Wealthy donors are great—especially if they love your nonprofit. And, hey, if they are your donor, you can expect that they at least “like” your nonprofit. When it comes to making a planned gift commitment, though, your organization may not rise to the top. I always want to be in their top three our four charitable organizations, because you are more likely to end up with a legacy commitment.
But back to wealth. Wealth is good. Wealthy people do make larger planned gifts, especially if those gifts are distributions from trusts. But let’s not overlook those donors who aren’t wealthy.
Giving USA 2021 reports that for 2020:
So, people with estates of $5 million or less made legacy gifts that nearly equaled the total legacy gifts of those with estates larger than $5 million. Especially since so much of household wealth these days is in real estate appreciation, that should be good news for most of us.
Instead of worrying about how wealthy your donors are, look for engagement and length of time of engagement. The longer they have been with you, the more likely they are to be committed.
An easy way to have that conversation is to ask them to endow their annual gift. If your endowment has a 4 percent spending policy, you can ask for 25 times their annual gift. In other words, a $25,000 legacy commitment for a $1,000 annual donor would produce a $1,000 gift. That is a consideration most of your faithful donors could entertain—whether you or they consider them "wealthy".
Wealth is nice, but it’s not your first consideration in building a planned giving program. Don’t let anyone tell you that your donors aren’t wealthy enough to make a legacy commitment.
I have a theory. It has not been quantified—although over time if could be. It has not been validated by double blind testing or any of those things the CDC likes to talk about. No scientific journals have asked to write about. So far as I know, no PhD student is making this research the basis for a thesis. It’s just something I have come to believe over time and over the years. I call it my “Kitchen Table Theory” and it goes like this: the closer I can get to sitting down with my prospective donor at his or her kitchen table, the more likely I am to gain a gift commitment. The farther I am from that kitchen table, the harder it is to get a commitment.
I rank gift conversation locations in order of likelihood of getting a commitment:
#1 Kitchen Table
#2 Dining Room Table
#3 Den or Family Room or Outdoor Entertainment Area
#4 Living Room
#5 My Office
#6 Donor’s Office
#7 Donor’s Club
#8 Coffee Shop or Restaurant
Let’s start with my favorite spot, the kitchen table. If I walk into a donor’s home and they ask me where I’d like to sit, I almost always suggest the kitchen table. In most homes, the kitchen is the heart of the home. Think about where people gravitate during a party. It’s always the kitchen, even if the food is in the dining room. The kitchen equals comfort and I want my donors comfortable.
When donors are comfortable, they are relaxed. When they are relaxed, they are open and more willing to talk. They are not distracted. Oh sure, the oven timer may go off or the dog may want out, but those distractions would take them farther away from you if you were somewhere else in the house. Even if they have to move stuff or pick up a place mat, the kitchen table is where I want to be.
The dining room table is almost as good. Especially if it’s a dining room table that is used for something other than holidays. I like being able to spread stuff out, give donors a surface for writing, give them a place to put their glass or cup or pen. The dining room table works well.
If I’m at a table and there is one donor with me in the conversation, I try to sit at a right angle. Knees could almost bump—and if they do, that’s fine. If I am talking to a couple, I will probably sit across from them. Otherwise, I’ll find myself talking more to the one closest to me. And with couples, it’s important to engage both of them—equally if possible.
The den, family room, or outdoor entertainment area have a couple of pitfalls for you to negotiate. Obviously, there is no convenient writing surface, so if there are papers to be filled out you will have to do it on your lap or briefcase. You may have to turn and make a real effort, depending upon the seating arrangement, of course, to equally engage both partners.
The other thing to be cognizant of in these areas is not to sit in the donor’s spot. They always have one. And for some reason, they almost always offer you THEIR recliner. I guess it’s just being a good host if they view their spot as the primo spot. Be aware of the remote, glasses, an opened book, the newspaper, a puzzle—something that indicates this spot is routinely occupied—and make an excuse to sit elsewhere. You want the donor in his spot. You want the donor to be comfortable.
If the living room looks perfect and unused, it’s going to be harder. The donor thinks of this as a formal space, not a comfortable daily usage space. It is still home and it is still better than anywhere that is not home, but it is removed from the heart of the home. Living rooms sometimes, however, have useful décor that makes it easier to start a conversation. Are there family photos, pictures from vacation, an evident collection or interest in art? The living room often showcases pieces like these that can be prompts for helping the donor relax and talk about something important.
Once you are outside of the home, meeting in your office may be seen as a neutral spot IF THE DONOR CHOOSES TO MEET THERE. Whenever possible, I let the donor set the meeting place. For a variety of reasons the donor might not want to meet in his home. The dog is a problem, they don’t want to pick up the house, they will be in your area for another meeting, etc. If they want to meet in your office, that is not a bad sign. It means they mean business—or are at least receptive to it. And it was their choice. Not bad. It’s still businessy and not home, but it’s not bad.
Outside the office and on the donor’s turf is not bad, but it’s also not good. If you meet in the donor’s office, if being joined by the donor’s partner, it’s not that second person’s turf. The person whose turf it is may be distracted by incoming calls, interruptions, etc. Partner #2 can feel a little unequal in this situation.
If you meet at the donor’s club, both partners are probably comfortable, but this can be very social with lots of interruptions and distractions looking at people arriving and departing. And they may tend to consider it more a social meeting than a business meeting. Ideally, the donor would be seated with his back to the room, but that almost never happens. At least the donor is in his element in his club.
A coffee shop or restaurant is a major distraction. There are ordering interruptions, drink refreshing interruptions. There may be social interruptions from other guests. It is a public space where you want to have a private conversation. It’s far from ideal—and yet I would bet about half of all the gift planning conversations with development staff take place in just such places.
