Posts tagged ‘Russell N. James’

January 4, 2013

Fiscal Cliff Disaster Averted, but Trouble Looms

We ended 2012 by surviving the so-called Mayan Doomsday. We began 2013 by driving off the so-called Fiscal Cliff before averting possible economic disaster. Congress passed the American Taxpayer Relief Act of 2012 which put the nation back on safe ground, for the moment.

Previously, I looked at the Act and provided information about what key elements mean for the nonprofit sector. Now, let’s look at:

What’s next?Road Sign by Madjag via Flickr

The Charitable Giving Coalition, chaired by the Association of Fundraising Professionals, as well as the AFP Political Action Committee, won a great victory when Congress preserved the charitable giving tax deduction and reinstated the IRA Charitable Rollover for 2012 and 2013. Everyone who was involved in visiting members of Congress, writing them, or calling them to advocate for the nonprofit sector certainly has a right to take pride in what the sector has accomplished.

However, before we get too carried away congratulating ourselves, let’s remember that the nonprofit sector continues to face danger.

The return of Pease Amendment provisions will make charitable giving a bit more expensive for wealthy donors. Higher taxes will also mean that donors will have less money with which to give. As a result, organizations may face some challenges. But, these are challenges that we have faced before. We’ll just have to work a bit more creatively.

Unfortunately, there are other looming dangers.

Thelma & LouiseThe Fiscal Cliff legislation, which was originally supposed to decrease the deficit, will actually increase the deficit by $4 trillion over the next decade, according to the nonpartisan Congressional Budget Office. In other words, we’re still headed full-speed ahead to economic collapse which would be a disaster for the nonprofit sector and society in general.

Charitable giving has historically correlated to about two percent of Gross Domestic Product. If GDP growth continues at a slow pace, philanthropy is also likely to grow only modestly. If runaway deficit spending leads to another recession, we can expect a likely decline in overall philanthropy.

All Congress has done is buy a bit of time.

Republicans have signaled that they will address the issue of spending cuts within the next two months. In two months, Congress will have to vote on whether to increase the nation’s debt ceiling. President Obama has already said that any spending cuts will require an increase in tax revenue in order to garner Democrat support.

Having achieved a tax rate increase, The White House now seeks to raise additional revenue in other ways. For example, the Administration may want to apply the top tax rates to those earning less than the current threshold of $400,000 for individuals and $450,000 for married couples. Also, the Administration is likely to seek limitations on deductions, particularly for the “wealthy.” The Administration has previously expressed support for both revenue generating options. Now, it’s likely those proposals will resurface during spending-cut negotiations.

So, while the charitable deduction appears to be safe for the moment, that safety may only last for two months.

Think I’m being alarmist? Let me provide some perspective from the US Debt Clock:

In 2000 the deficit was $5.8 trillion, which was $56,150 per taxpayer.

In 2008 the deficit was $9.2 trillion, which was $85,893 per taxpayer.

In 2012 the deficit was $16.4 trillion, which was $145,620 for every taxpayer.

Now, the Fiscal Cliff deal will add another $4 trillion to the deficit over 10 years!

At some point, the American economy will either collapse, going the way of Greece, or the government will get its act together and control spending. I’ve heard a lot of talk during the debate over the Fiscal Cliff about the need to return to Clinton Era tax rates. Sadly, there was little talk of returning to Clinton Era spending levels, even as a percentage of GDP which would still allow for spending increases.

The situation must be dealt with for the good of the nation. Unfortunately, this may require some pain for the nonprofit sector in the form of a reduced charitable giving tax deduction and reduced direct grants to and contracts with nonprofit organizations.

On the floor of the House of Representatives, during debate over the Fiscal Cliff legislation, Democrats have already begun to argue for additional revenues, echoing statements this week from The White House. In other words, the nonprofit sector has made it out of the first round of debates. But, the second round is quickly approaching.

Challenging times remain immediately ahead.

December 28, 2012

Top Ten Posts of 2012, and Other Reflections

We’ve survived another “Doomsday”! Now, as 2012 draws to a close, I thought it would be interesting to look back briefly before we march into the new year.

 

Champagne Toast by viking_79 via Flickr

Happy New Year!

 

For starters, let’s look at which of my posts have been the most read in the past year:

1. Survey Sounds Alarm Bell for Nonprofit Sector

2. Can a Nonprofit Return a Donor’s Gift?

3. 10 Essential Tips to Protect Children from Real Monsters

4. Garth Brooks Sues Hospital for Return of $500,000 Gift

5. 8 Valuable Insights from a Major Donor

6. Overcoming the 9 Fundraising NOs (Bernard Ross)

7. Breaking News: Brain Scan Study Gives Fresh Insight into Charitable Giving Behavior

8. What NOT to Do in Your Email or Direct Mail Appeals

9. 20 Factoids about Planned Giving. Some May Surprise You.

10. Two Major Factors that Demotivate Donors

I invite you to read any posts you might have missed by clicking on the title above. If you’ve read them all, thank you for being a committed reader.

I’m honored to know that I have readers from around the world. (I love the Internet!) While I appreciate all of my readers, I thought it would be interesting to look, beyond the United States, to see my top ten countries for readership:

November 2, 2012

Despite Survey Report, Recognition Clubs Make Sense!

Despite a report from The Stelter Company that seems to suggest otherwise, donor recognition clubs can still be a valuable part of a sound development program.

Last month, I reported on insights and flaws contained in What Makes Them Give: 2012 Stelter Donor Insight Report. Now, I want to more thoroughly explore the controversy the report has spawned regarding the subject of whether or not donors want to be part of a donor recognition club.

The survey asked planned gift donors and “best prospects”:

Are you currently a member of a donor recognition club for any charity — this would be an organization for major donors and/or people who have made a planned gift to that charity?”

