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Here’s why gift officers should focus on planned giving

Shelter-in-place orders aren’t only driving people to get their houses in order, they’re also spurring many to get their financial affairs in order.

That’s evident given the marked rise in Google search queries such as “wills and estate planning,” “estate planning,” and “end of life decisions.”

That isn’t a surprise.

During challenging economic times, bequests and other testamentary gifts often make up a larger share of total giving as other forms of giving are quicker to slow down. That dynamic is likely to intensify this time around given that prior to the COVID-19 pandemic, we were already in the middle of the largest intergenerational wealth transfer in U.S. history.

As Baby Boomers age, they will pass on $59 trillion of wealth by 2065—with between $1 trillion and $2 trillion bequeathed to charity over that period. Bequest giving in the United States already accounted for 9% of the $427.71 billion contributed to charity in 2018, according to Giving USA, and annual bequest contributions have been above $30 billion for four consecutive years.

Nonprofit institutions need to ensure that they’re a part of that nationwide trend. That starts by offering thorough, up-to-date planned giving resources that are written in clear, easy-to-understand language. For example, Penn State—where I am assistant vice president of gift planning—offers an online “personal estate planning kit,” which includes a lesson book that walks prospects through essential tutorials on creating an effective estate plan, and a record book that helps them take inventory of their assets.

Those types of resources can prove invaluable both to donors and frontline fundraisers who can, and should, be engaging those donors in conversations around planned giving. Of course, these conversations shouldn’t come out of the blue. Instead, they should grow out of the regular wellness check-ins that fundraisers are already engaging in with donors during the pandemic. During one of these video calls, a donor may share her estate plans or her desire to find other ways to give, opening the door to a bequest conversation

Planned giving conversations aren’t for every donor, but they are worth broaching with more donors than many fundraisers might assume, including those who don’t have children, those who have experienced an increase in assets since the Great Recession, or others who may have suffered the death of a loved one.

After all, donors are 44 years old on average when they write their first will, according to a recent Giving USA  special report. And 53% of donors establish their first legacy gift at the same time as their first will.

During the COVID-19 pandemic, many donors have been thinking about making a will, revising their will, and/or getting their financial affairs in order. Based on my experience, as well as industry research, many of them are open to planned giving conversations. That same Giving USA report found that 73% of donors surveyed claim they are “very comfortable” or “somewhat comfortable” with their own mortality. Moreover, 73% were not worried about outliving their assets.

Offer donors other ways to support the institution

Gift officers should understand that planned giving isn’t for everyone—especially during the current public health and economic crises.

But that doesn’t mean they don’t want to support your institution. Some may boost their cash gifts thanks to the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which changed the above-the-line deduction to $300 for everyone, as well as made the maximum deduction for cash gifts 100% of the adjusted gross income instead of 60%. Meanwhile, others may be looking for, and thinking about, alternative means of contributing.

Here are a few areas that gift officers may want to present them:

  • Donor-advised fund grants, or DAFs, which allow donors to make a charitable contribution, receive an immediate tax deduction and then recommend grants from the fund over time. DAFs aren’t typically affected by economic uncertainty. They also aren’t directly affected by the CARES Act. Even so, institutions may see an increase in money coming out of DAFs because that money is already “gone” in donors’ eyes. That’s why, at Penn State, we’re encouraging our frontline gift officers to reach out to every previous DAF donor. We’re also encouraging gift officers to approach major gift prospects about DAFs with the question, “Many of our supporters give out of a donor advised fund. Would you like information on that?”
  • Qualified charitable deductions, which are gifts directly out of an IRA. These gifts will probably be down as the CARES Act eliminates required minimum distributions—the money people must take out of their IRA—in 2020. Even so, QCDs may make sense for many donors, especially as the stock market has rallied since its initial COVID-19 decline. Moreover, many donors using QCDs are seniors who have a greater share of bonds, which tend to be more stable than stocks. QCDs are likely to continue to make sense for many donors this year as they’re more beneficial than cash for donors who do not itemize their deductions because it saves them future taxes.
  • Stock gifts can be powerful, even in a down market, because most donors do not buy at the “peak” and still have some appreciated assets. One idea that fundraisers may want to present prospects is to donate stock without changing her portfolio by donating the stock and then immediately buying the same stock with cash.
  • Charitable lead trusts are irrevocable trusts designed to provide financial support to one or more charities for a period, with the remaining assets eventually going to family members or other beneficiaries. These are very attractive right now from a principal gift perspective because donors can transfer assets to loved ones and reduce gift and estate taxes by a significant amount or eliminate them entirely. That’s because a CLT can make an annual gift to an institution now and later transfer the remaining trust assets to children at a low tax cost.
  • Gift annuity is an arrangement between a donor and institution in which the donor receives a regular payment for life based on the value of assets transferred to the organization. After the donor’s death, the assets are retained by the organization. Given the uncertainty within the market and the strong likelihood that interest rates will drop, it makes sense for gift officers to convey this tool with a strong sense of urgency.

Many donors want to continue to support the organizations they care about—even during a financial downturn. Given the public health crisis, end-of-life decision-making and estate planning is front of mind for many. Others are simply looking to find other ways to help. By staying in touch with donors—and presenting them with various means of supporting the institution that suit their needs—gift officers can serve as a valuable resource, or problem-solver. That’s always important, but it is even more essential at a time when many institutions are feeling the weight of the COVID-19 recession.

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About the author

Michael Degenhart

Consulting Vice President

Michael J. Degenhart, Consulting Vice President for Gift Planning, brings more than 20 years of professional experience in development and fundraising with higher education institutions. Michael is currently serving as the Assistant Vice President of the Office of Gift Planning at The Pennsylvania State University (Penn State), where he is…