Your average nonprofit might have programs to seek out monthly gifts, annual fund donations, and major gifts, but there’s one valuable and oft overlooked type of gift…
Planned gifts, if solicited correctly, can give organizations major fundraising boosts. Their size is typically on par with, if not more than, the major gifts your fundraisers are bringing in.
Why are they usually overlooked, then? Well, most organizations believe that they’re too hard to predict. They are seen as surprise funds when they do come in, but they are not actively pursued.
That needs to change.
Before we get ahead of ourselves, though, let us rewind and go back to the basics. For starters, we need to define the term, planned giving.
WHAT IS PLANNED GIVING?
Planned gifts are just what you’d expect from looking at the term. You can think of them as donations that are on the docket.
Planned gifts are donations that are decided on in the present and made in the future.
In the case of a planned gift, the donor chooses to allocate the funds and also chooses exactly when those funds will become available to the receiving charity.
Most often, donors grant planned gifts through their wills, which means that the donations are given after death. Other than in wills, planned gifts are also typically given via trusts. The gifts do not have to be in monetary form. It is quite popular for a supporter to leave property or land to an organization, instead of direct funds.
Statistically, planned giving prospects are usually identifiable for two main reasons:
– a prospect’s age
– a prospect’s sense of loyalty towards your organization
In fact, 78% of supporters who donated planned gifts had already given the nonprofit named in their will 15 or more gifts during their lifetime. There are numerous traits that signify planned giving prospects, which will all be discussed later in this article, but the age of the prospect and the prospect’s connection to your organization are good starting places.
WHAT IS COMMON PLANNED GIVING TERMINOLOGY?
Although the concept behind planned giving is fairly easy to grasp, there are certain terms surrounding the subject that are less than straightforward.
When a donor is ready to seriously consider leaving a planned gift, your nonprofit needs to be prepared to have a well-informed conversation about the process and the various options available to that interested supporter.
Much of what seems confusing about planned giving at face-value is all the legalese.
Just in terms of the three main types of planned gifts you’ll receive, you’ll need to know the difference between a charitable remainder trust, a charitable gift annuity, and a charitable bequest.
Charitable Remainder Trust: This type of planned gift is granted after the completion of the terms of a trust. Usually, the trust pays a fixed amount to its recipients annually until the preset duration concludes. When that time period is over, the remaining funds are given to the specified charitable organization.
Charitable Gift Annuity: In this situation, a donor gifts a large amount of money to a nonprofit organization. The organization then pays the donor a set income annually, throughout the donor’s lifetime. Once the donor passes away, the remaining money is wholly donated to the nonprofit that has possession of it.
Charitable Bequest: These are planned gifts granted to organizations in donors’ wills.
As you can see from the terms defined above, the language used to name planned giving terms is often a bigger and more difficult to grasp barrier than the meaning behind the wording.
WHAT ARE THE PLANNED GIVING BENEFITS?
Planned giving is a beneficial donation option for nonprofits and donors alike.
Learning about planned giving can change the game for a nonprofit and its supporters.
A planned giving program has four main benefits.
#1: There’s a sizable tax break for donors.
From a sheer fiscal perspective, the tax breaks are a huge advantage to making some sort of planned giving arrangement. The specifics will vary according to a range of factors, so you’ll need to do research on individual cases.
#2: Donors have the opportunity to specify exactly how their funds will be used.
Donors can give to a certain campaign or the annual fund, but rarely do they have the chance to detail exactly how their money should be spent. Planned gifts put complete power in the donor’s hands.
#3: Planned giving is the perfect outlet for loyal donors to contribute more than would have been possible during their lifetimes.
Many people want to give major gifts in their lifetimes, but don’t have the financial flexibility to do so. Planned giving lets donors give those large gifts after they have passed away, when life expenses won’t interfere.
#4: Planned gifts are often some of the largest gifts an organization receives in a year.
Historically, planned gifts are up there with major gifts in terms of donation amount. For example, charitable bequests are 2.74 times larger than donors’ lifetime charitable giving.
The advantages don’t stop there. These four benefits of planned giving programs are just the tip of the iceberg.
HOW DO YOU IDENTIFY A PLANNED GIVING PROSPECT?
People often incorrectly assume that only the super-wealthy leave planned gifts. That misconception leads people in the wrong direction when searching for planned gift prospects.
Yes, some supporters who leave planned gifts are super-wealthy. But planned gift donors do not have to be that way. Although both major and planned gifts tend to be large amounts of money, their prospects don’t always share similar traits.
When identifying planned giving prospects, you have to look at two categories of traits:
– cause connectors
– statistical inclinations
Each set of factors has its own importance, and the best way of predicting planned giving takes both categories into account when making inferences.