The survey found, “Just 14 percent of planned givers and best prospects are currently members of a recognition club.” That breaks out as 17 percent of planned givers and 13 percent of best prospects saying they are members of a recognition club, according to Bev Hutney, Director of Research and Innovation at Stelter. Of those who are not members of a recognition club, only three percent of both groups say they would like to be “invited” to join one, when asked:

Would you like to be invited to be a member of this kind of organization for a charity you support, or would you prefer not?”

On the surface, the responses seem to suggest that donor recognition clubs are of little or no interest to donors and, therefore, of little or no value. However, Hutney acknowledges that interest might be low because the term “recognition club” might not be understood by those not part of such a group. Or, they might have been put-off by the idea of being “invited” to be part of such a group. Also, the use of the term “organization” might have been confusing for some.

The other issue with the survey result is that Selzer & Company, the research company that conducted the study, failed to take into account Social Desirability Bias. Russell N. James, III, JD, PhD, CFP, an economist and Director of Graduate Studies in Charitable Planning at Texas Tech University explains the issue with SDB this way:

One study found between 10 percent and 75 percent of the variance in participants’ responses can be explained by SDB (Nederhof, A. 1985. ‘Methods of coping with social desirability bias: a review.’ European Journal of Social Psychology, 15(3):263-280.)  Also, we know specifically that SDB is most likely to occur in responses to socially sensitive questions (King, M. and Bruner, G. 2000. ‘Social desirability bias: a neglected aspect of validity testing.’ Psychology and Marketing, 17(2):79–103.) like the issues we are dealing with here. For example, if you ask someone, ‘Are tax benefits motivational to you in making a charitable gift?,’ the answer is going to be ‘No,’ because ‘Yes’ is a socially inappropriate answer.

“Nevertheless, econometrically, we can see that deduction rates do strongly influence actual giving. Similarly, if you ask someone, ‘Would you like more public recognition of your donations?,’ the socially acceptable answer is ‘No.’”

June 9, 2012

How Much is a Bequest Commitment Worth?

A charitable bequest commitment has tremendous value for the organization receiving it. The value may be even greater than you realize. Bequest commitments are valuable in three important ways:

 

1.  Future Money

For donors, a charitable bequest commitment is an easy painless way to give. It’s a way even middle-class donors can be “major donors.” While most people cannot afford to make a huge cash gift to a nonprofit they love, most can make substantial gifts upon death. This is particularly important during economic hard or uncertain times. A bequest commitment allows donors to show their significant support for their favorite charities without having to deplete current cash resources.

For nonprofit organizations, bequests allow more money to flow into the organization than would otherwise be the case. And, the organization will not even necessarily need to wait decades for the donor to die and for the gift to be realized. Depending on the age and health of the donor, the bequest gift might be realized in a surprisingly short time period.

Many people have tried to estimate the value of the average bequest gift in the US. I’ve seen a range of numbers used. The consensus figure I used in my book, Donor-Centered Planned Gift Marketing, is $35,000. However, that’s not a particularly useful figure since there is such a massive range in the size of actual bequest gifts that individuals make.

So, researcher Russell N. James, III, JD, PhD, CFP®, Director of Graduate Studies in Charitable Planning at Texas Tech University, looked at how bequest giving compares with annual giving. In his AFP International Conference presentation, “The Presence and Timing of Charitable Estate Planning: New Research Findings,” James revealed the following about Americans over the age of 50:

 

 Total Estate Value

Annual Giving Multiple  

 < $100,000

0.15  

 $100,000 – < $500,000

1.89  

 $500,000 – < $1,000,000

3.73  

 $1,000,000 – < $5,000,000

8.12  

 $5,000,000+

11.65  

 TOTAL

5.07  

 

February 10, 2012

Breaking News: Brain Scan Study Gives Fresh Insight into Charitable Giving Behavior

An exciting new study from researchers at Texas Tech University used brain scans to garner fresh insight into charitable giving behavior. Specifically, the study looked at what motivates individuals to make a charitable bequest commitment as well as what de-motivates them. This is the first time that Magnetic Resonance Imaging has been used to examine charitable bequest decision making.

This blog post marks the first time that the breakthrough findings of the Texas Tech study have been released to the nonprofit development community. I am honored that Russell N. James, III, JD, PhD, CFP furnished me with a preview copy of his draft report, “Charitable Estate Planning as Visualized Autobiography: An fMRI Study of Its Neural Correlates.”  I thank James for providing me with the draft report and for allowing me to share it with you. I also want to recognize Michael W. O’Boyle, Ph.D. who co-authored the report.

While James has written a scientific paper with a suitably technical title, don’t be intimidated. My article will look at the data from a fundraiser’s perspective. If you want more detail or want to explore the science behind the findings, you can download the full report.

The three key findings of the report are:

 

  • Bequest giving and current giving stimulate different parts of the brain. This suggests that different motivators and de-motivators are at work. While the report compares and contrasts the differences in brain activity where current versus bequest giving are concerned, I’ll limit myself here to a review of the findings related to bequest giving.

  

  • Making a charitable bequest decision involves the internal visualization system, specifically those parts of the brain engaged for recalling autobiographical events, including the recent death of a loved one.

  

  • Charitable bequest decision making engages parts of the brain associated with, what researchers call, “management of death salience.” In other words, and not surprisingly, charitable bequest decision making involves reminders of one’s mortality.

 

So, what do these findings mean for development professionals?

Fundraisers need to understand that charitable bequest decision making is about autobiographical connections, not numbers, such as taxes, or even the needs of the charity. James suggests, “Start conversations by working to trigger autobiographical memories associated with the charity, or the cause the charity represents. The goal is to lay-out for the donor how a bequest gift to the organization fits neatly into their autobiography.”

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