Posts tagged ‘philanthropic planning’

July 13, 2018

How to Take the Guesswork Out of Fundraising

Many nonprofit professionals think that fundraising is an art. They rely upon conventional wisdom, best practices, what feels right, what they themselves like, what their boss likes. They often guess about how they can be more effective.

Yes, fundraising is an art. However, thinking of it only as an art will limit your success. Guessing about what might work, and relying on trial and error to find what will work, can be costly.

While fundraising is an art, it is also very much a science. Because fundraising is also a science, there’s plenty of solid research that can guide our efforts. In other words, you don’t need to rely on your gut to figure out the best fundraising approach.

As the winner of the Association of Fundraising Professionals-Skystone Partners Prize for Research in Philanthropy and Fundraising for my bestselling book Donor-Centered Planned Gift Marketing, I’m admittedly biased regarding the value of scientific inquiry for the nonprofit sector. Nevertheless, I recognize that it’s not always easy to find valid research reports on a given subject. Furthermore, busy fundraising professionals seldom have enough time to read all of the terrific studies that are now available.

Well, I have some great news for you! The folks at the University of Plymouth Hartsook Centre for Sustainable Philanthropy have prepared a literature review, commissioned by Legacy Voice. Authored by Dr. Claire Routley, Prof. Adrian Sargeant, and Harriet Day, the report will help you take the guesswork out of planned giving. Everything Research Can Tell Us about Legacy Giving in 2018 “is [an] in-depth report, compiled from more than 150 papers across fundraising, marketing, sociology, psychology and behavioural economics, available to anyone working in the not-for-profit sector free of charge,” writes Ashley Rowthorn, Managing Director of Legacy Voice.

In the Foreword of the report, Prof. Russell James III, JD, PhD, CFP® says:

It is wonderfully encouraging to read this review of research on legacy giving, and to know that it will be available for so many who can benefit from the work. Such a work is timely, significant, and much needed. Fundamentally, two things we know about legacy giving are that it is important, and it is different…. [The] possibility of dramatic expansion [in planned giving] starts with learning how legacy giving and legacy fundraising works. That starts with this excellent summary of what we know.”

Here are just seven tidbits from the report:

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May 24, 2018

New Charitable Gift Annuity Rates Announced

The American Council on Gift Annuities has announced an increase of its suggested maximum payout rates for Charitable Gift Annuities for the first time since 2012. The rates will be rising by 0.30 to 0.50 percentage points for those ages where most annuity contracts are done. The new rates become effective on July 1, 2018.

For some sample ages, the following table compares the current single-life payout rates to the new rates:

 

Current Rate through 6/30/18 New Rate, effective 7/1/18
Age 60 4.4% 4.7%
Age 70 5.1% 5.6%
Age 80 6.8% 7.3%
Age 90 9.0% 9.5%

As the above table illustrates, a 70 year-old donor who creates a Charitable Gift Annuity in July will receive a payout rate that is 9.8 percent greater than the rate currently available. Nonprofit organizations may find that the new, higher payout rates will generate greater interest in CGAs.

You can find the complete new rate schedule by clicking here.

When marketing your CGA program, there are a few tips that philanthropy researcher Prof. Russell James, III, JD, PhD, CFP® has found that can help you achieve greater success:

1. Tax Avoidance. Because the new tax code means that most donors will not itemize when filing their taxes, you might think you shouldn’t bother discussing tax avoidance when speaking with donors. However, that’s not necessarily the case. First, many of those who can afford to make a CGA donation will be tax itemizers who will be able to take advantage of the charitable gift deduction. Second, anyone with appreciated securities can avoid capital gains tax by establishing a CGA with a gift of stock rather than cash.

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May 22, 2018

New Research Proves Cash Is Not King in Fundraising

If you want to raise significantly more money for your nonprofit organization, you need to diversify the types of gifts you seek from individuals. That’s what successful charities do to raise significantly more money each passing year. Conversely, relying solely on cash contributions will likely stunt your organization’s growth.

Those are the key conclusions of a newly released study by Prof. Russell James III, JD, PhD, CFP®, philanthropy researcher at Texas Tech University. The study examined more than one million filings with the Internal Revenue Service by nonprofit organizations.

The following chart reveals that, from 2010 to 2015, nonprofits that consistently received gifts of stocks or bonds grew their contributions six times faster than those receiving only cash:

James’ study found the results are not limited to just those years. When looking at three-year rolling averages, organizations consistently receiving non-cash gifts grew much more quickly than those receiving only cash contributions. The study identified the same general growth pattern regardless of the starting size of the charity or the type of charitable organization.