I rarely contradict a donor’s choice of location, but I have been known to ask not to meet in one certain restaurant, which shall remain unnamed because it is so noisy, you cannot hear someone sitting across the table.
So that’s my Kitchen Table Theory. Heed it, ignore it, test it yourself. But I’ll bet you’ll find that the closer you get to the heart of the home the closer you will get to the heart of the donor. And that’s where gifts happen! Good luck!
As I reflect on 2020, I find I don’t really want to. To appropriate a phrase from Judith Viorst and her character Alexander, it’s hard to think there are many for whom 2020 wasn’t a “no good, very bad” year.
As we put 2020 behind us and anticipate a time when everyone is vaccinated—and we can assemble and hug and shake hands and go to concerts and movies and maybe even lose the masks—some elements of 2021 will shape the future.
As Madame Judio tugs on her turban and gazes into her garden globe for inspiration, these are some of the reflections that occur (although it might just be the glorious Arizona sunshine):
Our work environment . . .
Nonprofits will get smarter . . .
Either the sun has gone behind a cloud or Madame Judio is fading. It will be interesting to check back this summer or fall and see if her predictions are accurate. Fingers crossed that at least some of them are wrong—and hopeful that some are right. We don’t need another “no good, very bad” year.
A Charitable Gift Annuity (CGA) is a life-income giving vehicle that offers the donor an immediate income tax deduction and income for life. It can be for one or two lives, and it can even be set up to defer the start of income payments.
It is both age-sensitive and interest-sensitive. The older the annuitant, the higher the rate of return to the donor. Most charities issuing CGAs use the rates recommended by the American Council on Gift Annuities (https://www.acga-web.org/). They review rates regularly and change them with a month or two warning.
Additionally, many organizations issuing CGA’s decline to offer them in all states. The state where the annuitant lives is the state that regulates gift annuities. There is no uniformity of regulation. Some states are virtually “anything goes.” In others, there are lengthy hoops to jump through, reserve funds that must be established, preliminaries and follow-up to be completed, in some cases, annually. Again, the American Council on Gift Annuities offers detailed information about each state’s regulations.
Most organizations that issue CGAs utilize software provided either by Crescendo or PG Calc. It is wise to have the donor complete an information form before preparing the gift annuity contract in order to have complete and correct information. Additionally, some states require specific language for disclosures that have to be provided to the donor. Because of the complexity in offering CGA’s to donors, most organizations who provide them are national charities or large, well-established local nonprofits like community foundations, hospitals and colleges.
Appreciated stock and cash are the two most frequently utilized funding options for CGAs. Using appreciated stock to fund a CGA allows the donor to bypass capital gain that would have been due if sold. CGAs may not be funded with Qualified Charitable Distributions from IRA’s. Most organizations will not accept real estate for funding CGA’s but there are some national organizations that will fund a CGA with a gift of real property.
Many organizations have an age minimum and a minimum funding amount. For an example, a CGA proposed for a 66 year-old grandmother and her 2-year old grandson would not be possible because the projection would not allow for the minimum 10% remainder required by law. If there are two annuitants, the closer they are in age, the better rate they can claim. The average age for a first CGA is in the mid-70’s.
And despite all of the above reasons, the main reason most organizations don’t offer CGA’s is that the entire assets of the organization have to be pledged to the annuitants. Even if the annuitants outlive their life expectancy and the fund is in the red, the organization is still obligated to pay the annuitant for life.
To summarize, here are the “con’s”— the reasons not to offer CGA’s:
A former colleague reached out to pick my brain about naming opportunities. Having spent almost two decades at a university and watched us fumble a naming opportunity transition, I have fairly defined opinions about the do’s and don’ts of managing naming opportunities.
Most organizations first think about naming opportunities when they are building or renovating a facility. Occasionally an organization will approach it from an endowment standpoint. At what point is it worth the bookkeeping and reporting efforts to allow donors to name an endowment and segregate its use for a certain purpose? In the latter instance, I ask nonprofits to think about what the funds will be used for. That usually dictates a threshold dollar amount. For example, a $10,000 endowment with a four percent spending policy would generate $400 annually. Is that worth messing with? A $100,000 endowment would generate $4,000 annually. Depending upon the use for the fund, that might be worth messing with
Regardless of whether the naming gift will be used to build a facility, renovate a facility, name a program, or name an endowment the naming gift needs to be handled carefully.
Always start with a naming agreement. This is critical. A good naming agreement will be a legally enforceable document that has been prepared by the organization’s counsel and reviewed by the donor’s counsel. It should include these:
• Length of time the name will apply. For some athletics facilities, these are fairly short-term in the overall scheme of naming opportunities. An athletics facility is likely to carry a (usually a business) name for five to 20 years. Most naming opportunities, however, are designed to get a building out of the ground and the intention is that the naming will last for the “useful life” of the building.
What if the purpose for the building changes, but it is still being used? Let’s say the naming gift for the basketball arena was to last for the useful life of the building. Thirty years later, the university builds a new arena. The old arena is still in use—for PE classes and for practices.
In that instance, I would write the naming agreement so that if the purpose for which the naming agreement is made is transferred to a newer or different facility, the naming donor has first right of refusal to make the naming gift for the shiny new facility. All parties should be clear in advance that the new dollar amount will be significantly higher than the original dollar amount.
• How the naming gift will be received. Most organizations building something new need the money to build the building. Because of that, it would be unusual to let any but a small percentage of the money come from an estate gift. However, it is wise to have the agreement specify that if the donor dies before the pledge is fulfilled, the balance of the pledge will come from the estate. This is especially important if the organization feels a surviving spouse or children might not honor the pledge.
Many capital campaign pledges run for five years. Some organization will allow a donor to divide that pledge into sixths and let one-sixth of it come from the estate as an irrevocable pledge commitment that it can book.
