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  

 

James finds that the estate gifts from those with estates valued at less than $100,000 do not even equal the donor’s total annual giving. However, as estate values grow, so too does the size of estate gift and the ratio of estate giving to annual giving. For example, among those with estates valued at $500,000 to $999,999, estate giving was 3.73 times greater than the annual giving total for these individuals. Those with estates valued at over $5 million have estate giving totals that are more than 11 times greater than their annual giving total.

The figures above represent total estate values, total annual giving, and total estate gift value rather than figures related to giving to a particular organization. Since donors tend to support far fewer organizations with a planned gift compared to their annual fund donations, the multiple of planned gift to annual donation to a particular organization might be many times greater than the study has revealed.

The data may suggest that it is wise to target individuals with large estate values. However, development professionals must understand that wealth is not an indicator of willingness.

The downside of targeting individuals who have estates greater than $5 million is that they are often less likely to support existing nonprofit organizations and more likely to establish a private foundation with their estate gift. Consider that no one with an estate valued under $500,000 is estimated to create a private foundation while 43.7 percent of those with estates valued at $5,000,000 or more are estimated to give in that way. While this might be a perfectly fine development for the nonprofit sector as a whole, it is not particularly helpful to the development professional attempting to secure an estate gift for a particular, existing organization.

James’ analysis has made an enormous contribution to our understanding of the value of bequest gifts though we still have much more to learn.

 

2.  Gateway Planned Gift

Because bequest gifts are the easiest planned giving vehicle for donors, and because they’re easy for development professionals to promote, they are considered the most common form of planned giving.

James has reported (“The Myth of the Coming Charitable Estate Windfall,” The American Review of Public Administration) that 5.3 percent of Americans over the age of 50 have included a charity in their will. By contrast, I estimated for my book that fewer than one percent of Americans over the age of 65 have a charitable gift annuity.

Bequest giving is the easiest way to involve donors in planned giving. Once they express an interest in this gateway planned gift, donors can be asked to explore other gift planning options.

Consider what mega-philanthropist H. Gerry Lenfest, member of the Giving Pledge, has said:

Do not make the mistake of forgetting about us once you receive our gift commitment. We may truly appreciate how efficiently and effectively you handle contributed funds so much that we entrust you with another planned gift.”

In other words, planned gift donors do not necessarily make one planned gift and then move on. They are passionately loyal donors. If properly stewarded and if asked, they may very well make another type of planned gift.

 

3.  Influence Others

When an organization properly recognizes donors who make bequest commitments it helps ensure that the donor will maintain that commitment. It also positions the donor to influence others to do the same.

Others, seeing the list of legacy society members may be inspired to join the group by making their own planned gift commitment. More directly, the donors themselves may directly contact and influence their peers. Here’s what Lenfest said about that:

We are also in a position to influence others to do the same, so bringing together current and prospective planned gift donors for an informational event may have a very good outcome. Publishing stories — with or without the use of the donor’s name — can show prospects the many backgrounds of planned gift donors. Even a reluctant philanthropist may be urged to serve as an example for others to follow.”

Charitable bequest commitments are easy for donors to make, and they require no sacrifice while the donor is alive. It is easy and low-cost for nonprofit organizations to promote this gift vehicle. Because of the valuable impact of bequest gifts and given that it is easy and low-cost for nonprofit organizations to promote this gift vehicle, virtually every nonprofit can and should promote bequest giving.

Bequest giving is a great source of future revenue, an easy way to introduce donors to the concept of gift planning, and a great way to inspire others to do the same. If you’d like to better understand your own organization’s bequest giving potential, read my post “How Much Could Your Planned Giving Program be Worth?

Consider the numbers and the various ways securing a bequest commitment can help your organization. I think you’ll find, especially during these economic times when securing large cash gifts is more challenging, that it’s worth some extra effort and resources to more effectively promote this form of giving.

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

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9 Responses to “How Much is a Bequest Commitment Worth?”

  1. Interesting article, Michael. I think an organization’s ultimate goal is to have donors remember them with planned gifts when the time comes. Donors want to leave their mark on society, and be remembered for doing something good.

    I would agree that more emphasis should be put on people with smaller estates, as there are more individuals in that position, and that the very wealthy do tend to set up foundations and trusts. Every now and then, you will read about an organization which received a bequest from an individual who lived a frugal life that no one thought would be a major donor and benefited from their generosity. That is why respecting and appreciating every donor, regardless of their level of contribution, is so important.

  2. Michael, thanks for such a great article this week. Not only are bequests the easiest planned giving vehicle for donors, the easiest for NPOs to market and considered the most common form of planned giving, they are proof that every NPO should stand up and proudly boast they DO HAVE a planned giving program.

    As we all know, a planned giving program does not have to be a comprehensive program with a devoted staff person and a fancy title. Start with the promotion of a bequest program – even if the promotion is by word of mouth to donors and volunteers. Wouldn’t the world be a better place if all qualified charities had planned giving programs? I welcome the competition!!!

    Thank you for this wonderful reminder.

    Cathy

    • Cathy, thank you for your kind comment. Your comment reminded me of a social service agency CEO who once asked me whether her organization was ready for a planned giving program. As we talked, I learned that the agency received about six bequest gifts per year. I told the CEO, “I’m not sure how to tell you this, but you already have a planned giving program. You just didn’t know it.”

      More and more organizations are beginning to include planned giving in their development efforts. But, with only 22 percent of Americans over the age of 30 saying they have been asked for a planned gift, we as sector have a lot further to go.

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