Planned giving—it’s not as difficult as it seems

Suggest launching a planned giving program to a small or medium-sized nonprofit whose resources are already stretched and you will probably invoke a response ranging from resistance to anxiety. Planned giving can be complex. However, our intent is to show you why you should not forego the opportunities and to give you the motivation and understanding to get started.

Planned giving, defined

First, nonprofits should consider planned giving as one of many different tools – annual appeals or special events – in their fundraising tool kit. The confusion begins because “planned giving” refers to a multitude of ways a donor can structure a gift to your organization during his lifetime or after his death.

Depending upon the structure, a donor may be able to give a gift during his lifetime while continuing to meet his current income demands, manage tax implications and financially provide for his heirs after his death. A planned gift is never an isolated decision, but one that combines the needs of a donor, his family and future generations with his personal, financial and estate-planning goals.

In addition to the variety of gift structures, donors can also “gift” many different types of assets such as cash donations, stocks, real estate, art or business interests. Another choice is whether to donate directly to a specific nonprofit, to a donor fund at a community or private foundation, or to set up his own nonprofit to carry out his wishes.

While the choices seem endless, you don’t need to be an expert on all of the foregoing, nor will you need a full-time staff that is. While you will need a working understanding of this topic, there are financial, legal and accounting professionals with whom you can establish “on-call” access.

Long-term strategies

Charitable bequests in the U.S. amounted to almost $23 billion or 7.4 percent of total giving in 2008, a 129 percent increase over the last 50 years (Giving USA 2009). In addition, with life expectancy longer and the aging population, research indicates that between 1998-2052 more than $41 trillion will be transferred from one generation to the next with some $6 trillion to $27 trillion of that being donated to charity.

Now that your interest is piqued, the starting point is an understanding of your donor’s priorities and motivations. Financially, any planned giving strategy must integrate a donor’s philanthropic goals with his overall tax, estate and financial planning.

From a personal perspective, planned giving is about legacy building. Remember, legacies do not happen at the time of a donor’s death, but start now, are built over time and provide important philanthropic modeling for the donor’s family and future generations.

More practical benefits include:

• The ability to make a larger gift than one otherwise might make out of current assets;
• Depending on the gift structure, enabling a donor and his family to continue to receive a stream of income for life;
• Reducing income tax and/or avoiding capital gains tax; and
• Providing heirs with inheritances at reduced estate tax costs.

Organizational development

Because of the complexity, well-developed planned giving programs were historically within the reach of large nonprofits with a dedicated financial and legal staff to assist in creation, marketing and implementation. However, a program is feasible for a small-to-medium sized nonprofit that has reached the following organizational milestones:

Organization is at least 10 years old. Longevity gives donors comfort that your past success is indicative that you will continue to be doing your good work in the future.

Strong commitment. Planned giving requires the education, understanding and support of the board and senior management. It is not a quick fix for a funding shortfall, but requires an investment of resources and has a long-term horizon.

Strong donor base. A nonprofit should have a group of donors that has transitioned from annual appeals to “major gifts” (as defined by that organization). The ideal age of prospects to identify are those 55 years or older and it is the consistency of gifts, not the amount of their gifts, that matter.

If your nonprofit has reached this stage, even a small planned giving program requires the following infrastructure capabilities for success:

A policy related to gift acceptance (e.g. type, amount and conditions under which non-cash gifts like stocks, bonds or real estate will be accepted).
An investment policy for accepted gifts.
A point person who can field inquiries from donors, including technical questions about gifting mechanics.
A plan to market and administer the planned gifts.

Getting started

The following tips can get you started with a program that works and can generate revenue.

Start small. Experts agree small nonprofit’s should focus on bequests, at least at the beginning, and maybe always. A bequest is a gift left to a nonprofit in a legal document known as a will or trust that is administered after a donor dies. Bequests tend to be the most prevalent type of gift and the simplest to administer. Also, most people have a will, will leave an estate when they die, and even a small estate can arrange to leave a charitable bequest.

Educate yourself. If you are short of staff, time and money, begin by educating yourself through books, resources from professional associations, attending a workshop, or researching what types of programs are being utilized by similarly situated nonprofits.

Look internally. See if you can enlist the help of a combination of board members, advisory board members and/or volunteers to form a committee to help get the program off the ground, including establishing gift acceptance and investment policies. 
Establish “on-call” expertise. While you don’t need your own staff, you do need to establish a source of professional advice from planned giving consultants, accountants, financial advisers or lawyers that you can call upon, as needed, to work with you and a prospective donor.

Use existing techniques. You don’t need to invest money in an elaborate marketing plan at the beginning. Simply utilize your existing communication vehicles (e.g. newsletters, website, donation cards and fundraising events). When budget allows, there are companies that offer generic brochures explaining planned giving opportunities that can be imprinted with your organization’s name, logo and contact information. You can also set up a seminar with a well-respected financial adviser geared to prospective donors.

Select a point person. You will need to have a person in your organization that can field a donor inquiry and be prepared to answer these inquiries with a personal visit or meeting.

A planned giving program will take time and work. However, there is great financial reward and you only need to start with a small step.

Examples of planned gifts

Beneficiary designation: A donor designates a charity as the beneficiary of his life insurance or retirement assets. 
Bequests: A donor gives or leaves property to a nonprofit by will after he dies.

Charitable lead trusts: A donor designates a charity to receive income from a trust for a specified time period or the lifetime of a designated person. At the end of that time period, the remainder of the trust passes to the donor’s designated heirs or other non-charitable beneficiaries.

Charitable remainder trusts: A donor and/or other designated beneficiaries receive income from an irrevocable trust for their lifetime(s), or for a period of years not to exceed 20, with the remainder distributed to a charity that the donor has selected. 
Deferred giving: A donor makes a gift to a charity in the present that is not available for use until some future time, usually the death of the donor.

Gift annuities: A donor contributes funds or assets to a nonprofit organization through an irrevocable contract, and that nonprofit in turn makes stipulated fixed annuity payments to the donor or other designated beneficiary.
Source: AFP Fundraising Dictionary, Association of Fundraising Professionals.

For more information:

Articles

“Are You Ready for Planned Giving? A Guide to Evaluating Organizational Readiness for Nonprofit Executives and Volunteer Trustees,” National Committee on Planned Giving, Resources ( www.ncpg.org/resources/guide_start.asp?section=5)

“Get Going on Planned Giving,” Guidestar Newsletter (Nov. 2009) (www2.guidestar/org/rxa/news/articles/2009)

“Make 2010 the Year You Start Planned Giving,” Guidestar Newsletter (Feb. 2010)(www2.guidestar.org/rxa/news/articles/2010)

“Planned-Giving Programs & the Small Nonprofit: Getting Started,”
Association of Fundraising Professionals, Resources (www.afpnet.org/Publications/ArticleDetail.cfm?ItemNumber=913)

“What is Charitable Gift Planning?” National Committee on Planned Giving, Resources (www.ncpg.org/resources/aboutcgp.asp?section=5)

Books 

(Recommended by the Center on Philanthropy, Indiana University)

“Planned Giving for Small Nonprofits,” Jordan, Ron and Katelyn Quynn, New York, NY (John Wiley & Sons, Inc. 2002).

“Planned Giving Essentials: A Step by Step Guide to Success,” Barrett, Richard and Molly E. Ware, Gaithersurg, MD (Aspen Publishers, Inc. 2001).

Websites

Association of Fundraising Professionals- www.afpnet.org
National Committee on Planned Giving- www.ncpg.org