• What are the “out” clauses? Usually it is the nonprofit that is concerned about a naming that might embarrass them if future activities or information comes to light that portrays the donor in a manner the nonprofit would not want to be associated with. Think of all the names the “Me Too” movement alone has turned up.
However, I can foresee that a donor might want to disassociate with an organization. Let’s say a nonprofit CEO is imprisoned for embezzlement or sexual offenses and the donor no longer wants the family name linked with the nonprofit. The out clause opportunity should benefit both parties. That said, I would encourage the nonprofit not to refund money given. The nonprofit will have already receipted a charitable contribution. I’m not an attorney or a CPA, but there should be a 1099 involved and maybe more if a gift were to be refunded. The nonprofit could remove the name, but keep the money. By the way, not fulfilling a pledge is a typical “out” for a nonprofit to remove a name.
• How and who might change the name? It’s much easier to address that in the gift agreement than to have a family member petition a nonprofit to add a spouse’s or a child’s name to an existing naming opportunity after the gifting donor is deceased.
• What variations of the name are allowable and when must they be used? This will sound like overkill only to someone who hasn’t taken a call from a donor family complaining that only the last name of the facility was referenced in an invitation or press release as opposed to the full name. Clearly a nonprofit cannot be responsible for how a media outlet refers to a facility, but they can and must adhere to the agreed upon naming conventions in their own publications, releases, social media and website.
I heartily recommend before any naming happens, the board have a candid discussion about what is eligible for naming and perhaps even minimum dollar amounts. For example, what if a board wanted to create a naming for a deceased founder? Over the years the founder, doubtless, supported the organization in many ways, including financially. But should it inspire naming something? There will have been in the past and in the future, others who have been significantly instrumental for the nonprofit. How can the organization establish clear criteria that don’t lean toward favoritism?
Another situation I have encountered is that an organization gets a really big bequest. Immediately, the organization wants to honor that individual with a naming. But you can’t do an agreement with a deceased person. And what would keep a future board from removing that name for the next big gift?
I’d have to say that, in general, I’m opposed to namings for deceased individuals initiated by boards in the absence of a naming agreement. I much prefer to see legacy gifts recognized through a heritage circle or legacy society or a Giving Tree in the lobby. It’s cleaner and keeps the organization from showing its biases. If everything is tied to living donors and dollar amounts, the agreement will keep the organization honest.
To recap, naming opportunities are finite and should be handled carefully in written agreements. During capital campaigns organizations do a better job of thinking through naming opportunities. Where an organization can step into a hole is when they start naming rooms and facilities for beloved deceased donors without clear criteria for the naming. Think carefully and draft a solid naming agreement before moving forward.
We are all six months into the pandemic now and our outlooks and outreach have changed. Early on—back in those days of innocence when we thought we would be seeing one another in person by now—we were mostly concerned with staying connected and how we looked in our home office for Zooming. Half a year (even though it feels like half a decade) later we are veterans of virtual meetings and keep our Zoom tops handy. My swimsuit coverup is on the couch behind me, ready to grab before my next meeting a few minutes away.
But as time progresses, PPP money has been spent, galas have been canceled or gone virtual, and nonprofits are having to make tough decisions on how and whether they can keep things going online. Here are some of my thoughts on sensitive ways to reach out to donors right now:
Start a $300 giving club. You will recall that the CARES Act allows donors for 2020 only (at this point) to deduct $300 above the line for a charitable gift. That amount is per tax return, not per individual. And—unlike almost every other charitable gift—the donor doesn’t have to itemize. The number of donors who itemize is down to about 10% because of a 2017 change in the tax code.
If you live in Arizona—as many of my blog followers do—I would start with those who give you Arizona state tax credit money. If they are maxing out their $400 (or $800 if married) household donations with your organization, you may be their favorite organization. If you live elsewhere, I’d start with my $500 or $1,000 donors. Those mid-range donors are—most importantly—donors. They already know you and like you. And it’s quite likely they aren’t itemizing their taxes and being able to claim charitable deductions any more.
Arrive at a pandemic use for your $300 club. Make it clear that it’s short-lived, not permanent. Use it to cover shortfalls in your budget, save a staff position, maintain a program—or whatever works for your organization.
Make a special connection with your QCD donors. Those donors are the ones who have been making a QCD—Qualified Charitable Distribution—gift from their IRA to save on income taxes. This year—in 2020—Congress has decreed that no one has to take money out of their IRA, so most people won’t. However, show your donors that you are knowledgeable and recognize that. Thank them for their past contributions from their IRA’s and let them know that other contributions are welcome.
Remember the stimulus checks that households with income of less than $150K got in the spring? Adults got up to $1,200 and households with kids got $500 for each kid. I am betting lots of folks socked that money away to see if it would be needed. If it hasn’t been needed several months later, maybe an appeal regarding how it could be used to benefit your mission might be successful.
Really think about this one and keep your ears tuned to Congress. Right now the House and the Senate are trying to work out the two trillion dollar difference in their recommendations for the next stimulus package. However, most pundits agree there will be some kind of household stimulus checks in whatever they iron out.
If you receive grants from Donor Advised Funds, be aware that grantmaking from DAFS is up significantly over a year ago. Donors who have created those funds to support charities are responding to the needs they see in their own communities with generous grant recommendations. Fidelity Charitable reports that for the first four months of 2020 grants to food pantries and food banks in the Southwest Region (Arizona, New Mexico, Oklahoma, and Texas) increased 735% over the same 2019 time frame. While human services and essentials are obvious needs in times of stress, those same donors have continued their regular support for their other nonprofits. Where there was a decrease in a sector, it was slight—no more than 3%.