Cause connectors include:
(a) frequent donations
(b) conviction in your mission
(c) desire to give a larger gift than is currently realistic
(d) positively affected by your organization’s work
Statistical inclinations include:
(a) older in age
(b) single or widowed
(c) no children
(d) appreciated property
With a well-rounded prospect profile, you’ll be able to evaluate candidates for these traits and determine who on the list is most likely to leave a planned gift. Using that list, you’ll be ready to get started marketing your planned giving program.
HOW DO YOU START A PLANNED GIVING PROGRAM?
A planned giving program, though entirely worth the effort, will not run itself.
Like with any other fundraising initiative, a planned giving program will take proper organization and implementation to succeed.
Follow these five steps as an outline to running your planned giving program.
Step 1: Familiarize yourself and your team with planned giving details. That’s going to encompass everything from the basic concept, to more specific terms and processes.
Step 2: Generate marketing materials. Your program cannot go anywhere if people do not know about it. Marketing planned giving will be a major factor in how well your program does.
Step 3: Perform a prospect screening to find top candidates. As was discussed earlier, there are certain factors that indicate a prospect’s likelihood of leaving a planned gift. Use those factors to direct your attention when marketing your planned giving program.
Step 4: Send out communications. You know now who you want to reach and how you’re going to reach them. It is time to send out the materials that your team has put together.
Step 5: Thank accordingly. After all of this work of promoting and trying to secure planned gifts, relationships need to be solidified through active acknowledgment.
Within the progression of these five steps, you’ll have other practices that you’ll need to incorporate. This outline, however, will lead you through your planned giving program launch.
WHAT IS PLANNED GIVING MARKETING?
People wrongfully think that planned gifts cannot be planned for, ironically.
It is true that donors leaving you planned gifts do not have to tell your organization ahead of time, but that should not stop your organization from soliciting planned gifts.
A key component to that process is going to be developing planned giving marketing materials. There needs to be a shift from the word of mouth approach to active marketing. Awareness simply must be raised.
Traditional methods of raising awareness will work. From adding information to your direct mail campaigns to building a planned giving page on your website with any necessary information, you just need to get your messaging out there and included in a diverse array of communications outlets.
Planned gifts are not necessarily the first way a donor would think of giving. Your marketing materials should account for that. Don’t lead with the legalese that defines many of the planned giving options. Instead, focus on the foundation of planned giving.
The concept of allocating a future gift in the present is something your loyal donors will understand and be drawn to.
WHAT ARE THE PLANNED GIVING BEST PRACTICES?
Like with any nonprofit program, there are planned giving best practices.
They’re fairly standard and aimed at ensuring that both your team and your donors have the best experience during the process.
Here’s a list of recommended best practices for your planned giving program.
– Brand your planned giving efforts as a legacy program
– Select a strong team to advocate for your program, from staff to volunteers to board members.
– Learn how to identify planned giving prospects. They share some traits with major gifts donors but not all. You’ll need to learn the traits of a planned gift donor and how to look for them.
– Keep consistent and steady communications. Include planned giving in the mix of your correspondences, but vary the subject matter so one appeal type doesn’t dominate and overwhelm your supporters.
– Make sure that age is a part of your donor profiles. Age is a top indicator of planned giving and needs to be considered.
– Incorporate current planned giving donors into your promotions. Prospects like to hear from supporters who are already committed.
For more tips like these, we have an entire best practices article.
WHAT IS THE ROLE OF A PLANNED GIFTS OFFICER?
If you’re going to be making planned giving a priority, you’ll need to consider hiring a planned giving officer. At the very least, you’ll want to have a current member of your development staff take on a leadership role within your program.
Your planned gifts officer should take charge of all things planned giving. He or she will need to work to establish and maintain your program’s policies, while overseeing the ongoing progress of the program.
Planned giving is simple in some ways, but easily gets bogged down by legal technicalities. Rather than have your entire staff know a little about planned giving, a dedicated officer will be able to develop a solid understanding of the complexity and address any questions from inquiring supporters.
One or two experts on planned giving will serve your organization better than a group of beginners. Your planned gifts officer will be much like your major gifts officer, just for all things planned gifts, instead of major gifts.
WHAT ARE THE ETHICS OF PLANNED GIVING PROGRAMS?
Don’t worry. You will not be facing ethical quandaries on a regular basis with your planned giving program.
Most of the time, the exchange of planned gifts is done entirely for all the right reasons on both the part of the donor and the nonprofit receiving the funds.
The best way to avoid any ethical dilemmas is to make sure that the donor and the organization are well-educated about the implications of any planned gift.
The donor needs to be made fully aware of how the gift will affect the rest of his or her estate planning.
A major benefit of planned giving is the potential tax break. However, just because there are tax breaks that come along with planned giving, that doesn’t mean that those breaks should be driving the gifts. Planned giving is about philanthropy. Decisions about allocating funds for these gifts should be about helping the charity at hand, not avoiding taxes.
Trust your gut, and then back that instinct up with fact.
We hope you liked this article and learned something new about planned giving. Please enjoy exploring our other planned giving resources.