Planting Seeds: Planned Giving vs. Major Gifts

planned givingBack in December 2016, our blog focused on major gifts fundraising.  With the arrival of a new year, it’s a great time to discuss major gifts versus planned gifts.  There are many similarities between the two, but a planned gift often requires more research and fundraising work – with potential for an even greater donation to your nonprofit.

A square is a rectangle…

Planned gifts can be considered a type of major gift, though there are key differences.  A planned gift is made during a lifetime or posthumously as part of a donor’s overall financial and/or estate planning.  Just as a person bequeaths their assets to family and friends, so too can that person name a nonprofit as a beneficiary.

But a rectangle isn’t necessarily a square

Major gifts, as we know, are large donations made from a donor’s discretionary income.  What your organization considers “major” will certainly be different from the major gift goals of an Ivy League college or a local after-school club.  The donor may budget for the major gift, but it is not necessarily planned.  Major gifts include planned gifts, but are typically generous and recurring donations raised by active fundraising efforts.

How planned giving works

Generally, there are two paths donors take when gift planning:

  1. Bequest. The donor leaves a planned gift to a nonprofit in his/her will.  After the donor passes away, the gift amount is awarded to the organization.
  2. Charitable Gift Annuities. The donor enters into a contract with the nonprofit to award a large sum of money to the organization now.  For the rest of the donor’s life, the organization pays the donor a percentage of the original sum.  After the donor passes away, the organization keeps the remaining funds.

A donor may use cash, appreciated securities/stock, real estate or personal property, artwork, life insurance, etc. when planning a gift.  Typically, more assets means more taxes.  Gift planning is a way for donors to make a positive charitable impact while also reducing any financial burdens on themselves or their families.  Such tax benefits include avoiding capital gains tax on donations of appreciated property, and estate tax exemptions for gifts payable upon the donor’s death.  Learn more about planned giving tax benefits here.

Attracting and earning planned gifts

The larger the gift, the more work necessary to secure it.  However, the effort is certainly worth it.  Planned gifts are also known as legacy gifts, meaning the donor and her gift will have a lasting impact on the organization.  Because of her generous bequest, your organization could fund new programs or begin new projects to further serve your mission.

Major gift donors and planned giving donors are not always similar, but they often share similar traits.  Most commonly, you will see a variety of wealth indicators.  You may also learn that the best donors are also the best at “hiding” their wealth with trusts and real estates.  This is where research is critical to glean some insight on the prospect’s capacity to give.  As well, this is much easier if the prospect has already demonstrated propensity and affinity.

Research

Like soliciting major gifts, prospect research is the key to attracting and bringing in planned gifts to your organization.  As we’ve mentioned before, 12% of donors give 88% of donations.  Look to your internal donor data.  Of your major gift donors, those who have given for over five (5) years demonstrate the right combination of propensity, affinity, and capacity.  These donors are your best planned giving prospects.

planned givingUse your prospect research tool(s) to examine your prospect across various categories in a planned gift context, including: securities/stock, company and salary information, real estate holdings, etc.  Of these categories and more, pay specific attention to real estate.  As leading consultant Helen Brown writes, real estate is a green flag: “It’s information in a realm where anything concrete is already in short enough supply.”

Research is fundamental when first examining a gift prospect.  But it is also necessary for tracking a current donor’s lifetime giving.  A donor’s wealth, opportunities, and relationships with family, friends, and business associates will change over many years.  The public information you find on your donors over their lifetime provides context for planned giving conversations.

Cultivation and Solicitation

Depending on your organization’s major gift strategy, a fundraiser may cultivate and solicit major gift and planned gift prospects simultaneously.  Whatever your strategy, ensure you conduct conversations with planned giving prospects carefully.  The realities surrounding planned giving can be difficult to address, and prospects may involve other decision-makers like lawyers and family members.  Patience and diplomacy are key.

Stewardship

Stewardship is perhaps the most vital step of the planned giving process.  A donor may award major gifts to your organization all his life, but the moment he feels undervalued or at odds with the organization, he may reduce his gift amount significantly or look elsewhere entirely.  Stewardship is an opportunity to nurture relationships with donors of all kinds and capacities.  Relevant information fuels your stewardship efforts, and this is where we return to the research step of the fundraising cycle.

A final word

A blog post from Front Range Source discussed the challenges of planned gifts.  Frankly, no one likes to talk about or think about death.  On the one hand, planned giving is all about death.  However, it is more about offering lasting, long-term impact.  A such, the real difference between major gifts fundraising and planned gifts fundraising is language use.

A typical major gift is immediate, solving here-and-now issues standing between a nonprofit and its mission.  Planned giving focuses on the future.  Many people wish to be remembered after they are gone, to leave something behind that transcends their own lives.  It’s the same reason we plant seeds of trees whose shade we will never know.  A planned gift, however small or large, is a seed to help your organization grow.

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