And for your high income donors who might actually be able to use an income tax deduction, remember that there is a 2020-only special opportunity to deduct up to 100% of Adjusted Gross Income for cash contributions to public charities. There are wrinkles that will cause you to send them to their financial advisors for expert guidance. For example, if they have already given stock, that changes the formula. But because so many of the high dollar donors make their charitable contributions in the last quarter of the calendar year, now is the time to create awareness for those special donors.
We are living through an unprecedented experience. Not only do we have a healthcare crisis, we are facing a social justice crisis, a national election season, and seesawing financial markets. Keep talking to your donors and help them learn about these simple opportunities to support your mission.
To the notion that it costs too much money to have a planned giving program, I say, “Codswallop!” The real cost to an organization’s not having a planned giving program is that those legacy commitments go elsewhere. Leaving money on the table or just handing it off to a more organized organization—now that’s a cost to consider!
But what does it really cost to start a program in planned giving? No matter how you slice and dice the budget, the real and potentially the only initial cost, is staff time.
We tend to forget how much staff time is spent on galas and other events and moan about staff time invested in planned giving. In my opinion (notice I did not say, “humble”), staff time would be much better invested in even a rudimentary planned giving program than in almost any event.
So, whose time does it take? There has to be a point person—preferably a staffer, but I have seen planned giving programs flourish in all-volunteer organizations, too. For the purpose of this article, however, let’s assume there is a small staff. Whoever is anointed point person should plan to spend a little time in self-education.
For those who live in urban areas, there is usually a planned giving council, a financial planning association, an estate planning organization—which may or may not accept a nonprofit credential for membership—and an Association of Fundraising Professionals Chapter. The last will have minimal programming on planned giving, but it’s worth keeping an eye on it. Additionally, many universities these days have programs in nonprofit management, which may or may not have at least one class on planned giving.
The online world is filled with opportunities, however, for self-education—much of it free or reasonably priced. Both Crescendo and Stelter—companies that sell or sync with planned giving software—offer seminars, literature, and often have free resources on their website. With Crescendo, a student can go through the coursework in their eCollege and earn a Certified Gift Planning certification. And other organizations like MarketSmart and Bloomerang offer webinars. Lots of opportunities for self-education.
Perhaps as important as education is networking. All the above-named resources are organizations filled with folks who speak gift planning. It really isn’t necessary to be a guru yourself—you just need to be able to reach out to your own connections when you need advice or a simple answer.
There is other staff time involved as well. The leadership team—whether staff, board, or some combination—will need to review the organization’s gift acceptance policies and tweak them for planned gifts. There will need to be discussions with finance about what can and cannot be booked and, if endowed, how to invest and custody those funds appropriately. Being clear about how to recognize planned gift donors will save hassle and heartache later. I recommend a legacy society separate from however you recognize your annual fund major donors. The data team may need to be involved in surfacing prospects. The website will need an update about your planned giving program. And you’ll want to announce it on social media, too. Even the receptionist needs to be aware that a call asking for your EIN needs to be reported to someone for followup.
As the logically visible prospects are contacted, they will guide you toward your first expenditures other than staff time. Would they like a private briefing from the President, an insider tour, a chance to meet over coffee, a lapel pin? Do you need a brochure? Is there a mailing in your future? They will guide you toward your first non-staff expenditures.
But it still isn’t much. The organization will have spent a small amount for professional memberships and meetings, maybe reimbursing for coffees or lunches, eventually for smaller expenditures surrounding donor stewardship and recognition. It certainly isn’t enough outlay to use the cost of implementing a planned giving program as an excuse. It’s just a myth that you have to spend money to have a planned giving program. Don’t buy into that fiction.
An April study commissioned by Dunham + Company (https://www.dunhamandcompany.com/fundraising-research/donor-confidence-strong-in-the-face-of-covid-19/) offers insights into the immediate future of fundraising. A broad spectrum of more than 600 2019 donors who made gifts ranging from $20 to $66,500 were surveyed about their future charitable gifts. Although a slight majority (53%) indicate they plan to continue giving, they will do so with greater thought and care than pre-COVID. An additional 28% will continue their giving unchanged. But the worrisome segment is the 20% who will have to stop giving until the economy gets back on track for them.
Here is a graph from the study:
“After one month of shutdown, 10 percent of donors overall expect to give less because of either the pandemic or the economy in general, which is a direct result of the pandemic,” said Rick Dunham, CEO of Dunham+Company, a global fundraising and marketing consulting firm to the nonprofit sector.
One in four households are feeling the financial effects of the epidemic, making it difficult to meet their regular and charitable commitments.
Age is a factor in household giving, with Boomer and older donors indicating they would continue giving, while Millennials indicated they might give less. “It’s instructive, however, that this percentage is significantly lower for Boomers and older donors at just 6 percent, which are key giving demographics,” according to Dunham. For example, 66% of Boomers versus 40% of Millennials indicated their future giving was likely to increase or stay the same
And in good news for the future, 60% of households surveyed indicated that nonprofits are doing a good or excellent job. That faith should be repaid with dollars when the economy allows.
To that notion, I say—“Balderdash!”
Planned giving CAN be technical—if you want it to be. But it doesn’t have to be technical. Sure you can go around flinging down your CRUTs and CRATs and bemoaning the 7520 rate. And how many of your donors will have a clue what you’re talking about? None. Or next to none.
Again, echoing the advice of my planned giving guru Dr. Russell James, “use family words.” Remember how you learned that by being included in someone’s estate plan you were being made family? Think of talking about planned giving like you were talking to your grandmother
First, the term “planned giving” is suspect. In Canada, for a long time, it’s been the Canadian Association of Gift Planners. CAGP got it right while south of the border the US stumbled from being a “national committee” to a PPP and finally to the National Association of Charitable Gift Planners.
