Resource Center

Are You Ready for Planned Giving?

A Guide to Evaluating Organizational Readiness for Nonprofit Executives and Volunteer Trustees

INTRODUCTION

On behalf of the members of the more than 130 local planned giving councils which make up The Partnership for Philanthropic Planning^®, welcome to one of the most exciting areas of asset development for charitable organizations―planned giving. Your inquiry suggests a concern for the future of your organization. An appropriate planned giving program will enable your organization to bequeath its public service mission to future generations.

BACKGROUND

The most frequent request received by the the Partnership is for assistance in initiating a planned giving program. We hope this response to your inquiry will be helpful in deciding if a planned giving program should be initiated by your organization, and if so, the scope of an appropriate program.

PLANNED GIVING OR GIFT PLANNING?

Planned giving is a "buzz-word" that is being touted in the charitable world as the best fund development opportunity to come along in many years. In reality it isn't new; it's simply being more widely discussed. Many small and intermediate-sized charitable organizations realize they can share in some of the major resource development opportunities heretofore enjoyed by larger organizations. In the semi-annual Philanthropic Giving Index prepared by the Indiana University Center on Philanthropy, small and medium charities consistently rate planned giving as a fundraising strategy that has been most successful for them or that they are most interesting in pursuing.

The terms "planned giving," "deferred giving," and "gift planning" are often used synonymously and, for most purposes, have the same meaning. However, we'd like to encourage you to substitute the term "gift planning" in place of the term "planned giving." The concept of gift planning shifts us to an active stance from the passive and focuses on the best interests of the donor and not on "selling" planned giving techniques or products. It frees us to better do our jobs, as executives and/or volunteers and to motivate and excite our constituencies to be creative in assisting and supporting our respective missions. (For a glossary of planned giving terms, click here.)

GIFT PLANNING AND THE DEVELOPMENT PROCESS

Over the years, many nonprofit executives have claimed that implementing a gift planning program will only detract from the resources available to meet today’s needs. Because some individuals maintain this view, it is important to understand the role gift planning plays in the development process. [Syllabus for Gift Planners, section 4.04]

One key to understanding the role of gift planning is to examine the typical sources of funds [Syllabus for Gift Planners, section 3.02] which donors use to make certain types of gifts. For the most part, donors are using resources available through their annual disposable income to support the ongoing operational needs of the organization. To support a building project or some other capital improvement, they may dip into their savings. However, when it comes time to think about a planned gift, donors make distribution decisions concerning their entire accumulated assets. As a result, there is rarely a conflict among an organization’s various fundraising programs, so long as they are properly presented and administered.

In fact, a strong annual giving program is essential to creating an effective gift planning program. Your constituents will not consider entrusting your organization with their accumulated assets if they are not willing to support the ongoing operating needs.

An effective gift planning program may actually strengthen the annual and capital giving programs. Donors who have made significant planned gifts to help ensure the long-term financial viability of the organization often feel that supporting current needs bolsters and affirms their planned gift commitment. The Partnership’s Survey of Donors, conducted in 2000, shows that three-quarters of bequest donors and two-thirds of CRT donors have also made a cash gift to the same charity, and many have established multiple planned gifts.

It is also important to recognize that two of the most important attributes required in developing a gift planning program are patience and persistence. Unlike other fund development programs, gift planning does not always provide immediate gratification (although some gift planning programs have realized significant results as soon as two to three years from inception). It generally takes from seven to ten years to begin receiving significant current dollars for the institution.

Therefore, it is critical that governing boards develop long-term gift planning objectives [Syllabus for Gift Planners, section 4.03.02] when evaluating the current performance of nonprofit executives and their staffs. Assuming a program is properly implemented, such persistence and patience may realize major, ongoing cash flow for years to come as a result of planned gift commitments.

