Planned Giving or Charitable Estate Planning: What’s the Difference?

It has been many years since my first tenure as the Director of Planned Giving. The goal then (as it generally is today) was to go out, promote the organization, present planned gifting possibilities, and secure the gift. Since we assumed that long-time donors already believed in the organization, the challenge was to make the case for annuities, bequests, or various kinds of planned gifts. Today, I have a radically different perspective and approach.

Yes, I am aware that “gift planning,” not “planned giving,” are the words to use if you want peers to consider you a cutting-edge professional. Every decade or so, the terminology changes at non-profits. The old term “solicitor” is still used in legislation and other legal documents. But in the cultural language of the modern non-profit world, solicitors became fundraisers then campaign coordinators and donor-relations representatives. Likewise, fundraising became development then advancement. Donors and contributors became partners and then various kinds of club members. Today organizational fundraisers are called many things, including directors of financial empowerment, future fund directors, and vice-presidents of resource development.

Some say terminology and titles change to more accurately describe an organization’s process and objectives. Really? It seems to me that with each evolution the terminology becomes more obscure, not more descriptive.

Names change for various reasons at non-profits, not the least of which is to rebrand the fundraising position and process. How many of your peers have the title “Fundraiser” on their business cards? Organizations and executives are continually trying to distance themselves from profiles of their predecessors. I suspect, however, that donors are not as concerned about what non-profit representatives call themselves as much as what they actually do.

Understanding the differences could very well determine whether an organization declines or moves to a new level of service and stability.

It doesn’t matter if non-profit executives grasp the subtle differences between the terms “planned giving” and “gift planning” because the terminology makes no real difference. What non-profit executives really need to understand is the dynamic contrast between soliciting a planned gift and the process of comprehensive charitable estate planning. That really matters because understanding the differences could very well determine whether an organization declines or moves to a new level of service and stability.

THREE KEY DISTINCTIONS: Planned Giving Verses Charitable Estate Planning
By now every non-profit executive on the planet is aware that we are on the front edges of the greatest wealth transfer in history as trillions of dollars in net worth will be transferred to the next generation and/or to the Internal Revenue Service. They are also aware that donors over the age of 65 are responsible for more than 70 percent of individual giving. Consequently, non-profits have been scrambling to replace that annual giving by asking donors to consider bequests, charitable gift annuities, and various forms charitable trusts. Others are going a step further with organization-sponsored charitable estate planning services for their donors. Planned giving and charitable estate planning overlap in several ways. However, the approaches, the objectives, and the outcomes are very different. Below are three key distinctions:

1.  Asking or Answering
A planned gift is typically the largest contribution a donor will ever make. As the director of planned giving, the first skill I had to develop was the ability to look a donor straight in the eye and with unwavering confidence ask for a multi-million dollar gift. Early on I would hold my breath waiting for the reply, hoping my request did not sound as audacious to them as it did to me.

It takes a lot of nerve to make that kind of appeal, but I could always encourage myself with ideas like: “You have not because you ask not;” or “The worst thing that can happen is that they say no.” Actually, neither one of those sayings are true. In fact the very opposite is often the case. Major gifts are not always directly related to simply asking, and the result can indeed be much worst than the donor simply saying no.

The traditional approach to planned giving simply introduces a fourth big question into an already-stressful situation…

The three big questions on your donors’ minds are: 1) How much will my spouse and I need to live on for the rest of our lives?  2) What can or should we pass on to our children and when? 3) Would we rather leave a part of our estate to our favorite charities or to the IRS? The answers are neither simple nor easy, and since they have only one chance to do it right, the decisions can be quite stressful. Non-profit leaders have come to understand that a person will not and should not make a major planned gift until they can answer those three questions. The traditional approach to planned giving simply introduces a fourth big question into an already-stressful situation —Would you consider leaving a large planned gift to our organization?

In contrast, the prime objective of organization-sponsored charitable estate planning (CEP) is to assist donors in answering those three big questions. (See Helping Donors Answer Their Most Perplexing Question). The CEP process by its very nature forces non-profit representatives to do more listening than talking. Simply offering a planned giving instrument as a single, uncoordinated step without the full knowledge of the donor’s financial situation is very unlikely to be the optimum choice for a donor. It would be like trying to hit a flying duck by throwing a rock blindfolded — shear accident.