Dr. James did a study, “Testing the Effectiveness of Fundraiser Job Titles in Charitable Bequest and Complex Gift Planning.” Guess what? Most people didn’t understand the term “planned giving.” Job title info is both interesting and enlightening.
Second, anything that sounds like legalese is off-putting. Speak in simple English. You don’t want to sound like their attorney. You’re not their attorney. Even if you are an attorney, if you’re representing a nonprofit, you’re not THEIR attorney.
Most planned gifts your organization will receive arrive via bequest in a will or a distribution from a trust. Studies vary from 60-90% of planned gifts coming in that simplest of fashions. If you simply ask people to remember you in their wills—even if they have a trust or other form of estate plan—they understand what you mean. Your grandma understands what you mean. And in Dr. James’s study, the response for a request to make a bequest netted a 12% favorable response versus 23% who would consider making a gift in their will.
If you can talk to donors about why they might want to consider leaving something to your organization in their will that will continue their legacy, that’s what you need to be able to talk about. Ask someone to “send” not “submit”; request a “gift” not a “transfer of assets.”
Avoid death words. People want to be remembered, have their stories remembered, leave a legacy. Yes, they understand that they will be gone when it happens, but we don’t have to throw that in their faces. There’s no need to get into TOD and POD transfers to be successful in talking about planned giving.
Let your donors tell their stories—how easy it was to include your organization when they updated their will; why they decided to use stock this year for their annual gift; how they didn’t need all of that QCD and giving your nonprofit part of it saved on taxes. Their stories, their words—have impact with other donors and will not be technical.
So, if you can talk to your grandma about making a gift in her will to your nonprofit, you have all the necessary language to help your donors consider planned gifts and share their stories. Planned giving does not have to be technical. In fact, it is detrimental to make it so. Another excuse busted!
To that sentiment—voiced often by EDs and CFOs— may I say, “poppycock!”
The annual fund, in most organizations, is the driver of the budget. Development officers are pressured to make their goals. The annual fund keeps the wheels on and going around.
Many misguided nonprofit leaders fear planned giving and the often resulting endowment obligations for the organization. But saving that rabbit hole for another day, let me explain why the misguided believe it will hurt the annual fund.
That notion is a miscalculation on human nature. If people value your organization enough to put you in their will, name you as a beneficiary of their trust, give you their IRA, etc.—they have made you family. You are an honorary member of their tribe. They are not going to downsize their annual gift.
And it’s not just me that thinks that. Research bears that out. My planned giving hero is Dr. Russell James at Texas A&M. If you don’t know his work, go look him up.
His research clearly shows the pattern of what happens with donors who make legacy commitments. In my former organization, we called this the “tattoo slide.” I used it so often my colleague stated that if I were ever to get a tattoo, it would be this slide. And when they had my going away party, they put the slide on labels and stuck one on everyone coming in the door. But I digress.
Dr. James’s study was conducted nationally over a 16-year period. It involved approximately 10,000 donors with legacy commitments. The study showed that in the two years before they named the charity in an estate plan, donors’ annual gifts went up considerably. It didn’t quite double as they pondered including you in the family. Then for two years after they did the deed, there was exuberance. Their annual gift did double from before you were in the will. After that first two-year period of being in the will, their annual gifts dropped some, but never to the level of before you were in the will. Why would it? They have invested in your organization with the assets of their lifetime. They want you to succeed. You are family.
Asking someone for a planned gift or an endowment gift does not hurt the annual fund. It’s quite the opposite in fact. Your organizational leaders who fear planned giving are not only wrong—they are hurting the organization’s future by not seeking planned gifts. It is a baseless fear and a misguided notion that planned gifts hurt the annual fund. That’s a bad excuse for not having a planned giving program.
My apologies if you missed the disco era, but Gloria Gaynor’s “I Will Survive” keeps popping into my head. She was singing about overcoming lost love. As nonprofits, we have a lot to overcome now and in the weeks (hopefully, not months) ahead.
As recently as late February, projections were that nonprofits might see a 4% bump in revenues in 2020—if the market held. We all know that the economy destabilized and we have a reverse situation now.
Monday’s Nonprofit Times reports on a study conducted in late March of more than 500 organizations globally by the Charities Aid Foundation of America. Approximately one-third were in North America. In the survey, 97% of nonprofits indicated they have been negatively affected by COVID-19. Only 10 organizations reported no ill effects.
And the scary news is that 10% have already closed and suspended operations. Some of those, of course, are schools and churches, which will be back in business when the pandemic abates. All of of them won’t be back, though, and we will lose more as time progresses.
You can link to the report here: https://www.cafamerica.org/covid19report/
Decreasing contributions from donors, schedule disruptions (travel, events), and inability to reach donors were the primary concerns, followed closely with increasing demand for services. Almost two-thirds of organizations are now working remotely and only 28% say they are fully operating.
Here are some of the distractors nonprofits are facing:
• 88% have canceled major events
• 72% have halted business travel
• 2/3 have shifted their short-term goals and reduced costs
If there are any silver linings here, it may be that two-thirds of nonprofits are researching innovations to help them keep operating. For example, those who can manage programming online have shifted the emphasis there—but organizations that are heavily dependent upon volunteers for delivering services are hurting.
And there are resources out there for nonprofits through local grants and some of the recent provisions of the CARE Act.
It is still to early in the game to draw parallels to 2008/2009, but some will likely apply. In Arizona, we lost 10% of Arizona nonprofits in the Great Recession. How many will we lose in whatever we end up calling this event?
Those who are nimble. Those who have looked beyond their current budget. Those who are fully embracing their mission. Those with reserves. Those nonprofits will survive.
