Planned and major giving await comeback

Ret Boney

The 18-month seismic shift in the economy has rocked donors.

If their portfolios responded anything like the markets, wealthy givers likely lost about 28 percent on their investments in 2008, and home values were still in freefall into early 2009, according to Standard & Poor’s indices.

That shock to givers’ assets — and psyches — took a toll on planned giving and major gifts, and could lead to some long-term changes to both sides of the fundraising equation, experts say.

This downturn is deeper and more prolonged than other recent economic temblors, says Edith Falk, chair of the Giving USA Foundation and CEO of fundraising firm Campbell and Company.

“There’s a lot more conversation about how this downturn will fundamentally change how all of us do business,” she says.

While portfolio values are headed back in the right direction and home prices are inching up, there’s still a lot of uncertainty and fear, she says.

“We have to see sustained increases in portfolio values and continuing improvement in the general economy,” says Falk. “People are still spooked by rising unemployment numbers. I don’t remember a time when so many highly-paid professionals were out of work.”

And those highly-paid professionals are the source of many of the significant donations, both planned gifts and large gifts of cash or stock.

During the worst of the economic crisis, late 2008 through mid-2009, major gifts and most planned gifts dried up.

“The broad-based nature of this downturn was different,” says James Gibert, director of planned giving for Davidson College in North Carolina. “There was no place to run, no place to hide. A lot of people were just shell shocked.”

The fallout

The result was a sort of giving paralysis, says Gibert, with would-be donors to the school postponing or scuttling “irrevocable decisions,” particularly gifts made from a donor’s already-battered assets.

The most popular planned gift at Davidson, which has 1,700 students and raised in $24.9 million in fiscal 2009, is the donation of stock.

“There was a dramatic decrease in people wanting to give stock because they couldn’t predict what it would be worth,” says Gibert. “When you have markets making huge moves in one or two days, it’s unpredictable and people just don’t want to do it.”

And harder to come by were vehicles like charitable remainder trusts and gift annuities, both of which pay income to donors or their designees for a period of time, with principal amounts going to charitable beneficiaries at the end of that time period.

“People often use those as a way of turning one sort of asset into something that produces more income,” says Gibert.

And with assets dwindling, the income potential from those assets shrank, causing donors to wait for asset values to start climbing again.

The experience was much the same at the Minneapolis Foundation, a community foundation that typically brings in, and grants out, $30 million to $40 million a year, says Mary Ellis Peterson, a gift planning officer for the funder.

“Most of our donors give appreciated stock, and suddenly, no one had any,” she says. “At the same time, people were concerned about giving cash. They thought they might need it.”

That led to a substantial drop-off in donations, she says, but planned and major gifts began to pick up again in the last couple of months of 2009.

That’s in part because markets, and investment portfolios, have been trending up, but donors also faced the end of the tax year, when the window for 2009 tax deductions would close.

And the general sense of gloom and doom appears to be lifting, says Gibert.

“I don’t know if people got jaded or used to it, but the pervasive sense of catastrophe isn’t what it was a year ago,” he says.

And in a bright note, the college this month received a $10 million gift, its  fourth-largest ever, to start a scholarship program for international students.

The long-term impact

While the entire recession experience was traumatic for donors, and the institutions and charities that rely on them, the new landscape isn’t all bad.

When events force people to reevaluate their financial situations, typically they are looking for alternatives, says Gibert.

And for those who are charitably-inclined to begin with, any encouragement to plan is a boon to planned giving.

“What has happened over the past 18 months has made everyone more sophisticated about what can happen,” he says. “Any time people get more sophisticated about how the market works, that actually increases their willingness to consider a planned gift.”

The upheaval caused by the downturn is further exacerbated by changes to the estate tax, which lawmakers have suspended for 2010 and likely will reinstate at some point, at some level.

All that uncertainty is driving many wealthy people to their estate planners or other professionals for help.

“It’s a great opportunity to remind people about their options,” says Peterson. “People don’t normally change their wills to make a charitable gift. But if they’re in there anyway, it’s a great time to do it.”

Donors are more open to those conversations at this particular point in time, she says.

“The conversation may be a little deeper because people have had to stop and take stock of their values and what’s really important,” she says. “They’ve seen people hurt in this recession they thought were safe.”

At the same time, donors are thinking more strategically and are demanding more of recipient organizations. They will continue to give, but they want to see evidence that their donations will make a difference.

“They don’t want to just throw money at a problem,” says Peterson. “They want to see how you’re going to fix it.”

On the other side of the equation, fundraisers are getting back to the fundamentals, really focusing on donors’ wants and needs, says Falk.

“We’re seeing a lot more emphasis on stewardship,” she says of her clients. “They are really paying attention to donors,” he says, “and making sure they continue to build ties with donors even if they can’t increase their gifts this year.”

Lines of communication are staying open, and charities are taking the time to tell donors how the economy is affecting their budgets and programs.

Development officers are altering their approaches somewhat, too, being willing to wait longer for five-, six- or seven-figure gifts or helping donors find different ways to structure their gifts.

“Be very respectful of donors,” says Falk. “Be sensitive and willing to hear that it’s not a good time right now.”

That’s the approach Davidson is taking.

“Davidson survived the Civil War, the Great Depression and World War II,” says Gibert. “That’s a luxury some charities don’t have. Donors won’t get any pressure from us to act quickly, because we’re going to be here.”


“Flat is the new normal,” says Falk, whose Giving USA publishes the most comprehensive annual tally of charitable giving by American individuals, corporations and foundations.

Giving in 2008 totaled $307.65 billion, off by 2 percent from the year before, and 2009 could see another drop.

“If we can maintain a giving level that’s flat, that will mean things are improving,” she says.

As of right now, portfolio values are rising, stability is returning to the markets, and Falk is hearing less talk of a second major dip in stock prices.

And the more time that passes without a major aftershock, the more likely donors are to be optimistic about their ability to give, she says.

“There’s a lot of psychology at play here,” says Falk. “More than what’s actually happening out there in the economy.”

And the fact that giving hasn’t dried up altogether is cause for hope, says Peterson.

“People do care,” she says of donors to the Minneapolis Foundation. “Even when it’s hard to give, and they’re having to giving sacrificially, they’re still doing it.”

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