Are You
Ready for Planned Giving?
A Guide to Evaluating Organizational Readiness
for Nonprofit Executives and Volunteer Trustees |
INTRODUCTION
On behalf of the members of the more than 130
local planned giving councils
which make up the
The Partnership for Philanthropic Planning®, welcome
to one of the most exciting areas of asset development for
charitable organizations―planned
giving. Your inquiry suggests a concern for the future of your
organization. An appropriate planned giving program will enable your
organization to bequeath its public service mission to future
generations.
BACKGROUND
The most frequent request received by the
the Partnership is for assistance in initiating a planned giving program. We hope this response to your inquiry will be helpful in deciding if a planned giving program should be initiated by your organization, and if so, the scope of an appropriate program.
PLANNED GIVING OR GIFT PLANNING?
Planned giving is a "buzz-word" that is being touted in the charitable world as the best fund development opportunity to come along in many years. In reality it isn't new; it's simply being more widely discussed. Many small and intermediate-sized charitable organizations realize they can share in some of the major resource development opportunities heretofore enjoyed by larger organizations. In the semi-annual
Philanthropic Giving Index
prepared by the Indiana University Center on Philanthropy, small and medium charities consistently rate planned giving as a fundraising strategy that has been most successful for them or that they are most interesting in pursuing.
The terms "planned giving," "deferred giving," and "gift planning" are often used synonymously and, for most purposes, have the same meaning. However, we'd like to encourage you to substitute the term "gift planning" in place of the term "planned giving." The concept of gift planning shifts us to an active stance from the passive and focuses on the best interests of the donor and not on "selling" planned giving techniques or products. It frees us to better do our jobs, as executives and/or volunteers and to motivate and excite our constituencies to be creative in assisting and supporting our respective missions.
(For a glossary of planned giving terms, click
here.)
GIFT PLANNING AND THE DEVELOPMENT PROCESS
Over the years, many nonprofit executives have claimed that implementing a gift planning program will only detract from the resources available to meet today’s needs. Because some individuals maintain this view, it is important to understand the role gift planning plays in the development process.
[Syllabus for Gift
Planners, section 4.04]
One key to understanding the role of gift planning is to examine the typical sources of funds
[Syllabus for Gift
Planners, section 3.02] which donors use to make certain types of gifts. For the most part, donors are using resources available through their annual disposable income to support the ongoing operational needs of the organization. To support a building project or some other capital improvement, they may dip into their savings. However, when it comes time to
think about a planned gift, donors make distribution decisions concerning their entire accumulated assets. As a result, there is rarely a conflict among an organization’s various fundraising programs, so long as they are properly presented and administered.
In fact, a strong annual giving program is essential to creating an effective gift planning program. Your constituents will not consider entrusting your
organization with their accumulated assets if they are not willing to support the ongoing operating needs.
An effective gift planning program may actually strengthen the annual and capital giving programs. Donors who have made significant planned gifts to help ensure the long-term financial viability of the organization often feel that supporting current needs bolsters and affirms their planned gift commitment.
The Partnership’s
Survey of Donors, conducted in 2000, shows that three-quarters of bequest donors and two-thirds of CRT donors have also made a cash gift to the same charity, and many have established multiple planned gifts.
It is also important to recognize that two of the most important attributes required in developing a gift planning program are patience and persistence. Unlike other fund development programs, gift planning does not always provide immediate gratification (although some gift planning programs have realized significant results as soon as two to three years from inception). It generally takes from seven to ten years to begin receiving significant current dollars for the institution.
Therefore, it is critical that governing boards develop long-term gift planning objectives
[Syllabus for Gift
Planners, section 4.03.02] when evaluating the current performance of nonprofit executives and their staffs. Assuming a program is properly implemented, such persistence and patience may realize major, ongoing cash flow for years to come as a result of planned gift commitments.