James observes:

Beyond simple opinions or war stories, the previous results conclusively demonstrate that organizations raising non-cash gifts experience dramatically greater growth in total contributions, both contemporaneously and over the long term. Why? This is likely due in part to the effects of mental framing.

First, it is important to understand that wealth is not held in cash. Census bureau estimates suggest that only about 3% of household wealth is held in cash and checking accounts. When fundraisers ask for cash, they are asking from the ‘small bucket.’ This makes a psychological difference because it changes the reference point for the gift. The same gift may seem ridiculously large when compared to other checkbook purchases (elective expenditures from spendable income), but quite small when compared with total wealth (other non-cash assets). Donors who have never made a gift from assets may simply never have considered giving from wealth rather than giving from spare income. This is particularly important considering findings from experimental research demonstrating that people are much more willing to make charitable donations from irregular, unearned rewards (such as might occur with an appreciated asset) than from regular work earnings.

[Second,] gifts of appreciated assets are also cheaper than gifts of cash because the donor avoids capital gains taxes. This special benefit is particularly important under the new tax law, because it applies to all donors, even non-itemizers who can’t use charitable deductions.”

Intuitively, most fundraising professionals have already known what the James study now proves. So, if fundraisers know they should be seeking cash AND non-cash gifts, why do so many ask for only cash or merely make a feeble attempt to get non-cash donations?

James answers:

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May 3, 2018

Who Wins as a Result of New ACGA Decision?

For the first time since 2012, the American Council on Gift Annuities has approved an increase of its suggested maximum payout rates for Charitable Gift Annuities. The rates will be rising by 0.30 to 0.50 percent for those ages where most annuity contracts are done. The ACGA will publish the final rate schedules by May 15, with the new rates becoming effective on July 1, 2018.

The rate increase will make donors the winners of the ACGA decision. Beginning in the second half of the year, CGA donors will be able to receive more income than they previously could in recent years.

A CGA is a gift mechanism that allows donors to make a gift to charity, and then receive an income for life. A CGA contract sets the rate and terms with the donor. The rate is dependent on the age and gender of the annuitant(s), and the number of annuitants.

For charities, the higher CGA payout rates will make this planned-giving instrument more attractive to donors and, therefore, could generate more gifts. So, charities are another winner.

The ACGA summarizes what conditions its board considered when setting the new rates:

Generally speaking, the ACGA’s suggested maximum rates are designed to produce a target gift for charity at the conclusion of the contract equal to 50 percent of the funds contributed for the annuity. The rates are further predicated on the following:

An annuitant mortality assumption equal to a 50/50 blended of male and female mortality under the 2012 Individual Annuity Reserving Table (the 2012 IAR);

A gross investment return expectation of 4.75 percent (which is up from the previous return assumption of 4.25 percent) per year on the charity’s gift annuity funds;

An expense assumption of 1 percent per year.”

If your organization has a CGA program, you’ll want to reach-out to your prospects and donors to let them know about the CGA opportunity and higher rates. The new rate schedule provides a good reason to contact people about CGAs.

When communicating with people about CGAs, remember to encourage them to think about establishing a CGA with a gift of appreciated property (e.g., stocks, bonds, real estate). This will provide the donor with the added benefit of avoiding capital gains tax. Your organization will also benefit. Nonprofits that experienced greatest growth in their CGA programs, as well as average CGA gift size, emphasized gifts of appreciated property compared to cash, according to a recent ACGA report.

If your organization does not already have a CGA program, you might want to consider starting one. While managing an in-house CGA program can be administratively burdensome, there are third-party organizations (i.e., community foundations) that can administer your program for you.

Whether you manage the program in-house or out-source it, your organization will still be legally responsible for making payments to donors. While the CGA rates are designed to allow approximately 50 percent of a gift to ultimately go to the charity, there are many instances (particularly during the Great Recession) when that was not the case and charities received less than 50 percent, nothing, or were in a negative position. CGA programs are not without risk.

When marketing your CGA program, be careful to avoid a common mistake:

Do NOT sell CGAs as investments.

There are three reasons to avoid “selling” CGAs as an investment:

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April 9, 2018

8 Simple Tips to Boost Planned Giving Results

Planned Giving is a vital source of contributions for the nonprofit sector. Organizations that do not have a gift-planning program envy those that do. Those that do have a planned-giving program want even better results.