BEFORE YOU BEGIN

Many charities in the United States have developed rather sophisticated fund development/planned giving programs over the past 100 years. However, you should be cautious in developing your program so as not to become buried in complexities which you and your staff and volunteers may not understand or be able to manage. We suggest you become familiar with the various planned giving instruments [Glossary of Terms] available to your donors. You should know the difference between life insurance and annuities, bequests and lead trusts, cash and pledges, pooled income funds and charitable remainder trusts, etc. But don't get hung up on the complexities of the instruments. Leave that to the appropriate professionals [Syllabus for Gift Planners, section 2.03], such as attorneys, accountants and other gift planning experts.

The planned giving instruments that are currently available are as varied as the nonprofit organizations that use them. The gift planning program you develop for your organization should be tailored to your needs and the interests of your constituency. In short, the "cookie cutter" approach to development of a gift planning program will never work! Each nonprofit is unique in its mission, history, life expectancy, sphere of influence and service, fund raising experience, volunteer and staff commitments, and so forth. Your program should reflect these distinctive characteristics.

We have designed this guide to point out, as simply as possible, the primary issues related to establishing a gift planning program. Through this resource, we hope to help in the assessment of your organization's potential and to give some practical suggestions for "next steps."

Successful development professionals, executives, and volunteers responsible for resource development on behalf of their organizations advance their cause more effectively by being open to the ideas of others. We must listen to our own organizational committees, participants, and other constituencies who give and receive services. We must test proposals in light of our own realities, discerning the nuances of the gift planning potential for our mission and its faithful donors and supporters.

This journey of discovery opens a wide variety of possible ways to carry on an effective program. There are, however, some agreed-upon principles to employ and there are cautions to heed. As complex as it seems, a properly designed and implemented gift planning program is usually well worth the effort. Such a program may enable your organization to more fully address its charitable mission and the needs of its constituents now and for many years in the future.

ASSESSING ORGANIZATIONAL READINESS

This guide was designed to provide a basic roadmap for the journey into gift planning. But don't overlook other essentials necessary to be effective in the fund development field. It is important to have a strong fund development and public relations program in place as a foundation upon which to build a gift planning program. Before you begin, try to look at your organization from the donor's perspective by conducting a mission-effectiveness survey. If the answers to any of the following points are not affirmative, you must address those areas first, before beginning a gift planning program:

How visible is the organization? Does the public know the organization's name?
Is the public aware of the organization's activities?
Is there evidence the organization is a legitimate charitable organization? Does it have a well-communicated, future-oriented mission statement? A vision statement? A strategic plan which is publicized?
Is the volunteer Board of Directors representative of a cross-section of the organization's constituency? Do they have limited terms of office and are they elected or appointed to office?
Can you be certain that volunteers, benefactors and employees are receiving appropriate compensation and/or benefits from the organization?
Is the organization financially well-managed and able to professionally administer large contributions? Does the organization have a long-term mission? Is the organization perceived as stable, with constituents who are confident that the organization will be around for a while?
Does the organization follow government regulations? Does it hold 501(c)(3) nonprofit status and 170 charitable status with the Internal Revenue Service? Does it hold any required state or city licenses to solicit funds? Does it publish and/or make available upon request an annual report or current financial statement?
What percentage of contributions is used for fund raising? How does this compare to similar charitable organizations?

PHASES OF THE GIFT PLANNING PROCESS

When your organization has established a strong foundation for development activities, take a gradual approach to adding gift planning to your other fundraising strategies. This guide suggests three distinct, but inter-related phases in the development of an effective gift planning program:

I. Phase One, the Bequest and Beneficiary Designation Program [Syllabus for Gift Planners, section 3.01.09], is quite basic, but the results can be very rewarding. It requires a thorough understanding and implementation of a practical wills and bequests program for which effective educational efforts and marketing and public relations programs are critical elements. Many times outright gifts of appreciated securities and real estate are also included as part of a phase one program. For many charitable organizations, it may not be necessary, prudent, or affordable to progress beyond this stage of the gift planning process.