BEFORE YOU BEGIN
Many charities in the United States have developed rather sophisticated fund development/planned giving programs over the past 100 years. However, you should be cautious in developing your program so as not to become buried in complexities which you and your staff and volunteers may not understand or be able to manage. We suggest you become familiar with the various planned giving instruments
[Glossary of Terms] available to your donors. You should know the difference between life insurance and annuities, bequests and lead trusts, cash and pledges, pooled income funds and charitable remainder trusts, etc. But don't get hung up on the complexities of the instruments. Leave that to the appropriate professionals
[Syllabus
for Gift Planners, section 2.03], such as attorneys, accountants and other gift planning experts.
The planned giving instruments that are currently available are as varied as the nonprofit organizations that use them. The gift planning program you develop for your organization should be tailored to your needs and the interests of your constituency. In short, the "cookie cutter" approach to development of a gift planning program will never work! Each nonprofit is unique in its mission, history, life expectancy, sphere of influence and service, fund raising experience, volunteer and staff commitments, and so forth. Your program should reflect these distinctive characteristics.
We have designed this guide to point out, as simply as possible, the primary issues related to establishing a gift planning program. Through this resource, we hope to help in the assessment of your organization's potential and to give some practical suggestions for "next steps."
Successful development professionals, executives, and volunteers responsible for resource development on behalf of their organizations advance their cause more effectively by being open to the ideas of others. We must listen to our own organizational committees, participants, and other constituencies who give and receive services. We must test proposals in light of our own realities, discerning the nuances of the gift planning potential for our mission and its faithful donors and supporters.
This journey of discovery opens a wide variety of possible ways to carry on an effective program. There are, however, some agreed-upon principles to employ and there are cautions to heed. As complex as it seems, a properly designed and implemented gift planning program is usually well worth the effort. Such a program may enable your organization to more fully address its charitable mission and the needs of its constituents now and for many years in the future.
ASSESSING ORGANIZATIONAL READINESS
This guide was designed to provide a basic roadmap for the journey into gift planning. But don't overlook other essentials necessary to be effective in the fund development field. It is important to have a strong fund development and public relations program in place as a foundation upon which to build a gift planning program. Before you begin, try to look at your organization from the donor's perspective by conducting a mission-effectiveness survey. If the answers to any of the following points are not affirmative, you must address those areas first, before beginning a gift planning program:
- How visible is the organization? Does the public know the organization's name?
- Is the public aware of the organization's activities?
- Is there evidence the organization is a legitimate charitable organization? Does it have a well-communicated, future-oriented mission statement? A vision statement? A strategic plan which is publicized?
- Is the volunteer Board of Directors representative of a cross-section of the organization's constituency? Do they have limited terms of office and are they elected or appointed to office?
- Can you be certain that volunteers,
benefactors and employees are receiving appropriate compensation and/or
benefits from the organization?
- Is the organization financially well-managed and able to professionally administer large contributions? Does the organization have a long-term mission? Is the organization perceived as stable, with constituents who are confident that the organization will be around for a while?
- Does the organization follow government regulations? Does it hold 501(c)(3) nonprofit status and 170 charitable status with the Internal Revenue Service? Does it hold any required state or city licenses to solicit funds? Does it publish and/or make available upon request an annual report or current financial statement?
- What percentage of contributions is used for fund raising? How does this compare to similar charitable organizations?
PHASES
OF THE GIFT PLANNING PROCESS
When your organization has established a strong
foundation for development activities, take a gradual approach to adding
gift planning to your other fundraising strategies. This guide suggests
three distinct, but inter-related phases in the development of an effective
gift planning program:
I.
Phase One, the Bequest
and Beneficiary Designation Program [Syllabus
for Gift Planners,
section 3.01.09], is quite basic, but the results
can be very rewarding. It requires a thorough understanding and
implementation of a practical wills and bequests program for which
effective educational efforts and marketing and public relations programs
are critical elements. Many times outright gifts of appreciated securities
and real estate are also included as part of a phase one program. For many
charitable organizations, it may not be necessary, prudent, or
affordable to progress beyond this stage of the gift planning process.
II.
Phase Two, the Life
Income Gifts Program. [Syllabus
for Gift Planners,
section 3.01] The nonprofit organization which has
successfully initiated Phase One may be ready to proceed with a life
income gifts program. This phase assumes an advanced understanding of gift
planning options and commitment of the resources necessary to move
successfully into a fully developed gift planning program. It builds on
the successes achieved in the development of a strong Phase One foundation
by continuing educational, marketing and public relations efforts.
