4 Legacy Giving Program Building Blocks

In my last article, It’s Fundraising Malpractice Not to Build Future Reserves, I introduced the subject of having both an organizational checking and savings account so you don’t risk going belly up when people rely on you. I talked about building a case for endowment and bringing your board on board.

Then I tried to make it easy for you to get a legacy giving program ramped up by doing four specific things.  The first was to identify top prospects. Today I’ll tackle the other three program building blocks.

2. Focus on easy, basic gifts.

People often shy away from building a legacy giving program because they think they have to understand all the ins and outs of a full range of complex planned giving arrangements. No, you don’t! When starting out, don’t worry about charitable trusts, pooled income funds, life estates, gift annuities, or anything else that makes you feel not quite ready for prime time. If someone wants to do any of these things, or if you think they have a situation that might merit some expert legal and financial planning, you can find outside advisors to help. For starters,  turn your focus to these popular vehicles:

(1) Most legacy gifts come from bequests in a donor’s will or trust.

You need to know just enough about bequests to refer donors – who may want to make the largest gift of which they’ll likely ever be capable — to their own legal and financial advisors. You can help donors and advisors out by providing sample bequest language. You can also install an online estate planning tool such as FreeWill or givingdocs.

INTERESTING FACTS: Although less than six percent of Americans include a charitable gift in their will, one-third of Americans claim they would consider it when asked by an organization. Bequests from middle-class donors frequently exceed $100,000, and some colleges report the typical bequest is 2,500 times the average annual gift.

(2) Beneficiary designations can yield big gifts, and don’t require a visit to an attorney.

A donor need only request a beneficiary form from their financial institution (e.g., the holder of their checking, savings, IRA, 401(k), 403(b) or other retirement account) or insurer (yes, charities can be primary or contingent beneficiaries of life insurance policies.) This is an attractive way to leave a legacy because the gift is made only once the donor no longer needs access to the funds.  And, little known fact, since a lot of retirement money has never been taxed (income tax is only paid when it’s withdrawn), the IRS will require family members who inherit this money to pay a double tax: estate tax plus what’s known as income tax in respect of a decedent. This means it’s much better to leave this particular asset to a qualified charity (preserving much more of the corpus of the donor’s hard-earned money) and leave other less heavily taxed assets to family and loved ones.

(3) Donor advised funds (DAFs) offer opportunities for lifetime legacy giving.

Some people just don’t want to think about their mortality, but still may wish to help you build endowment. It can’t hurt to ask folks if they have a DAF, and if they’d like to make a distribution to you from this Fund. Ownership of DAFs has exploded in recent years, and many donors decided to “bunch” donations (with a big gift in one year intended to cover charitable distributions in ensuing years) in order to make the 2018 tax law work in their favor for tax deductions. So… now they’ve got a DAF filled with money just waiting to be distributed! When you approach them for a gift this year, they may just have forgotten this little ‘burning pocket.’ It’s a painless way for them to give, and they can earmark the gift to unrestricted endowment!

(4) Gifts of appreciated stock allow donors to give from assets, rather than income. 

Such gifts tend to be much larger, and also offer donor benefits such as avoidance of capital gains taxes. Research shows organizations promoting and accepting such gifts saw a 55% increase in growth over those accepting just cash. It’s your job to let donors know you accept these gifts, and make it easy for them to give.  So set up at least one brokerage account, and offer a step-by-step resource telling donors how to make a stock gift.

3. Sprinkle legacy giving fairy dust everywhere.

The point is to make it clear you accept legacy gifts. This may seem obvious to you, but if donors see this elsewhere and not with your charity, they just won’t think of you that way.

Here are some ways to plant the seed and keep the idea of legacy giving front and center:

• On your website:“Where there’s a will there’s a way. Learn how a will can help you accomplish personal family, financial and charitable objectives.”
• On your donation landing page: “What will your legacy be?” “Consider leaving a legacy to memorialize your important values.” Then include suggested language.
• On your outer mailing envelopes or email signature: “Create a lasting legacy.” Or “Please remember XYZ charity in your will.”
• In your newsletter or blog: Consider a legacy giving section promoting what bequests make possible and/or profiling donors who’ve made a legacy gift.
• Ask donors if they’ve made provision for your charity in their estate plans.Do this:
  • On your mailed appeal donor remit pieces
  • On your online donation landing page
  • In a mailed or emailed survey
  • As an insert to another publication (e.g., annual report; program brochure; volunteer application)
• Ask donors if they’d like more informationabout leaving a bequest.
• Send a targeted mailing.If you’ve done some predictive modeling around “planned giving likelihood” you may have a good idea who your best prospects are, so save more expensive targeted legacy campaigns for them (or for folks who’ve given frequently and are clearly loyal).

4. Keep your board fired up.

Where your board leads, others will follow. That’s why beginning with Step #1 is critical.  You’ve got to talk with each board member individually so they understand, and buy into, the importance of building an endowment. Then you’ve got to talk with them about making their own commitment. If you can’t get them on board, it will be difficult to get others inspired.

Here are some ways to keep the importance of building endowment on the board agenda:

• Invite guests to your board meetings to address the group about legacy giving strategies. You can put this on your board agenda every meeting, every other meeting or quarterly (depending on your meeting schedule). For example:
  • Ask a local estate planning attorney to talk about leaving a charitable bequest.
  • Ask a planned giving expert or tax planning attorney to talk about tax benefits of certain legacy gifts.
  • Ask an insurance expert to talk about making a gift of a life insurance policy.
  • Ask a development professional from a local university or hospital (they tend to have robust planned giving programs) how they go about attracting legacy gifts.
  • Ask another board member, or former board member, to present on why they made a legacy gift.
• If you have a legacy society, invite board members to attend an event. I used to use these events as opportunities for members to offer testimonials, and they never failed to be inspiring.
• Share legacy donor stories. If you’re fortunate enough to have donors who’ve let you know of their intent to leave a legacy, call them up and interview them.  Ask if you can share their story to inspire others (this way their giving is a double good deed!). With permission, share these stories broadly – at board meetings, on your website, and in donor publications.
• Report back on legacy gifts committed. Remember, you started this with a case for support. Building an endowment should be viewed as a campaign, whether you formally announce one or not.

Keep information flowing to your board, letting them know not only what gifts have been received but what new strategies you’re employing and how you can use their help.

Back to Being Prudent

People and organizations require sufficient assets to weather crisis, emergency, inflation, recession and unanticipated funding cutbacks without needing to reduce, or eliminate, programs, services, and staff. Building endowment is a fiscally responsible approach to planning and management, in contrast to living solely on annual earned and contributed income – paycheck to paycheck.

Of course, you can start with an operating reserve. But a “reserve” somehow doesn’t inspire people to consider leaving a legacy. So, sometimes it’s a good idea to have the board designate at least some of this as quasi-endowment so you can invest it accordingly and not be tempted to spend it.

It’s great to be able to prudently invest some money, because then it works on your behalf – throwing off income in perpetuity — and you can ultimately become your own best funder. Plus, showing donors you have an endowment can inspire them to also make designated endowment gifts to assure you’ll always be there. Because you’re needed.

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Image: Three San Francisco Hearts: Spring in the Bay; Of Corsets; Beginnings. Benefit for S.F. General Hospital Foundation