It’s no wonder.

Bequest giving amounted to eight percent of all charitable donations in 2016 (Giving USA). That’s just counting people who included a charity in their Will. It does not include people who gave through Beneficiary Designation, Charitable Gift Annuity, Stock, Appreciated Personal Property, or other planned-giving vehicles.

While planned giving can certainly present challenges, there are many simple things you can do to create or enhance your organization’s gift-planning efforts:

1.  Focus Your Efforts

You likely do not have the time or budget to reach-out personally to every one of your organization’s supporters to seek a planned gift. Instead, you need to focus on the highest priority prospects, those most likely to make a planned gift.

So, who are your best planned-giving prospects?

The answer to that question will depend on what type of planned gift you are seeking. For example, if you want more people to include your charity in their Will, arguably the most common form of planned giving, you’ll want to consider two key factors:

First, people who are childless are far more likely to include a charity in their Will, according to philanthropy researcher Russell James, JD, PhD, CFP®. However, just because someone is more likely to make a Charitable Bequest commitment to a charity does not mean they will be willing to commit to your charity.

Second, loyal supporters of your organization are the people most likely to make a planned gift to your specific organization, according to UK-based philanthropy researcher Claire Routley, PhD. Your loyal supporters are people who donate frequently, regardless of gift amount. Loyal supporters are also people who volunteer. People who donate cash and volunteer are nearly twice as likely to make a gift through their Will compared to individuals who do only one or the other, James’ has discovered.

When seeking other types of planned gifts, you’ll want to take into account other factors. For example, if you want people to contribute from their IRA, you’ll want to appeal to people over the age of 70.5, the age of eligibility for such giving. If you want folks to donate appreciated Stock, you’ll broaden your audience because the majority of Americans own Stock.

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March 21, 2018

15 Things You Might Not Know about Planned Giving

There’s a lot about planned giving that’s worth knowing and that can help you raise more money. Fortunately, it’s not necessarily all complicated.

Yes, vast differences exist from one planned giving program to the next. Some nonprofit organizations invest heavily in planned giving with dedicated staff and marketing. Other charities invest little and have development generalists talk with donors about gift planning from time-to-time. Despite the differences from one organization to another, there are a large number of points in common.

To help you be a more successful fundraising professional, I want to share 15 insights about planned giving:

1.  Almost everyone has the ability to make a planned gift. A common myth about planned giving is that it is just for rich people. However, that’s not the case. For example, anyone who owns a retirement account, a life insurance policy, appreciated stock, or a home can be a planned gift donor. As H. Gerry Lenfest, the mega-philanthropist, wrote in the Foreword to Donor-Centered Planned Gift Marketing,  “Planned gifts are the major gifts of the middle class.”

2.  The average age of someone who makes their first charitable bequest commitment is 40-50. Another misconception about planned giving is that it is something that old people engage in. While that’s true for certain planned gifts (e.g., gifts from an IRA, or gifts to set up a non-deferred Charitable Gift Annuity), donors of any age can create a charitable provision in their Will or set-up a Beneficiary Designation.

3.  High-income women are more likely than men to use complex gift planning tools. High-income women (those with an annual household income of $150,000 or more) are more likely than high-income men to seek expert financial advice. They are also more likely to establish Donor-Advised Funds or Charitable Remainder Trusts. So, do not ignore female prospects. Instead, be prepared to talk with high-income women about sophisticated giving options.

4.  Using a challenge grant for a planned gift appeal can create urgency leading to action. Research shows that people tend to avoid conversations or decisions involving their own demise. One way to shift the focus of the planned giving conversation from death is to use a challenge grant to encourage prospects to think about making a planned gift commitment so that the organization receives an extra benefit. A challenge grant also creates a sense of urgency that gives donors a reason to act now rather than further delay making a planned gift decision.

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January 30, 2018

Russell James: Three for the Price of FREE!

One of the nation’s leading philanthropy researchers provides us with helpful insights about the new tax code and its impact on charitable giving. He also offers valuable information about planned giving.

Russell James, JD, PhD, CFP® articles, books, and videos will benefit any fundraising professional. Here are just three that will be a big benefit to you:

1. A Donor’s Guide to the 2018 Tax Law (video)

In just nine-and-a-half minutes, James explains how key provisions of the new tax code can benefit donors. With his insights, you’ll be in a better position to inspire more donations and larger gifts to your nonprofit organization. Simple illustrations and great examples will help you easily grasp the concepts.

