Planned giving can ward off disaster

Julia Vail

In times of economic turmoil, planned giving provides a reliable way of building endowments and staving off financial crisis, experts say.

However, too many nonprofits, content to stick with an annual check, refuse to broach the subject of planned giving with their donors, says Fred Stang, director of development for the Triangle Community Foundation in Durham, N.C.

Especially during economically stressful times, nonprofit fundraisers tend to set aside future concerns to address immediate needs. As a result, they miss out on opportunities to fortify their organizations.

“The lesson here is: Don’t wait,” Stang says. “Yes, these are tough times, and yes, people’s portfolios have been diminished, but this is as good a time as any for donors to think about what’s important to them.”

Further, getting contributions for present and future concerns is not an “either-or situation,” he says.

Building relationships with donors can not only lead to more substantial annual donations, but also can make donors feel more comfortable about putting nonprofits in their wills.

“If you’ve worked to build donor relationships and keep donors educated about needs, you feel much more comfortable going out to close friends of the organization and asking them to dig a little deeper,” Stang says. “I’m not sure you’ve been in a position to do that if you’ve only relied on an annual phone call.”

Benefits during economic slump

Planned giving offers several benefits both for nonprofits and donors in a down economy.

For nonprofits, it provides funds for establishing endowments, and usually entails more money than annual gifts.

Planned gifts also provide an alternative source of income to keep nonprofits from relying too heavily on one-time donations.

“The organizations that have built up strong, diversified fundraising programs are the ones that are going to do better in this sort of economy,” Stang says. “You’re not putting all your eggs in one basket.”

David Routh, director of planned giving at the University of North Carolina at Chapel Hill, says different types of donations also tend to complement each other.

“If donors give cash today and combine that with the right kind of deferred gift, it provides the means for that gift to continue through perpetuity,” he says. “If charities think about planned giving in that way, it’s a very powerful means of building and securing their futures.”

For donors, planned giving provides a variety of ways to make tax-deductible contributions.

At the same time, it reassures donors that their most cherished causes will be taken care of over the long term.

And during tough economic times, planned giving allows donors to keep giving while keeping a close eye on their checkbooks, Routh says.

That’s because planned gifts typically are made from a donor’s assets, rather than their monthly income.

“When cash giving is tougher, people tend to be somewhat more interested in other ways to make gifts,” he says.

Creative ways to give

Though bequests are the most popular planned-giving option, there are many creative ways to give that could work for any donor.

As the economic storm has made landfall at universities nationwide, UNC-Chapel Hill has seen more interest in new types of planned giving, including charitable gift annuities and real estate, Routh says.

When donors set up charitable gift annuities, they receive a fixed income for the rest of the annuity’s existence, he says, while the charity receives the principal upon the donor’s death.

“Today, the idea of a fixed income stream that cannot be impacted by market forces is much more attractive than it was two years ago,” he says.

Another option is the charitable IRA rollover, which allows donors who are age 70 or older to transfer money from their IRAs to charities tax-free.

Another option is donating stock, says Routh.

Donors who have lost money in stocks can sell them, give the proceeds to a nonprofit of their choice, and get a substantial tax benefit.

And Stang says donors also can transfer ownership of insurance policies and real estate.

“You should be not only talking to your donors about planned gifts, but also looking at creative ways of accomplishing that,” he says.

Getting donors involved

Fundraisers should begin by communicating the nonprofit’s mission and outlining what the nonprofit is doing to accomplish its goals, Stang says.

If donors believe an organization is effecting positive change, they will be more likely to see their donations as investments in the community.

“Anytime someone gives us a contribution, it’s because, on some level, we’ve proven ourselves,” he says.

And the economic crisis may actually help nonprofits attract more donors who are interested in planned giving, he says.

“Loyal donors want to help during bad times,” he says. “You’re giving them the opportunity to know that, when they pass away, their legacy is going to continue to preserve land, feed the hungry, develop sound policy.”

However, in asking for donations during a down economy, nonprofits have to walk a fine line, Stang says.

While they want to make it obvious that they need donations to accomplish their missions, he says, they do not want to seem as though they are too destitute to make effective use of donors’ gifts.

The best approach, he says, is to be honest with donors and express what planned giving would mean to the organization.

“Nonprofits should say, ‘You’ve been a committed donor for many years, but when you pass away, the support you’ve given us is going to stop. We’d like you to consider making a gift that will last beyond your time here,'” Stang says.

Routh says that, even in the throes of a global economic crisis, the rules for communicating with donors have remained constant.

“Listen first, and then provide education around the options,” he says. “I have every confidence that if we do those two things, people will do the right things for their families and for us at the same time.”

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