How Much Could Your Planned Giving Program be Worth?

If your organization already has a gift planning program, is it worth investing more money to promote it?

If your organization is contemplating starting a gift planning program, will it really be worthwhile to do?

In my book, Donor-Centered Planned Gift Marketing, I wanted to help development professionals answer those questions. So, I developed a worksheet that looks at the most common planned gift instrument: charitable bequests. Of course, bequests are just one facet of a planned giving program. Charitable gift annuities, trusts and, some would even say, gifts of stock can also be part of a robust planned giving program. However, since most planned gifts will be in the form of bequests let’s look more closely at what your organization’s potential is for this type of gift.

To truly project how much a planned giving program can produce, one must understand as many of the variables as possible including the nature of the prospect pool, the wealth of prospects, the passion of prospects, the history of the organization, past service performance, the purpose of the fundraising effort, the nature of the cause, the community, past philanthropic performance, the marketing effort, and so on. Collectively, this makes it difficult to forecast planned giving results. However, one can fairly easy gauge an organization’s potential given a mythical, ideal set of circumstances. The following worksheet is meant to provide development professionals with an understanding of the broad potential impact of planned giving for their organizations.

While this is not a scientific forecasting tool and while the worksheet only addresses one type of gift, it can still help with forecasting by outlining aspirational targets. This worksheet looks at the most common, easy-to-market type of planned gift while my book also includes a worksheet for projecting charitable gift annuity potential.

Bequest Potential Worksheet:

Step 1: Size of database = ________ Records

Since the core prospect market for a bequest program are frequent annual donors, you should count the number of donors to your organization. However, depending on your organization, you might want to include other loyal supporters such as volunteers.

Step 2: Number of records x 5.3% = ________, Low-end number of potential donors

Take the number of records you have and multiply that figure by 5.3 percent, which is the percentage of Americans over the age of 50 that have made a bequest commitment. If your donor file skews younger, you might want to back off that number a bit.

Step 3: Number of records x 33% = ________, High-end number of potential donors

Take the original number of records you recorded in Step 1 and multiply that figure by 33 percent, which is the percentage of Americans that are willing to consider a bequest gift.

Step 4: Low-end number of potential donors/3 = ________ the revised low-end number of potential donors

Unfortunately, not every potential bequest donor will choose to support your organization. Some donors will support other organizations. Some who will be willing to consider a commitment will ultimately decide not to do so. The formula assumes that your organization can secure bequest gifts from one-third of its potential market. If you are feeling conservative, increase the denominator. If you are more ambitious, lower it. The outcome will be the estimated low-end number of potential donors that you can secure over time with an effective marketing effort.

Step 5: High-end number of potential donors/3 = ________ the revised high-end number of potential donors

This follows the same process as Step 4 except it is applied to the high-end number of potential donors. Unfortunately, not every potential bequest donor will choose to support your organization. Some donors will support other organizations. Some who may be willing to consider a commitment will ultimately decide not to do so. The formula assumes that your organization can secure bequest gifts from one-third of its potential market. If you are feeling conservative, increase the denominator. If you are more ambitious, lower it. The outcome will be the estimated high-end number of potential donors that you can secure over time with an effective marketing effort.

Step 6: Estimated number of low-end potential donors x $________ = $________, potential dollars

Take the estimated number of low-end potential donors (Step 4) and multiply by $35,000, which is what some believe to be at or near the average bequest value in the United States. Alternatively, you can multiply the number of potential donors by your organization’s average bequest gift value, being sure to deduct any unusually large gifts when calculating the average. The result is the gross potential dollars that could come from future bequest gifts at the low-end. Of course, this does not take into account the growth of the donor base (Step 1) over time.

Step 7: Estimated number of high-end potential donors x $________ = $________, potential dollars

This step follows the same process as Step 6 except it is applied to the high-end number of potential donors. Take the estimated number of high-end potential donors (Step 5) and multiply by $35,000, which is what some believe to be at or near the average bequest value in the United States. Alternatively, you can multiply the number of potential donors by your organization’s average bequest gift value, being sure to deduct any unusually large gifts when calculating the average. The result is the gross potential dollars that could come from future bequest gifts at the high-end. Of course, this does not take into account the growth of the donor base (Step 1) over time.

Step 8: Summary

Low-end potential donors (Step 4): ____________

Low-end potential dollars (Step 6): $____________

High-end potential donors (Step 5): ____________

High-end potential dollars (Step 7): $____________

After completing all eight steps, you will have a low-end to high-end gauge of your organization’s potential for bequest giving over time. While this is not a forecast, it does provide some indication of the potential results for your organization. How does your organization’s current bequest marketing performance compare? Should your organization invest more in planned gift marketing?

That’s what Michael Rosen says… What do you say?

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15 Responses to “How Much Could Your Planned Giving Program be Worth?”

  1. You asked for it, Michael, so this is what Jeff Steele says:

    According to company records, when IBM created its first production computer for scientific calculations, they thoroughly researched and identified only 20 potential lessees in the entire country, and traveled around to pitch it. Since it was extremely expensive to lease, they dared not hope for or expect five customers, but returned with orders for 18.

    Forget the formula. Even if was possible to estimate bequest potential – which it isn’t – it wouldn’t represent overall planned gift potential. Contrary to all the pundits, bequests are the least – not the most – common form of planned gift (and the numbers prove it, if anyone would like to discuss it at another time).

    In any event, since many, if not most, bequest intentions do not come to fruition (with the exception of higher ed institutions and some religious organizations), they should be promoted at absolutely minimal expense. Don’t waste a nickel on postage for a separate bequest or legacy society mailing. Save your money to promote irrevocable gifts.

