Planned Giving 101: How Nonprofits Can Build, Maintain and Enhance Their Programs

Creating a planned giving program may be the last thing on nonprofit professionals’ minds in times of crisis. However, the current environment may present an opportunity to speak to donors about their financial and estate plans, and ask them to consider earmarking their legacies for nonprofit gifts.

Recognizing these issues, First Republic Bank is sharing insights about planned giving from Orr Group's Kelly Dunphy, Managing Director; CJ Orr, Vice President, and Craig Shelley, Managing Director. Based in New York City and Washington, D.C., Orr Group offers strategic and innovative fundraising solutions to nonprofits.

Challenges and Opportunities in Planned Giving

Although nonprofit professionals recognize the benefits of planned giving, the reality of heavy workloads, concerns about getting credit for such long-range fundraising and a reluctance to talk about death often relegate this strategy to the fundraising margins.

When asked about organizations’ approaches to planned giving, Dunphy, Orr and Shelley shared several anonymized responses from clients:

• “We pretended to do planned giving for a long time.”
• “We know that it’s a conversation we should have, but we have not.”
• “We’re not at square one, but we’re at square two right now.”
• “We know we need to think about planned giving now more than ever, especially in our current environment.”

While planned giving feels challenging, starting conversations with donors about their significant long-term donations bears indisputable value. “Over the next several decades, the largest and wealthiest generation in U.S. history will transfer $67 trillion to their Gen X and millennial children,” according to Orr Group. This anticipated wealth transfer means that right now is an unprecedented, ideal time for planned giving conversations.

Planned giving offers specific benefits that other kinds of donations do not. For one, planned giving donations have a high return on investment (ROI). “People dramatically underestimate the ROI of planned giving,” Dunphy said. “The return is generally good because the gifts are large.”

In fact, planned giving donations have the highest ROI of any other component of a development campaign, yielding $57 for every dollar spent, according to a March 2017 study by Planned Giving Today, as cited by Orr Group. By comparison, major giving yields $33 per dollar spent, and events bring in $3.50 per dollar. Moreover, having that daunting conversation deepens an organization’s relationship with prospective donors — and yields tangible results: Once donors commit to a planned gift, they often increase their annual giving as well.

How to Start the Planned Giving Conversation

Even in times of need, when nonprofit organizations and donors alike may be struggling with the financial impact of COVID-19, “planned giving is as relevant and just as important,” Dunphy said. “We’re seeing an uptick in interest in estate planning and will creation, meaning this may be a good time to have conversations with your donors about planned giving.”

For nonprofits considering or in the midst of a fundraising campaign, Orr Group suggests taking the opportunity to introduce planned giving. “It’s best to bake it in from the beginning,” Shelley said, by talking with prospective donors about blended gifts. That's when one donation benefits the campaign, while another is designated for planned or annual giving. Asking for blended giving can be a sound backup strategy if a donor cannot give right now at their original capacity, according to Dunphy.

Even if donors decide not to do planned giving, those who hear about it ultimately give more to a campaign, creating a different win for the organization. “And you’ve planted a seed; they still may do it down the road,” Shelley said.

Creating such opportunities hinges on opening the conversation. Many fundraisers avoid planned giving conversations because they fear talking about death. In one sense, the topic is unavoidable: People understand that upon their death — after their heirs are financially taken care of — a portion of their estate can either go to the government in taxes or, alternatively, to charity.

Still, death isn’t at the heart of an effective planned giving conversation.

“People are going to donate to you because you’re talking about their legacy,” Shelley explained. A lasting legacy compels most people to consider including nonprofits in their estate planning. Legacy springs from what matters to a donor and their family, what they want to pass on to their children and what they want people to say about them after they’re gone. Find out what kind of legacy your potential donors aspire to leave; the conversation should be all about them, Shelley advised. Taxes are really only a small part of the equation.

The Key to Success: A Baked-In Strategy

None of this can happen, though, if an organization takes a "catch as catch can" approach to planned giving. Orr Group emphasizes that nonprofits must be proactive if they’re to become a part of someone’s legacy. To do so, they must weave planned giving not only into their fundraising and development culture, but into their fundamental organizational culture as well. This means that even those outside of fundraising and development must be comfortable with the topic. “It’s everybody’s job,” Shelley noted.

Planned giving isn’t just for the ultra-wealthy, either — though this is a common misconception among both nonprofit professionals and potential donors. In fact, it is appropriate to broach the topic with any prospective donor. Many donors find estate planning confusing or overwhelming, and they may not know they're candidates for planned giving.

“A lot of nonprofit leaders are getting calls about planned giving requests. People are building their wills,” Orr said, citing a demand for insight. Nonprofit professionals are uniquely situated to raise this important issue, ideally at transition points in people’s lives.

Orr Group encourages nonprofit professionals to understand some basic wealth transfer how-to’s before talking about planned giving. One fundamental distinction is between revocable gifts, which can be redirected at donor discretion, and irrevocable gifts, which the donor cannot terminate or change. Each category encompasses a variety of giving vehicles, with different legal and tax-related implications.

For example, irrevocable gifts can be given via life insurance, charitable gift annuities and irrevocable testamentary pledges — some of which allow money to flow immediately to the designated charity. Estate provisions and bequests, donor-owned life insurance and bank or brokerage accounts are some revocable ways of giving, meaning the donor could change their mind about the gift and redirect it. 

However donors choose to give, it is a nonprofit’s responsibility to recognize donors appropriately and to keep them engaged with the organization. When broaching these discussions, it’s important for fundraisers to maintain the boundaries of their role, according to Shelley. “You can explain the instruments,” he said. “But you’re not a financial planner. Do not ever give anyone financial advice.” Instead, recommend a financial planner familiar with your organization.

*provides immediate benefit (income) for donor

**provides immediate benefit (income) for charity

To make giving easier, nonprofits can provide specific language for wills on their websites.  Doctors Without Borders, for example, dedicates one of their website pages to naming the organization in one’s will. The website includes Doctors Without Borders’ full legal name, address and federal tax ID number. It also provides the following sample language for one’s will: "I give and bequeath to Doctors Without Borders USA, 40 Rector Street, 16th Floor, New York, NY 10006 [the sum of __________ Dollars ($____)] [ _______ % of the rest, residue and remainder of my estate], to be used for its general charitable purposes." 

To increase awareness, nonprofits can mention planned giving on their correspondence and other materials. “Every type of collateral that will be in front of a donor should have planned giving on it,” Orr said. Additionally, organizations may consider creating a recognition society for planned giving donors.

While instituting a planned giving program can feel intimidating, especially in the current climate, Orr Group urges nonprofits to get started. “This is not as complicated as you think it is; don’t be scared of it,” Shelley said. “Donors want it, and your organization will be better for it. Maybe you won’t get credit, but you can go to bed at night knowing you’ve made the future of your organization better.”