II. Phase Two, the Life Income Gifts Program. [Syllabus for Gift Planners, section 3.01] The nonprofit organization which has successfully initiated Phase One may be ready to proceed with a life income gifts program. This phase assumes an advanced understanding of gift planning options and commitment of the resources necessary to move successfully into a fully developed gift planning program. It builds on the successes achieved in the development of a strong Phase One foundation by continuing educational, marketing and public relations efforts.

III. Phase Three, the Charitable Gift and Estate Planning [Syllabus for Gift Planners, section 5] phase, is the most pro-active option. This is the level at which organizations engage in professional gift planning and counseling with prospective donors. It involves well-trained third parties, such as attorneys, accountants, financial planners and other members of the planning team in the dialogue with prospective donors. It requires the retention of a level of professional expertise and training which many nonprofits may not have available on a full time basis. In many cases, the donor will actually engage the services of a professional who will help tailor the gift to insure that it meets the donor's needs and protects the donor's interests.

STEPS TO BEGIN

Get the backing of your organizations’ governing board and executive staff, including an approved budget [Syllabus for Gift Planners, section 4.03.01] which provides resources for staff and program needs. You may also wish to establish a board-level gift planning committee to oversee the activities in this area.
Review the The Partnership's Model Standards of Practice for the Charitable Gift Planner to understand the expectations and context for ethical gift planning activities.
Review the Syllabus for Gift Planners and begin a self-education program in those areas in which you lack knowledge or experience.
Attend a basic seminar offered by recognized planned giving professionals. The Partnership publishes an annual Training Opportunities Calendar to assist you in locating seminars and determining how they relate to the Syllabus for Gift Planners.
Review your existing fund-raising program and adopt gift planning program policies [Syllabus for Gift Planners, section 4.01] which compliment it, including gift acceptance policies, an ethical statement establishing how the gift solicitation and management will be conducted, and a policy on the types of planned gifts that will be sponsored by the organization and who is authorized to negotiate and accept gifts on behalf of the organization.
Seek out a mentor who is experienced in the field and with whom you will feel comfortable being in contact frequently. Members of the Partnership may seek informal mentoring and advice via GIFT-PL, an e-mail discussion forum with hundreds of subscribers.
You may also be well advised to seek Board approval to hire a consultant [The Partnership Business Pages] with specific expertise in the design and implementation of planned giving programs. A qualified planned giving consultant will be able to help you structure a program that will be appropriate to your organization's needs and capabilities. A consultant can also help your governing board understand the realities of undertaking a planned giving program and assist in the development of policies and procedures. Some organizations also use qualified charitable gift planners to assist in gift negotiations with prospective donors.
Obtain legal counsel and form alliances with professional gift and estate planners in your area. Join a planned giving council and/or LEAVE A LEGACY^® program that serves your area. The Partnership will be happy to refer you to one of its local councils.

CONCLUSION

Consideration of a gift planning program begins with a realization that:

Planned gifts will offer excellent opportunities for significant financial rewards. Gift planning is a continuing process from which the first fruits may be a long time in coming.
It involves the up-front commitment of time and resources by the organization's governing board, its administration, staff, and sometimes, volunteers.
The extent of the organization's up-front commitment and planning will likely dictate the expediency and degree to which results will be seen.
A planned giving program is one part of an organization’s asset development effort and in order to be successful, the organization must have a well-communicated, important charitable purpose and need for long-term financial resources.
Major gifts are the desired result of--and typify--a planned gift. The type of plan, the "gift vehicle" used, is simply the means of making a major gift possible.
Major gifts evolve from long-term relationships that take time and effort to cultivate.
Planned gifts are arranged through instruments (often maturing at a future date or event), as opposed to cash, pledges, in-kind, or other traditional forms of giving. For the donor, potentially beneficial by-products of the gift planning process can include income and estate tax savings and addressing other financial planning goals.
You'll never know everything--and you won't need to. Remember, there is help available from the National Committee on Planned Giving^® and its member councils.