Planned giving spurred by tax incentives, wealth transfer, competition.
By Todd Cohen
Sparked by sweeping changes in federal tax law in 1969 that created new options for making deferred charitable gifts, planned giving enjoyed modest growth until hitting an early peak in the 1990s.
“There was finally a realization that if they weren’t in the planned-giving and endowment business, they were going to be in big trouble in 20 years,” says Bryan Clontz, president of Charitable Solutions, a consulting firm in Atlanta that advises large charities.
Triggering that embrace of planned giving by charities was the growing awareness that unprecedented wealth was starting to be transferred between generations.
That awareness was ratcheted up in 1999 with a report by researchers at Boston College who estimated at least $41 trillion would move between generations over 50 years, with at least $6 trillion of it going to charity.
Planned-giving programs, which can take years of cultivation before producing gifts, and 10 to 15 years before those gifts actually pay off, began to yield dramatic results in the late 1980s and early 90s for charities that launched programs in the mid-to-late 70s and early 80s, says Clontz, who was vice president for development at the Community Foundation for Greater Atlanta from 1997 to 2003.
Because it does not yield an instant payoff, he says, charities that invest in planned giving tend to drop it after a few years, only to renew interest, and spur it at other charities, when planned gifts made years earlier began to be realized.
“You’re building a pipeline,” he says. “Once it starts coming out, it will never stop coming out.”
The key, he says, is to “hang on long enough.”
Once the focus mainly of the wealthiest individuals and largest organizations, planned giving now appeals to and is an option for an ever-growing share of donors and nonprofits.
“Both donors and development officers continue to become more sophisticated, and as a result we are constructing gifts that make financial sense to the donors, using all of the donors’ assets, not just the cash they have in hand,” says Laura Simic, associate vice chancellor for development at the University of North Carolina at Charlotte.
“It may be that using other assets is more financially advantageous to the donor rather than giving away what’s in their checking account,” she says, “and we want all gifts to be mutually beneficial to the donor and the institution.”
H. King McGlaughon Jr., professor of philanthropic studies at The American College in Bryn Mawr, Pa., says he sees “traditional fundraisers on the development side of nonprofit organizations feeling the need or desire to learn the planned-giving side of fundraising.”
At The American College, for example, roughly half the 750 students in the philanthropy program are development officers who enrolled so they can learn about planned giving, he says.
High-net-worth individuals tend to look for more complex solutions that will spread the cost of their gift over longer periods of time, he says, so traditional fundraising professionals want to become more familiar with more complex giving strategies.
And as they ask donors to make ever-larger gifts, he says, charities must look for more complex strategies “to free up the assets” to make those larger gifts.