Do you know?: Just one of the things you’ll learn from the video is that donors can contribute appreciated stock to avoid capital gains tax. Even non-itemizers can benefit from this. While this provision of the tax code remains unaltered, what has changed is that the new code makes this provision even more valuable for donors. James explains how in the free video:

2.Visual Planned Giving: An Introduction to the Law & Taxation of Charitable Gift Planning (e-book, updated January 2018)

I’m honored that James has allowed me to offer you a free copy of his 433-page e-book Visual Planned Giving: An Introduction to the Law & Taxation of Charitable Gift Planning. James designed the newly updated book for fundraisers and financial advisors seeking to expand their knowledge about charitable gift planning. This introductory book addresses all of the major topics in planned giving law and taxation in an accessible way.

Do you know?: Wealth is not held in cash. It’s held in assets. James has found that only one percent of financial assets are held in cash! So, if you want larger donations, you need to talk with supporters about making a planned gift from non-cash assets (e.g., stocks, personal property, real estate, retirement accounts, life insurance, etc.).

If you want to learn more about planned giving or help a colleague gain a fundamental understanding, you can download your free copy of Visual Planned Giving by clicking here.

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January 12, 2018

Hang-on to the Holiday Spirit with FREE Gifts and Resources to Raise More Money!

For most of us, whether we observe Hanukkah, Christmas, or just the New Year, the holiday season is an uplifting time full of joy. However, the same cannot always be said of the post-holiday period, according to Linda Walter, LCSW. Her article in Psychology Today cites many reasons for the post-holiday blahs, for some, even depression.

As an antidote for the after-holiday letdown, I want to share several free resources with you that just might help you keep the holiday spirit going while also helping you raise more money in 2018.

The Donor-Advised Fund Widget. For starters, let me tell you about the Donor-Advised Fund Widget created and offered free-of-charge by the generous folks at MarketSmart. This useful, free gift will help you continue to celebrate the season and raise more money for your nonprofit organization.

When it comes to fundraising, a general rule is: Make it easy for people to give your organization money. You probably already do this in a number of ways. For example, your organization probably allows donors to place gifts on their credit card, mail a check in a business reply envelope you supply, give online, or contribute when they buy products (e.g., Amazon Smile).

So, why not also make it easy for someone to recommend a donation from his or her DAF account?

Rather than viewing DAFs as enemies that divert vitally needed funds away from charities, nonprofit organizations should view DAFs as a great fundraising opportunity. Unfortunately, the problem is that nonprofits have not made it easy for people to donate from their DAF accounts…until now.

Greg Warner, Founder and CEO of MarketSmart, says:

Amazon is successful primarily because they make it easy to buy stuff. Similarly, if nonprofits just made it easy to transfer DAF money, the bottleneck would get un-clogged. But no one was stepping up. So I did!”

The DAF Widget goes on your organization’s website. Your donors with DAF accounts then can easily find their account management company from a comprehensive list of over 800 service providers. Then, they simply click to go directly to their DAF management company’s website where they can enter the relevant information to make a donation recommendation for your organization. To see the widget live, visit the Navy-Marine Corps Relief Society website by clicking here.

DAFs are an increasingly valuable source of donations for charities. Consider the following market-wide insights from The National Philanthropic Trust 2017 Donor-Advised Fund Report:

  2012 2016
Number of DAF Accounts 204,704 284,965
Total Assets in DAF Accounts $44.71 billion $85,15 billion
Grants from DAF Accounts $8.5 billion $15.75 billion
Ave. DAF Asset Size $218,413 $298,809

To put the above figures into context, non-corporate private foundations gave $45.15 billion to charities in 2016. By contrast, donations made from DAFs totaled $15.75 billion that same year, equating to roughly one-third (34.8 percent) of the estimated amount granted by non-corporate private foundations.

In other words, DAF donations represent a significant and growing source of gifts for nonprofit organizations. However, to get your share, you need to make it easy for people to recommend donations from their DAF accounts. That’s why MarketSmart created the free DAF Widget.

You can learn more about the DAF Widget and claim yours by clicking here.

There is just one catch, if you want to call it that. The DAF Widget is in its Beta Edition. So, MarketSmart is looking for feedback, either directly or through comments below. Then, Greg promises to invest more time and money to make the DAF Widget even better. So, if you use the DAF Widget, please let us know how you think it could be made easier to use and more effective.

