above!
If there’s any overarching guideline, the truth is that planned gifts generally represent the largest gift a donor will make to you.
Legacy donors plan ahead to defer the gift of an asset until they no longer need it.
Because these gifts tend to come from their overall estate, as opposed to a gift from just their income, they tend to be larger than an annual gift. That’s because the gift comes from a different account – one they’d rarely consider tapping into while they’re alive (e.g. their house; bank savings or retirement account, or life insurance policy). To bring the gift to fruition, they may visit an attorney or simply contact their account holder to request a beneficiary designation form. Whatever steps they take, they don’t give on impulse.
Major outright donors also plan their gifts.
These gifts may come from assets or income, but extremely few major donors wake up one morning and decide out of the blue “I think I’ll give someone a six-figure gift today!”) There’s generally a lot of nurturing involved to get donors to the point where they’re ready to say “yes.”
Life income donors plan to reap personal benefits.
Besides receiving income for life or a period of years, these donors also care about avoidance of income, capital gains, estate and inheritance taxes. They may learn about the opportunity from their own legal or financial advisor, a friend or relative, an article they read, or even another nonprofit. But if you’re doing your job effectively, they’ll also hear about it from you. Or at least the idea will be reinforced by you. Your job as a philanthropy facilitator is to provide effective donor service for those who seek to fulfill both personal and charitable objectives through their giving.
The Myths about “Planned Gifts”
Are you taking even the simplest steps to generate more of these “largest ever gifts a donor will ever make?” Many non-profits don’t fully take advantage of planned giving – an exceptionally high payoff fundraising strategy — because they think:
- It’s too complicated; we don’t have expertise.
- It’s too expensive to get up to speed.
- We don’t have rich donors.
- We don’t have elderly donors.
- We don’t have time to wait for gifts to “mature.”
- We’ve tried it; it doesn’t really work.
- … and many more poor excuses.
Most of what everybody knows about planned giving is wrong.
All of the excuses above are mythology. And these “we can’t,” “we don’t know how,” “we don’t have the staff,” “we need to wait on this,” “this won’t work for us” excuses will cost you a boatload of money, today and tomorrow.
How to Reframe the Planned Gifts Conversation
“Planned giving” shouldn’t be foreign or scary. It’s nothing more than a term of art development professionals have slapped onto a process, and donors don’t care about processes. They care about making an impact and enacting their values. Your job is to help donors make whatever form of gift works for them to make their largest, most heartfelt impact.
You can help people give more than they thought they could.
If you can open people’s eyes to the notion they have more philanthropic resources than they might have previously considered, that’s a win. People get a jolt of feel good dopamine when they merely contemplate making a gift.
If you can point donors to some tax-advantageous strategies, that’s a win. People will associate this feel good helpfulness with you.
The more money flowing to philanthropy, the better. And, essentially, what we’ve gotten used to calling “planned giving” simply incentivizes philanthropy.
The timing is right.
Why am I talking about this now? We’re seeing the greatest generational transfer of wealth in history. Many of your donors have estate planning questions. They want to minimize taxes on income, capital gains and inheritance. Some want to generate retirement income, or income to care for a loved one. Others want to help your charity, and wonder which assets are best left as charitable bequests and which are best left to heirs. You don’t have to know a lot to help answer donor questions. But it’s good to know enough.
Primarily, you want to:
- Be able to spot opportunities that will help your donors and your mission simultaneously.
- Confidently support your donors in taking the next steps once these opportunities are spotted.
How well are you meeting this moment in time?
No More Excuses
If you’ve be around 10+ years, and you have donors, you should have a dynamic planned giving program. It doesn’t have to be giant; it just has to be. Donors need to know you accept major planned gifts, both outright and deferred. Otherwise, they simply won’t think of you this way.
If you don’t explicitly tell folks you can help them with a “planned gift,” they won’t think you can. They’ll go to another charity and leave the bequest… or insurance policy… or retirement account… or piece of real estate… or interest in a business… or you-name-it to that charity instead of you. Even if they gave to you religiously during their lifetime.
Because, you see, donors think “planned giving” is complicated too. Your job is to show them how easy it is!
Time to Focus on the Simple Basics that Work
When people tell me “We have a planned giving program, but it really doesn’t work,” I ask them what their so-called program consists of. The typical response includes the fact they have one or more of the following:
- Brochures covering a multitude of gift vehicle options (often there’s a stock of these sitting in a closet somewhere)
- Website page (often not particularly user friendly) with focus on complex gift vehicle features
- Advertising with focus on tax and income advantages of different gift vehicles
- Planned giving officer who focuses on marketing (may be part-time)
- Planned giving consultant who prepares complex gift calculations (as needed).
- Educational marketing seminars
- Planned giving committee of professionals (who rarely, if ever, meet)
- Legacy giving society (which has no benefits, except for an annual honor roll listing)
If you’re reading this, the problem should be obvious: there’s no real focus on getting to know the donor better, building a stronger donor relationship, or even making an explicit ask to consider leaving a legacy to ensure the donor’s values live on. When the approach is too complex, Fundraising 101 gets thrown out the window.
Let’s get back to some basics.