2. Givers or Takers
At the development offices of The Great Organization, executives review strategic plans, projected budgets, donor profiles, and planned giving performance metrics. The planned giving staff leaves with a list of names to approach donors about the organizational needs, program results, and how a planned gifts could benefit both donors and The Great Organization.

I’ve made hundreds of those planned giving presentations and each time with one of two assumptions in mind — that donors had already settled those three big questions or that those questions didn’t matter. Introducing my request with no idea of the complexities of their financial situation, I was simply implying that my big question should be moved to the top of their lists. No wonder so many donors responded politely but with a look that seemed to say:

“I appreciate your organization’s needs, but I have too many big financial issues that I have no idea how to solve. I can’t even think about your needs right now.”

This really gets to the heart of the donor-organization relationship. Donors are concerned for their own needs but also the needs of The Great Organization. However, uninformed funding requests, (particularly large requests) seem to imply a concern only for the organizational needs. There is obviously an inequity in that relationship, and donors are often very aware of it.  That’s the source of the common complaint: “All they care about is my money.” See The Greatest Fundraiser of All.

In contrast, the donor’s greatest financial planning needs are what drive charitable estate planning. In that process the organization approaches donors with disinterested benevolence. If it results in a charitable gift — great! If a gift to another organization — also great! If no gift at all, — still great! If the organization and it representatives do it right, the CEP process begs the question that is often verbalized by donors:

“Why are doing this for us?”

3. Return on Investment
The cost of fundraising is a closely monitored number at every non-profit organization. Every form of fundraising is an investment with a measurable return. Naturally, any type of investment justified in part by deferred or revocable gifts gets a lot of scrutiny. Non-profit executives are really going to think twice about investing in a charitable estate planning initiative that does not include a direct funding appeal and is likely to result in a gift only if it is beneficial to the donor. The current trend in gift planning is to replace the director of gift planning with a major/planned gift officer as non-profits look for more immediate gifts. It seems that we are moving more to the transactional approach.

While planned giving appeals result in a gift less than ten percent of the time, I have found that charitable estate planning services result in a gift over ninety percent of the time.

Back to the saying, “You have not because you ask not,” it is generally true but not always. Which do you think has the greater return on investment, a direct planned giving appeal or charitable estate planning service with no strings attached? Ironically, serving donor needs has a far greater return than the appeal. I spent many years making the pitch for planned gifts and many more offering charitable estate planning services. While planned giving appeals result in a gift less than ten percent of the time, I have found that charitable estate planning services result in a gift over ninety percent of the time. Not only that, residual donor-relations benefits often result in immediate gifts in addition to the estate planning gifts.

I told a group of hospital development professional recently:

“You cannot dream big enough dreams for this (charitable estate planning) kind of approach because the dollar amounts are so much larger and the closing percentages are so much greater.”

— Eddie Thompson, Ed. D.

copyright 2011 – Eddie Thompson

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2 Responses to Planned Giving or Charitable Estate Planning: What’s the Difference?

  1. Eric Quist says:

    Eddie,

    After 22 years following the traditional approach to gift planning and now, three years with Thompson & Associates, I can truly say that you are absolutely correct. I have learned that through experience.We are getting more and larger gifts as a result of offering a neutral service that takes into account the donor’s entire situation.

    Best wishes,

    Eric Quist
    MultiCare Health System
    Tacoma, WA

  2. Barry says:

    Good friend and new friends. In many ways we have the very best job in the universe. It’s even better than helping people get well and stay well. It’s better than teaching young people to read. It’s better than mentoring those less fortunate among us. We help people fulfill their dreams. Some have the distinct ability and courage to really listen and let silence communicate. When we weave ourselves into the emotional dna of our donor investors, they win!
    As leaders, we have staff members that depend upon us to coach and encourage them. We cannnot accept their unwillingness or refusal to accept this ideal. “get off the bus” or “find another seat”. We have really important work to do.

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