The CARES Act (Coronavirus, Aid, Relief, and Economic Security Act), which passed into law on March 27, has some limited provisions that may make a difference in how nonprofits fundraise from their donors this year. And as with most legislation, it can be a good news/bad news scenario.
Let’s have the good news first. For your smaller, cash donors, there is some good news. Section 2104 of the new law takes into account that since 2018 the number of Americans who can benefit from a charitable income tax deduction has dropped to about 10% of taxpayers. For those non-itemizers, who make a cash gift of $300, they can deduct it above the line on the 2020 tax return. In essence, that means it comes off the top and effectively reduces their taxable income by $300.
This applies only to non-itemizers and only to cash gifts. And as far as I can tell, right now it applies only to 2020 income taxes. Additionally, I would caution you to make it clear to your donors that this is ONE $300 deduction for the year. It is NOT a $300 deduction to multiple charities.
If I were an annual fund manager, I would be looking though my donors and appealing to receive their $300 gift. Maybe you start a 300 club and send them a static cling for their car window. Those things cost pennies. And I would be doing it yesterday. They only get one $300 deduction. Make it their gift to your mission. Start with your appropriate donors who haven’t given yet in 2020 and appeal to them. Then, go back and try for an upgrade of your $50-on-up donors to get an additional gift to put them into the 300 Club. To strengthen your appeal think of some tangible impacts of a $300 gift for your mission.
Notice that this is not a ploy for the major gift officer. Major gift officers are dealing with the itemizers. This deduction does not apply to them. The legislation clearly clarifies: “The term ‘eligible taxpayer’ means any individual who does not elect to itemize deductions.” And the usual restrictions apply. It must go to a qualified charity, not a supporting organization or donor advised fund.
But, major gift officers should be aware that itemizers can deduct up to 100% of their adjusted gross income for CASH gifts to qualified charities—not stock, not real estate—cash. You will recall that the Tax Cut and Jobs Act changed the ceiling for gifts to charities from 50% to 60% of AGI. Some of your major donors might utilize that deduction. Good news for those donors and their MGOs.
There are other provisions that are advantageous to nonprofits, but that isn’t for this entry. You can get the full text of the act here: https://www.congress.gov/bill/116th-congress/senate-bill/3548/text
Now for the not-so-good news. Let’s set the stage: Congress, way back in 2015, finally made what we used to call the “IRA rollover” a permanent giving opportunity for our donors aged 70.5 and older who had to take a required minimum distribution (RMD) from their traditional IRAs.
Smart charities have been educating their older donors to give their annual gifts through what we now call the Qualified Charitable Distribution (QCD). The benefit to the donors is that they don’t have to pay income tax on those QCDs—although, of course, there is no charitable contribution deduction. But most of those donors couldn’t itemize anyway.
Now that some organizations have diligently sought and nourished those donors and trained them to give through their IRAs, it appears that there are no RMDs required in 2020. We were thrown a curve in December when the SECURE Act was signed into law. It said that anyone who wasn’t already 70.5 by December 31, 2019 could wait until they were 72 to take their RMDs.
Now it appears that no one has to take an RMD in 2020. Let me add a caveat to that statement. I have attended three webinars and read several articles about the CARE Act. All of them declare that there are no RMDs in 2020; however, I can’t find it in the text of the Act. Admittedly, I haven’t read the whole Act. But it has sections. It is not in the section about IRA withdrawals. That section is all about repaying withdrawals taken for COVID-19 expenses. It has to be in there somewhere because all these smart people say it is, but I like to see it with my own eyes before I pass it on. I’m just a stubborn girl from Missouri, whose state motto is “Show Me.”
So to recap:
I encourage you to peruse the CARE Act for yourselves. As I often say, I am not an attorney nor a CPA. And for heaven’s sake, if you find the spot in the text that says there are no RMDs in 2020, please point me to it.
Now go think about your messaging to your donors.
Most of us are working from home now with only incidental appearances in the office. Not only do we miss our colleagues, but we miss our clients, our donors, our volunteers, our routine, out contacts in the break room.
#1. Stay in touch. If you are an ED, keep communication open with your board and staff. If you staff a committee, be in touch with your board chair. If you head volunteers, call a few every day just to check in. If staff report to you, check on them individually as people, not just employees. This is the most important thing you can do.
#2. Harpoon a desk shark. Those are the things we shove over in the corner or put out of sight on the credenza because they are a pain or time consuming or require unbroken concentration (and when do you ever have that at the office?) or we just plain old don’t want to do it. You will feel better, I promise.
#3. List the top 10 people who can help you meet your goals this year. Then consider something individually you could do for each. Maybe it’s forwarding an email, pointing them toward an article you’ve read, or maybe it’s something personal like acknowledging a birthday. Your contact doesn’t have to tie directly to the goal.
#4. Thank someone. It doesn’t have to be a donor, although that’s OK, too. They will get a formal acknowledgment, but a personal call or email from you wouldn’t go amiss. Did someone point you toward a resource, help you with a project? It’s OK if it was a few weeks ago. We’ve all been busy and the fact that you are still thinking about it makes it even better that it was significant enough to merit a special contact.
#5. Think forward. What can you do to facilitate your organization’s mission if you don’t go back to the office until May, June, July, heaven forbid six months? How can you help create success with the work-at-home-tools at your disposal? What is missing that could make life easier? Just having thought about it could make you the star of the next Zoom team meeting.
#6. Post something positive on social media. You may have to dig for it, but there is so much bad news out there right now, people want to hear something good. It could be as innocuous as posting birthday congrats to your oldest volunteer (with her permission of course). We have already tuned out those long posts on what every organization is doing for their own COVID-19 response. I was even invited to sign up for a webinar about what my alma mater is doing. I’m sure it’s important, but I’ll read the bullets when it comes out in a newsletter. Find something good to say and get it out there.