Basic #1: Planned Gift Donors are Loyal Supporters
Many have been small or medium-size donors during their lifetimes, but are able to leave a major bequest when they no longer need the assets. A good place to look for potential legacy donors are among recurring supporters. You might even send a targeted appeal to your monthly donors!
Many were not annual donors at all, but were loyal volunteers, purchasers of services or family members of people who benefited. You might even send a targeted appeal to any of these segments, noting how grateful you are for their ongoing meaningful support.
Many were neither donors nor volunteers, but admired you from afar because the values you enacted matched their personal values. This is a reason to assure your website and all marketing communications make a strong, values-based case for support. You want people to know what you stand for, not just what you do.
The strength of the relationship and identification with your vision, mission and values – whether you know about it or don’t – matters.
Basic #2: Planned Gift Donors Know No Demographic Boundaries
People tend to think about estate planning at various lifecycle stages, and not just when they’re old. They may visit an attorney when they get married, have a child, plan major travel, are diagnosed with a chronic illness, retire, have grandchildren, or decide to embark on risky adventure like skydiving or mountain climbing.
By the time someone is in their 70’s or 80’s they’re more likely to have an estate plan, but these bequests tend to be smaller than those made, and sustained, by people who are younger. The reasoning is that the longer someone includes your charity in their estate, the more they identify with you. So each time they visit their advisor for another lifecycle event, they tend to increase the amount of their bequest. Better yet, especially if they are childless, they may make you the residuary beneficiary (you get what’s left when all other specific bequests are fulfilled). A residuary bequest can be as much as ten times larger than a specific bequest, because most people vastly underestimate what the size of their estate will be at death.
The fact the donor has a will or trust matters more than their age or wealth. For this reason, you may simply want to encourage people to write a will to take care of their loved ones. Help, don’t sell. This is “philanthropy (aka “love of humankind”) in action.
Basic #3: Planned Gift Donors Respond to Gratitude
Deciding to give a major gift, whether outright or deferred, is a big decision. People need to know you’ll be grateful. Here are some simple steps you can take to demonstrate your appreciation:
- List the benefits of membership in your Legacy Society, including opportunities to meet with VIPs (e.g., the E.D. or Board President or another significant program leader like the symphony conductor, lead researcher, department chair, head scientist, principal attorney, zookeeper, etc.).
- Offer opportunities to engage with like-minded peers who share the donor’s values.
- Profile legacy and major outright donors in donor publications and on your website.
- Tell stories about outcomes legacy gifts have made possible in dedicated reports you send to donors.
- Thank planned gift donors more than once during the year, including dedicated emails, texts, phone calls, blog posts, newsletter articles, the donor recognition pages of your annual report and, publicly, at events.
Basic #4: Get it in Writing
I recommend asking legacy donors to complete a non-binding Letter of Intent. You can find some examples here and here. Let donors know this will help you assure their wishes are fulfilled “to the letter” when their gift matures. If your donor wants to share specifics regarding the amount and giving vehicle they can, but the basic function of the Letter of Intent is simply to formalize their commitment in some fashion. Make it optional; people can get a bit leery if you seem too nosy. Just know once they commit in writing they’re more likely to stick with the commitment — especially if you steward them over time. The written Letter of Intent serves as a record so future staff will be alerted to the need to continue ongoing cultivation and recognition of these loyal supporters.
Pro Tip: Include a space where donors can write a personal statement about why they are leaving this legacy. Let them know you’ll hope to share parts of this statement with future generations who wonder “Who were Jane and John Doe, and why did they decide to leave a bequest?” Many donors enjoy this exercise, and some will even leave notes to their heirs explaining why they did this.
Focus on What’s in This for the Donor
I encourage you to think about planned giving, as with any giving, from a donor-centered perspective. This means not focusing so much on money, vehicles and taxes, and more on:
- Values and the legacy they’d like to leave the world.
- Outcomes and what the gift will make possible.
- Family and friends, and how they’d like to take care of theirs.
Thinking about values, outcomes, family and friends brings people joy. Thinking about money brings people angst. One is transformational; the other merely transactional.
When donors plan ahead to make a major gift commitment to your organization, they self-identify as someone who considers themselves a part of your family. They’re taking care of you, just as they would a family member. They’re invested in your success. If you trust them, value them and nurture them, they will blossom and grow. In fact research shows when people commit to a legacy gift their joy spills over to their annual giving as well, often resulting in increased lifetime support. If you treat people as members of the family, they’re more likely to treat you the same way.
Want to Learn More About Planned Giving that Works?
It helps to begin with good training. As you may be aware, I’m partnering with the Veritus Group this year to bring you a number of dynamic courses that mix theory, experienced practice and useful “how to” action steps. This year there’s a self-paced 6-week course on planned giving! Check out the details of Planned Giving Principals for Every Fundraiser’s Success.
It’s designed for all adult learners and is a multi-media extravaganza including live and recorded materials. Anything you can’t attend live will be recorded for you, so you won’t miss a thing. The “early bird” may have already flown the coop, but you can still save using my exclusive Clairification discount code (Shhh….) CA5
Questions? Just email me!
Photo by David Vives on Unsplash