The Case for Organization Sponsored Charitable Estate Planning: Top Ten Hesitations

The long-term sustainability of non-profit organizations at their current levels is going to largely depend on their ability to secure planned or testamentary gifts from donors’ accumulated net worth. We’ve known this for some time because of the increasing average age of donors and because we are on the leading edge of a great wealth transfer. Add to those two factors the great economic uncertainty about the future, and the stakes get higher. Non-profits relying solely on gifts from income will face questions not just about sustainability but about survivability.

Having engaged so many non-profit executives in conversations about organization-sponsored charitable estate planning services, here their top ten hesitations. I don’t try to counter every objection or hesitation. Organizations need to move forward at their own pace and move on initiatives when they feel they are ready. But if asked, my responses would be as noted.

Hesitation #1.  We do not have the time or the staff to help donors with their estate planning issues.

Hesitation #2.  Our staff and/or board do not have the financial experience to move forward on this.

Hesitations #1 and #2 are most common because these are facts of life at many small to medium-sized organizations. However, it is important to note that organizations with the most successful and most productive charitable estate planning services for their donors purposely do not maintain staff with the required time and expertise. In fact, they find it preferable to have outside legal and financial professionals assisting their donors. In the best situations, those financial professionals work in confidentiality and, unless requested by the donor, do not reveal a donor’s financial details to the organization sponsoring their work.

Hesitation #3.  Our organization is too small. We need to put our full attention on the annual fund and capital projects.

The most significant factor that set these top-tier organizations apart was their ability to solicit and acquire gifts from donors’ net worth, regardless of whether those gifts went to the annual fund, capital campaign, or endowment.

Where donations go and where they come from are two different issues. As a part of the work my on doctoral dissertation, I researched the fundraising practices at thirteen of the most successful universities in the United States. The most significant factor that set these top-tier organizations apart was their ability to solicit and acquire gifts from donors’ net worth, regardless of whether those gifts went to the annual fund, capital campaign, or endowment.

Gifts of net worth are easier to give, they tend to be larger, and they are not felt immediately. On the other hand, when soliciting gifts of discretionary income, non-profits are going after contributions from the same account used for the mortgage, the utility bill, and the family’s lifestyle. While thousands of organizations compete for those discretionary dollars, those top tier organizations keep building with gifts from net worth in addition to gifts from income.

If the strategy is to wait until they are successful to begin fund raising like the most successful organizations, it is unlikely to happen. You will never become a top-tier organization until you adopt a top-tier funding strategy. With regard to funding, that means soliciting gifts from net worth. I’ve always told my sons, “If you want to be successful, do what successful people do. If you want to be wealthy, do what wealthy people do. If you want to be poor…”

Hesitation #4.  We don’t have the kind of organizational mission to which people leave money in their estate.

Hesitation #5.  We don’t have wealthy donors.

Hesitations #4 and #5 are off-hand assessments of the donor base and their perception of the organization. However, off-hand assessments are very often wrong.

I was meeting with an employee of a non-profit institution who had worked there over thirty years. She was single, had no children, drove an old car, and lived with her parents. Though she had never made over $50,000 per year, she asked if we could help with her estate plan.

One of the executives at the organization said, “I don’t know if there is a lot there. She is not wealthy, and so it might not be a good use of the limited amount of time we have you with us.” We went forward nonetheless. On the last of eight meetings with the employee, we invited that same organization executive to join us.

“I would like to set up a fund to provide scholarships for continuing education,” the employee said.

The executive replied, “That’s really thoughtful of you, but it is very expensive.”

“Will $6 million do it? She asked? Of the estate valued at about $6.3 million, she had decided to give $6 million to charity.

Hesitation #6.  Our organization has not been around long enough for donors to leave us money.

That is actually a good point. If people are giving large or perpetual gifts, they want to know that the organization they give to will be around for a long time. Suppose you ran a new and/or small organization that served the unique needs of people with a very rare disease. Or suppose that organization provided for common need in a place where no other organization was serving. People invest in those services because they believe in the cause. They can continue supporting that cause indefinitely with gifts of net worth to a donor advised fund with recommendations for the support of that small start up organization. If the original organization fails, the advised fund instructions would divert funds to similar groups serving those needs. People like to make contributions that really make a difference and often that means funding a start up organization that is uniquely meeting a need. They can do the same thing through their estate.

Hesitation #7.  We (our board members) are uncomfortable talking to people about their estates, their deaths.

Hesitation #8.  We’ve already taken care of that with our newsletters and planned giving brochures.

Hesitations #7 and #8 don’t come up that often. If they do, it is often a sign that problems go much deeper than the need for charitable estate planning services. Brochures and newsletters are important tools. However, the hesitation to talk personally with donors about financial matters, relying instead on printed or electronic communications, is a pretty good indicator of a non-profit that is or soon will be in trouble. If non-profit executives are regularly visiting donors, building relationships, and talking about the impact of their gifts, a discussion about estate planning services comes very naturally. In fact, it is the easiest conversation an organizational representative will ever have because he or she are not asking for a gift but offering a service.

Hesitation #9.  We don’t feel we should invest in charitable estate planning services because we want to keep our fundraising cost percentage as low as possible. 

From Institutional Sustainability: Making the Transition from Hunter-Gatherers to Cultivation-Based Fund Development:

“Organizations effectively transitioning from hunter-gatherers to cultivators understand the value and expense of planting and cultivating. They invest proactively in expanding donor relations because it is only organizational investment that will produce a financial return. In contrast, many try to keep fund-raising expense percentages as low as possible, hoping to demonstrate to donors the efficiency of their gifts. Striving to keep fundraising expense as low as possible on their Form 990, they lock themselves into a hunter-gatherer approach. The irony is that professional grant-makers and donor-investors look for more development and donor-relation investments, not less.”

Hesitation #10.  We don’t feel comfortable spending donated dollars on providing estate planning services without the guarantee of an irrevocable gift?

Every non-profit is making fundraising investments, even if it is only the salary of a single donor-relations staffer. And there are never any guarantees. Typically, organization-sponsored charitable estate planning services with which I have participated have over time produced a return at the rate of $44 for every one dollar invested. How can that ratio be so high? It is because donors are being provided the opportunity to give out of net worth.

Whatever the hesitations, one fact remains: If you don’t engage your donors in conversations about bequests or estate gifts, a representative from some other organization will. Even though your organization may be the favorite, you may be surprised to hear about the large testamentary gift to another organization simply because their representatives engaged the donor in a charitable estate planning process.

— Eddie Thompson, Ed.D.

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