III.
Phase Three, the Charitable
Gift and Estate Planning [Syllabus
for Gift Planners,
section 5] phase, is the most pro-active option. This
is the level at which organizations engage in professional gift planning
and counseling with prospective donors. It involves well-trained third
parties, such as attorneys, accountants, financial planners and other
members of the planning team in the dialogue with prospective donors. It
requires the retention of a level of professional expertise and training
which many nonprofits may not have available on a full time basis. In many
cases, the donor will actually engage the services of a professional who
will help tailor the gift to insure that it meets the donor's needs and
protects the donor's interests.
STEPS
TO BEGIN
-
Get the backing of
your organizations’ governing board and executive staff, including
an approved budget [Syllabus
for Gift Planners, section 4.03.01] which provides
resources for staff and program needs. You may also wish to establish
a board-level gift planning committee to oversee the activities in
this area.
-
Review the
The Partnership's
Model Standards of Practice for the Charitable Gift Planner to
understand the expectations and context for ethical gift planning
activities.
-
Review the
Syllabus for Gift Planners and begin a self-education program in those
areas in which you lack knowledge or experience.
-
Attend a basic
seminar offered by recognized planned giving professionals.
The Partnership
publishes an annual Training Opportunities Calendar to
assist you in locating seminars and determining how they relate to the
Syllabus for Gift Planners.
-
Review your
existing fund-raising program and adopt gift planning program policies
[Syllabus
for Gift Planners, section 4.01] which compliment it, including gift
acceptance policies, an ethical statement establishing how the gift
solicitation and management will be conducted, and a policy on the
types of planned gifts that will be sponsored by the organization and
who is authorized to negotiate and accept gifts on behalf of the
organization.
-
Seek out a mentor
who is experienced in the field and with whom you will feel
comfortable being in contact frequently.
Members of the Partnership
may seek informal mentoring and advice via
GIFT-PL, an e-mail discussion forum with hundreds of subscribers.
-
You may also be
well advised to seek Board approval to hire a consultant
[The
Partnership
Business Pages] with specific expertise in the design and
implementation of planned giving programs. A qualified planned giving
consultant will be able to help you structure a program that will be
appropriate to your organization's needs and capabilities. A
consultant can also help your governing board understand the realities
of undertaking a planned giving program and assist in the development
of policies and procedures. Some organizations also use qualified
charitable gift planners to assist in gift negotiations with
prospective donors.
-
Obtain legal
counsel and form alliances with professional gift and estate planners
in your area. Join a planned giving council and/or
LEAVE
A LEGACY® program
that serves your area. The Partnership will
be happy to refer you to one of its
local
councils.
CONCLUSION
Consideration
of a gift planning program begins with a realization that:
-
Planned gifts will
offer excellent opportunities for significant financial rewards. Gift
planning is a continuing process from which the first fruits may be a
long time in coming.
-
It involves the
up-front commitment of time and resources by the organization's
governing board, its administration, staff, and sometimes, volunteers.
-
The extent of the
organization's up-front commitment and planning will likely dictate
the expediency and degree to which results will be seen.
-
A planned giving
program is one part of an organization’s asset development effort
and in order to be successful, the organization must have a
well-communicated, important charitable purpose and need for long-term
financial resources.
-
Major gifts are the
desired result of--and typify--a planned gift. The type of plan, the
"gift vehicle" used, is simply the means of making a major
gift possible.
-
Major gifts evolve
from long-term relationships that take time and effort to cultivate.
-
Planned gifts are
arranged through instruments (often maturing at a future date or
event), as opposed to cash, pledges, in-kind, or other traditional
forms of giving. For the donor, potentially beneficial by-products of
the gift planning process can include income and estate tax savings
and addressing other financial planning goals.
-
You'll never know
everything--and you won't need to. Remember, there is help available
from the National Committee on Planned Giving® and its member
councils.
Good luck!
|
