Are You Optimizing Planned Giving?

Does your organization have a planned giving effort? If so, how do you approach conversations about planned giving with donors?

Almost every nonprofit can benefit from pursuing planned giving, so hopefully your answer to the first question is “yes.” As for the second question, the way you approach this sensitive topic matters greatly because conversations about planned giving are conversations about planning for death.

First Some Stats

If you aren’t currently pursuing planned giving, here are two dramatic statistics you should consider (from Russell James, Professor of Charitable Financial Planning at Texas Tech University, J.D., Ph.D., CFP):

• Only 2.3% of household wealth is in cash and bank accounts. Pursue the rest through planned giving and non-cash requests.

• Annual giving increases by 77% after donors add charities to their estate plans, and studies show that this increase lasts for years to come—it’s not a one-time act of greater generosity that dies out quickly.

The majority of wealth isn’t sitting in bank accounts. Because the rest is often viewed by donors as being “locked away,” bringing non-cash wealth into the conversation can help donors think about greater generosity both for immediate needs and for planned giving. Also, planned giving can offer donors a more advantageous way to give for tax purposes.

Endowments & Planned Giving

Although planned gifts don’t have to go to an endowment, the two pair well together, like peanut butter and jelly. This is because planned giving and endowments both involve long-term thinking and goals that extend beyond one lifetime. Endowments ensure the future of an organization; planned giving ensures a family’s wealth is used well after their time on earth ends.

Large estate gifts can certainly go to an annual fund, but when planning for the future, donors like to see that the organizations they support are also planning for the future. If one of your donors is considering leaving money to your organization but you don’t have an endowment, the donor may opt to leave a smaller gift than they would have if you had an endowment.

As a donor myself, in my mind, an endowment has staying power. It supplies for the mission and vision for years to come. Since the corpus isn’t touched, it will be there in perpetuity. This gets me excited about planning for the future life of organizations I love while planning for my future death.

Also, if you work for a smaller nonprofit that has, say, a $500,000 annual budget, a donor will probably not leave a $500,000 planned gift to you. People tend to scale their gifts to the needs of the organization and its capacity to handle a large planned gift.

Donors may give annual fund gifts during their lifetime because they see the immediate impact and current funding needs. They trust that the organization is currently doing good work and knows how to use a normal-sized gift well. When thinking about planned gifts, however, donors shift to wondering: Can this organization handle a gift this size and stay true to its mission for years to come?

So, does your organization have an investment policy and a payout policy, and do you abide by these? Do you have board members or employees who understand investing? If you can emphatically answer yes to these questions, be sure your donors know this information. It will help grow their trust that you can steward a substantial estate gift.

A Delicate Conversation

We believe that the approach to asking a donor to consider leaving your organization in his/her will should be much slower and more delicate than a typical annual fund or capital gift request. You are bringing up the undeniable fact of the donor’s imminent death and plans for his/her family and descendants.

It’s a minefield of emotional triggers that you don’t even know you’re stepping into. Some people resent their inheritance because of complicated family dynamics, so the task of choosing how to allocate it is painful. Some are dealing with broken relationships with their children or grandchildren. Some might feel the weight of the family’s honor and reputation as it ties to this money.

On the flip side, when donors choose to leave an organization in their wills, that often means they view you like family, like the children and grandchildren who they have most likely also included in the will.

Planned giving requests are not for the early stages of a relationship with a donor—in fact, research shows that the most likely donor to leave a planned gift is the one who has given to your organization for many years in a row—but when you reach the stage where it’s appropriate to step in delicately, here’s the first question we at CG&A recommend: “Have you already or would you consider leaving our organization in your will or estate plans?”

One donor told me honestly that he wasn’t ready to talk about that right then, which is a great answer. I appreciated his honesty and asked him to let us know if the time ever came when it would be appropriate to talk about that.

Often, donors will tell gift officers that they already have left the organization in their estate plans. In that case, we recommend asking, “If you think it’s ever appropriate to tell me more about that and how you’d like that gift to be used, we’d love to hear.”

As they plan for the future, it’s helpful for organizations to know the percent of the estate a donor intends to leave to them. When asking donors for more details, feel out if it’s appropriate to ask for the percentage, explaining that it helps the organization plan. I had one donor friend who simply wasn’t comfortable sharing that information even though she had gladly left the organization in her will. So, I simply thanked her, and we continued on with our meeting.

In all conversations like this one, I don’t care what the answer is—the questions are important to ask, but the answers matter far less than walking with donors on their generosity journey.

Our Eternal Legacy

Thinking through and preparing for the future can bring up many fears, emotions, and challenges, but if you are a believer in Jesus Christ, remember that our legacy is as children of the King. Even so, we (both donors and organizations) get to be stewards of the gifts the King has entrusted to us. What an honor that is!

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Learn more about how planned giving can benefit your organization at our September Fundamentals of Fundraising seminar or by contacting us.