#7. Keep up professionally. Sign up for some of those webinars you never manage to squeeze in when you’re in the office. Learn more about the charitable provision of the CARES Act. Are you up to speed with the SECURE Act and how it could affect your work? Just do it.
#8. Organize your at-home work space. I have been working from home for six weeks and I have too many piles for different projects. I promise to prioritize and file. Will you join me?
#9. Consider your planned giving program. OK. I admit that’s kind of a sideways sneak attack, but planned giving so often gets left in the dust as EDs and CFOs worry about the annual budget. Think of two things you can do in support of planned giving for your organization. Just two. Then do them.
#10. Take care of yourself. Take walks. Social distance. Stay well. You are no good to your organization or your family if you get sick. Be well.
In two days I have had calls from two gift planning officers. They know or suspect that I am a legacy donor for their mission. Both calls have been just checking in to see if my husband and I are OK. Both officers are working from home as things have been canceled for at least April, if not May. In one case, I felt able to help with some advice—since this is my field, too. In another, I learned about some folks in my home state of Missouri and got updates on events and operations.
I truly applaud them. They are going down their list and reaching out by phone. That is what I would be doing if I still had my own list of donors to steward and nurture.
In both instances, these gift planning officers are with large organizations that have operating reserves and endowment funds. Neither mentioned anything about ongoing capital campaigns at their institutions, although both organizations are engaged in them. It was truly a how-are-you-doing check-in.
I hope major gifts officers are making the same types of calls. I hope someone somewhere is tracking those faithful donors who haven’t missed a year of giving this century and are reaching out to them with a similar check-in, letting them know they are important to the organization and the mission because they are faithful donors who can be counted on.
In Arizona we are just at the beginning of that COVID-19 curve that keeps showing up on TV. Lots of small nonprofits with minimal or small staff are closed and have had to postpone fundraisers. Some have probably had to lay off staff. I feel for those EDs worried about everything from whether to leave the heat off and hope the pipes don’t freeze to whether they will be able to pay the rent next month. I know there are several programs that should help if they can hang on long enough to get the help.
This is a strange time—unique in our lifetimes (we certainly hope!) and one that our strategic plans didn’t encompass. To those nonprofit staffers instinctively doing the right things, I truly applaud you. You can rarely go wrong with a check-in call to someone important to your organization.
If your house is on fire and the fire department pulls up, no one worries about whether water will come out of the hose. Yet that worry is analogous to what many nonprofits are going through in this current economic crisis. Think house = nonprofit and water = funding.
Those nonprofits who survive on their gala or their golf tournament are going to find themselves in a world of hurt if their big event is this spring or early summer. If a significant part of the budget relies upon proceeds from your Big Event, it may be time to think long-term—provided you can bridge the deficit. Sure, if you are the Olympics and your event IS your mission, it is a different model. The participation fees and sponsorships will keep them going.
There are sure to be grants to nonprofits that will help get some of them through this current crisis. I have two possibilities on my email right now. But what happens in the meantime? Energy that should be expended on the mission is being spent on event cancellations and refunds.
If your Big Event IS your organization—and if you are not the Olympics—I hope there has been serious consideration in the board room and in your long-range planning sessions about WHY you do the Big Event. There are legitimate reasons:
But if the real reason for your Big Event is to fund your mission, may I suggest some alternatives. Of course, some nonprofits never move beyond funding through grants and events. Some operate primarily on a fee-for-service model. Others are membership organizations with an annual membership fee that will carry them through.
Other organizations that survive are both adroit and lucky. But for those who believe hope and luck are not strategies, may I offer some basic suggestions:
These are just some ideas that might help out now. I trust you are already maximizing available channels for fundraising. That is,
If any of these basics are missing, please retrench and rectify immediately. Call me to discuss. We don’t want your organization to be missing from the active charities when this current situation is over. Pull out that hose. Make sure it’s hooked up to the water. And let’s make sure it can reach your house.
My family, friends, and colleagues have heard this rant before, but I am serious. I want you to think, research, get professional advice, and think some more before you start a nonprofit.
There is a local civic institution which shall remain unnamed that features a regular program about starting your own nonprofit. I have jokingly threatened to request time immediately after that program do one exhorting the opposite.
Then last week, in a conversation with another consultant, I learned of another nonprofit that (in my opinion) is ill conceived. Hence this week’s diatribe.
We all value thoughtful, altruistic gestures. As a lover of and firm believer in nonprofits, I know our world and its inhabitants would be much worse off without well run nonprofits. That said, too many nonprofits fail because they weren’t properly planned and developed. So, don’t bring another half-formed nonprofit into the world. Do these things first when the notion strikes you to start a nonprofit:
Don’t just figure out who is doing it, but look at how and where. Maybe there is nothing in your geographic area. Or maybe there is a slice of the big picture mission that you could handle. Or maybe it’s already being handled and you could volunteer to help an existing organization.
The Foundation Directory may be available to you through a university or public library. If not, type in key words related to your prospective mission in the Guidestar database, sort by your state, and look at the nonprofits turned up in that search.
Make sure you are not duplicating efforts and slicing the donor pie even smaller.
Your CPA should ask you pointed questions about your business plan, and can help you think through financing, bank accounts, credit cards, logical amounts for facility rental, website and social media presence, and budgeting. If those items have never occurred to you, STOP. You are not ready to open a nonprofit. It is much more than a letter from the IRS.
In short, if your mission/vision is unique; both an attorney and a CPA have offered wise counsel; you have constructed a board that has no family or friends after seeking advice about nonprofit board constitution; and you have a year’s funding up front—go for it. Otherwise, please, don’t be one of the nonprofits that founds, flails, and fails. It just hurts the sector and the people you are hoping to serve. Do. Not. Start. A. Nonprofit—without all the advance work necessary for success. Just don’t.