Here are seven additional resources for you to help get 2018 off to a great start:

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January 5, 2018

How Bad is the New Tax Code for Your Charity?

If you’ve been reading the mainstream press, or even some of the industry media, you might believe that the future is all doom and gloom for charitable giving thanks to the Tax Cut and Jobs Act. But, how bad will things really be for you and your nonprofit organization?

As a former newspaper editor, I know that the media lives by the axiom: If it bleeds, it leads. In other words, negativity attracts readers and viewers, which in turn attracts advertising dollars. So, it’s no surprise that the media have put the new tax code in the most negative light when it comes to charitable giving.

Fortunately, reality is something quite a bit different. Let me explain, using figures from 2016 (the most current numbers available).

Overall, charitable giving totaled $390.05 billion. US Gross Domestic Product totaled $18.6 trillion. Therefore, total philanthropy in 2016 equaled 2.1 percent of GDP.

As a result of the new tax code, charitable giving could decline by approximately $21 billion, according to Patrick Rooney, PhD, Executive Associate Dean for Academic Programs and Professor of Economics and Philanthropic Studies at Indiana University-Purdue University.

However, is that number accurate? Unfortunately, we have no way of truly knowing as Rooney himself states.

For example, the estimated philanthropic decline of $21 billion does not take into account the impact of a likely increase in Gross Domestic Product.

Because philanthropy closely correlates to GDP at the rate of approximately two percent, we can expect a rise in GDP to result in a rise in giving.

So, how much will GDP rise? Again, no one knows for certain. The estimates vary greatly from 0.08 to 0.35 percentage points. The Tax Foundation provided the latter estimate. Applying that percentage to the 2016 GDP, we would see GDP increase by $651 billion. If two percent of that increase goes to charitable giving, that would be approximately $13 billion. So, Rooney’s prediction of a $21 billion decline in philanthropy could be mitigated partially by GDP growth resulting in just an $8 billion drop in giving. However, even that number could be further offset by growth in foundation giving resulting from robust growth in the stock market.

Simply put, the new tax code could increase GDP and stock values leading to more charitable giving that could, at least partially, offset any potential decline in giving resulting from the new tax policy.

For the sake of discussion, however, let’s assume a $21 billion drop in giving, as Rooney outlined. That would take philanthropy as a percentage of GDP from 2.1 percent to 1.9 percent, using 2016 numbers. This is still within the 40+ year historical range.

The bottom line is that the new tax law could result in a decline in charitable giving. However, we don’t know for certain if that will be the case and, if it is, how much the dip will be. Even if there is a dip, giving will still remain at historically typical levels, around two percent of GDP. Furthermore, there is the possibility that the pundits are mistaken and that charitable giving will actually increase. Time will tell.

While the new tax code may change how and when people donate, history teaches us that changes in the tax code have only a short-term impact on the amount of giving though the methods and timing may vary. For example, the Reagan tax cuts resulted in greater year-end giving in 1986 before giving normalized thereafter. Furthermore, while a dip of billions of dollars is a big number, the reality is that it is not massive in the context of overall philanthropy.

Here are some of the relevant items you need to know from the 500+ page Tax Cut and Jobs Act signed into law on December 22, 2017 by President Donald Trump:

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February 7, 2017

Get a FREE Book for Nonprofits by a Noted Researcher

Do you like getting something for free? I do, especially when it can help me be more successful.

Now, thanks to Russell James, JD, PhD, CFP, the Texas Tech University professor and philanthropy researcher, you can download a free, 427 page book that will become an important reference source in your fundraising library.

Whether you call it planned giving, gift planning, legacy planning, philanthropic planning, charitable estate planning, charitable gift planning, or something else, the subject is complex. However, it does not have to be overwhelmingly confusing.

visual-planned-giving-2017-coverTo help you, James has put together the book Visual Planned Giving: Introduction to the Law & Taxation of Charitable Gift Planning, newly revised and updated for 2017. Designed for fundraisers and financial advisors seeking to expand their knowledge about charitable gift planning, this introductory book addresses all of the major topics in planned giving law and taxation.

The gift planning topics you’ll learn about include elements of a gift, documentation requirements, valuation rules, income limitations, bargain sales, charitable gift annuities, charitable remainder trusts, charitable lead trusts, life insurance, retirement assets, private foundations, and donor advised funds. Over 1,000 full-color illustrations and images will guide you through complex concepts in a visual and intuitive way. James makes planned giving accessible and pain-free for the busy professional.

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