    Sorry to disagree, Michael, but you know I’m an outspoken ornery geezer, set in my ways, and you’re a big boy. You can take it on the chin once in a while.

    • Jeff, if you did not disagree with me once in awhile, I would not appreciate all of the times you have agreed with me quite as much. While it is difficult to pinpoint precisely what percentage of planned gifts come through a bequest, most gift planning experts (though clearly not all) seem to think that the charitable bequest is indeed the most common. Even if the bequest is not THE most common, it is certainly one of the most common and the easiest for a donor to execute. While irrevocable commitments would certainly be the preference of nonprofit organizations, a discussion of a bequest commitment is one way to begin the gift planning conversation. Think of the bequest as a gateway planned gift. If someone is willing to discuss taking the simple step of adding a charitable gift provision to his/her will, that’s someone worth talking to about other gift planning instruments, including those that are irrevocable. One reason we see so much bequest giving in higher education and not other sectors is that our higher education colleagues have been very good at talking about bequest giving for a long time. If folks in other sectors put in a similar effort, they’d likely get a similar result, maybe not as strong but darn good anyway. I also need to point out that the research shows (Stelter and others) that once a charity is named in a will, there is only a very small chance that it will be removed. So, while a bequest commitment is revocable, as a practical matter it is a pretty secure commitment. Of course, there are also techniques that can even make a simple bequest commitment irrevocable, but I won’t get into that now. Because bequest commitments can be substantial and because they can be realized (uh, the person dies) in a surprisingly short time, it won’t take many commitments to make a marketing effort worthwhile. Finally, I just want to point out that the purpose of the worksheet exercise is simply to illustrate for most nonprofits that they are not coming anywhere close to realizing their planned giving potential. And, they can and should be doing more to encourage their donors to make planned gifts. Perhaps those are two points on which we can agree. As always, thank you for sharing your thoughts.

  2. Since so many small nonprofit organizations don’t do any type of planned giving fundraising, I always encourage my clients to at least talk to their best and most loyal donors about bequests. I think this would be a very useful tool to help show nonprofits the value of putting even a small effort into encouraging bequests for their organization.

    • Amy, I think you’re absolutely right. Thank you for sharing your thoughts. For nonprofit organizations, it should not be an issue of whether or not to have a planned giving program. Instead, it should be a question of what scale of planned giving program to implement. At a minimum, organizations should be talking with their loyal supporters about gift planning.

  3. Michael, I’m in your corner regarding this debate. I will grant to Jeff that the type of institution probably does have a lot to do with whether bequests can be counted on or not, but in my last two jobs, one a K-12 Independent School, and now the Philadelphia Zoo, bequests make up the vast majority of planned gifts by far. I think you can add health care institutions to this list other cultural, religious, wildlife and conservation organizations where there is a strong personal bond. That’s a pretty broad spectrum, though clearly not all encompassing, of non-profits.

    • Clayton, I thank you for sharing your thoughts. One of the things I like about the charitable bequest is that it is something easy for both the donor and the development professional to talk about. So, it’s a good place to begin a planned giving conversation. Once the conversation starts, however, it may quickly lead to a discussion about other planned giving instruments. The key is to actually start the gift planning conversation and to remain sensitive to the donor’s needs and philanthropic aspirations.

    • Michael and Clayton,

      There is so much confusion about the wisdom of promoting bequests in preference to (and sometimes, even to the exclusion of ) other forms of planned gifts, and, in fact, even what constitutes a planned gift, that it would be impossible to resolve all the misconceptions and inconsistencies in a forum such as this.

      I will, however, state two things unequivocally: (1) The truth of a matter is not determined by majority opinion, and (2) I stand ready to eat the entire contents of a haberdashery if I cannot demonstrate to open-minded planned gift fundraisers that bequests do not comprise the preponderance of planned gifts to charity.

      • I should add that my previous comments weren’t meant to say that I think bequests shouldn’t be promoted. Rather, that the resources devoted to the effort should be limited, in order that they be directed to far more productive avenues of planned gift fundraising.

  4. Jeff, I agree with you that nonprofit organizations should be promoting a wide-range of gift planning options. Promoting only one type of planned gift instrument is not donor-centered. We need to help donors understand their full range of options. Now, having said that, I recognize that not all organizations will be equipped to do that in equal ways. The three easiest planned giving options, both for the donor and the organization are (in no particular order): bequests, charitable gift annuities, and stock gifts. Promoting planned giving can take many forms. Of course, the best way to promote the concept is to actually talk with donors and prospective donors. By finding out about the donor’s needs and philanthropic aspirations, development professionals will be better able to assist the donor and generate a meaningful gift for the organization. Thanks again for sharing your views.

  5. Trying to convince the Board that all the staff time dealing with problems in administration, unexpected crashes in the stock market, and annuitants living way past their life expectancies, you can see how they rationalize that the gift annuity program may not be worth the effort. However, I, like Jeff, see this as a conversation starter with the donors so they may see they have a continued role in the future, provide for their loved ones as they would like, and establish a planned gift for the organization. The way I see it is any estate-planning activity is a planned giving opportunity. There are many other gift alternatives, such as multiple varieties of charitable trusts, charitable annuities, life insurance, real estate, pension and retirement plans, and other beneficiary designations that a donor may be unaware of as a way to contribute.

    Philip Byrdsong

    • Philip, thank you for sharing your thoughts about planned giving. You’re quite correct: the key is to start the conversation. That’s one reason why I liked the IRA Charitable Rollover. By itself, the IRA Rollover was not hugely beneficial to nonprofit organizations or donors. It was only somewhat beneficial. However, it had tremendous value as a conversation starter. So, the combined benefits made the IRA Rollover program worthwhile. We just need to regularly look for creative ways to have the conversation with our supporters and potential supporters.

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