“May you live in interesting times”—supposedly a curse in some cultures. And certainly one we are experiencing right now. I don’t know about you, but my calendar is filled with cancellations. Not that I object. I certainly don’t want to retire and then immediately die from the coronavirus. Puerto Vallarta will still be there when the virus has run its course.
But what to do with these interesting times? Might I suggest that this is a great time to utilize your database and those old hard copy files and do some planned giving grunt work.
Let’s start with the list you keep somewhere of your legacy/heritage society members.
• I hope you know everyone on the list and I’m even more hopeful that you know who is still alive and who isn’t. I’m also a realist. You know some of them, but not all. May I suggest that you pick up the phone—no, not to text. Make a phone call. Unless you are working remotely, make that call from the office phone on your desk—not your cell. Many of the individuals on your list will have landlines that will still be active. Many of those donors screen their calls. Seeing your organization’s name on the caller ID might, just might, get the phone answered.
Whether the phone is answered or whether you have to leave a message, introduce yourself as being with your organization, and indicate you are just checking in with some of your longtime supporters to make sure they are OK and are weathering the crisis well. Offer to help if there is anything you can do. Leave your number. Most won’t call you back, but some will. If there is something you can do for them, do it. Pick up a prescription—or toilet paper—and leave it on their doorstep. You might do more than help your organization. You could even save a life.
• When you have touched base with everyone on your list, tackle those old, dusty hard copy files. This is harder work because no one has pulled those files in years. Cross-check with your donor records and see whether those legacy gifts have come in. In those cases, you can mark them complete so your successor a decade from now doesn’t do the same thing.
For those with no clear disposition, start working backwards. Believe it or not, some of those landlines will still work. If you run into a dead end with those numbers and you have a letter or trust document from an attorney, call the law office and ask to speak to the attorney’s paralegal. Tell her or him that you are going through old files and trying to ascertain whether living or dead and whether the legacy gift is still viable. Most will help you. You will likely get a disposition or contact info. Either way you know what to do.
I am going to digress for a moment and wax lyrical for something we used to have as a resource. Maybe there is an alternate online I don’t know about and someone will share with me. There used to be a thick hard bound book in every library called a City Directory. There was a new one every year. It listed the houses in the order they appeared on the street with the names of the adult residents, their employment and, in the back, you could do a reverse lookup with the street address and get a phone number. In those days, if you couldn’t find a person but they were still listed as living there, you could usually call a neighbor, identify yourself as being with the charity, and tell them you were checking up on your volunteer or member and get info about where they are now. These are “interesting times” and people are much more cautious, but when the virus is behind us if you still have a backlog of unfound people, go in pairs, wearing your organization’s nametag and knock on neighbors’ doors. Just wait until this crisis is over.
The excavation work I’ve just prescribed might keep you busy throughout the crisis. Stay tuned for future ideas about planned giving work. Meanwhile, as I look at all the cancellations on my calendar, I’m finding myself with no excuse to avoid cleaning out the garage. Interesting times, indeed.
Does that have any bearing on the nonprofit fundraising business? I think so.
In January when the collector car auctions were in Phoenix, I sat through a couple of days of auctions. At that time, I was struck by how few cars sold for even the minimum pre-auction estimate and how many cars were not sold because they didn’t meet the seller’s reserve.
Last weekend, my husband watched the collector car auctions on Amelia Island, and commented on the same thing.
Scientific observation? No. But is there a logical application to the nonprofit world? I’m afraid so. All of this was before the big market cataclysms of this week, but investors were already being cautious. Collectible cars ARE an investment. A typical service call is five figures. They are a fun and enjoyable investment, but almost no one drops six or seven figures to buy a vehicle that is going to be worth significantly less in a year or two.
So what are the takeaways for nonprofits?
If we can look back a decade to the Great Recession, we did see overall giving decline, but our major donors, as a group, continued to give—and in many cases gave more as they realized they were in a position to help whereas others might not be. Basic human needs were supported more than anything else.
Your donors may not be exotic car buyers, but they might be thinking like them. If you keep your mission front and center, ask appropriately, and thank appreciatively, your nonprofit should survive whatever is happening now. Be aware of, but not afraid of the phenomenon of collector cars not selling well.
Years ago, as a young development officer, I had the pleasure of working with David Glass, when he was President of Wal-Mart and before he owned the Kansas City Royals. David was from the hills of the Ozarks and despite the prestige of his professional accomplishments, he remained folksy in his wisdom.
I don’t remember the exact scenario that prompted the advice, but I have always remembered the advice because it made so much sense: dance with the one that brung you.
If ever there is a time to heed that advice, it is now. Translating that to the nonprofit world, take care of your existing donors. Make sure your acknowledgment letters go out promptly. Pick up the phone just to check in. Remember important dates – the good ones like birthdays and anniversaries and the not-so-good ones like dates of loss so they know you are thinking of them.
When times are uncertain, as they are now – who will win the Democratic nomination? Who will win the election in November? Where will the coronavirus hit next? How low can the markets go? – people tend to tuck in. Even millionaires feel poor when they see their net worth declining daily.
When times are uncertain, people tend to postpone major decisions. If your organization was involved in a major campaign in 2008 or 2009, think back. Did the campaign stall? Did you extend the timeline? What about staffing? Did your organization experience staff cuts? Mine did.
This is the time to nurture the relationships you already have. Take care of the donors and volunteers who have taken your organization to where it is today. Let them know they are valued, even cherished. Valentine’s Day is past for this year, but it’s not to late to let your valued clientele know you intend to dance with the one that brung you.