BUILDING/MAINTAINING THE LEGACY GIFT PIPELINE (1-15-2016)
I. Develop the Case for Support Be able to answer basic questions in a consistent and compelling fashion... Why does our organization need legacy gifts? What are our future needs? What impact would MY bequest have on the organization when received? II. Create a Reasonable Policy to Chart Progress Decide how revocable and irrevocable gifts will be valued, counted and documented. Suggestions are as follows: Irrevocable gifts - count the net fair market value of the assets. Revocable gifts - count the estimated value of the legacy gift at time of commitment. If no estimated value provided, consider three options: (a) value at $0; (b) value at $1 for those databases that do not allow $0 gifts to be recorded; or (b) average value of the smallest legacy gifts received during the prior years. Whether you value the gift at $0, $1 or something else, each revocable gift counts as one commitment. Agree on what documentation is needed from the donor (or the donor’s advisor) in order for the gift to count. Common documents include (a) a written statement from the donor (or the donor’s advisor) confirming that the legacy commitment exists; (b) a copy of pertinent parts of the revocable trust or will which memorializes the gift; and/or (c) a memorandum of understanding or other gift commitment document. Just Starting Up? Consider Soft Goals: It is meaningful for those just beginning to weight progress more towards activity rather than productivity. Such measures include (1) meetings with legacy prospects or their advisors; (2) pitches on a legacy gift; and (3) increasing the number of members in your legacy society. These complimentary goals could be established in conjunction with $$ goals. III. Discover Your Legacy Prospects By Demographics A number of studies provide guidance on individuals likely to make legacy gift commitments to charitable organizations. If you appreciate the demographics at play, it can help appropriately focus your development (and stewardship) efforts. Age & Education o A study by the Center on Philanthropy at Indiana University found that Americans ages 40-60 with an advanced degree or an undergraduate degree were the most likely to make a charitable bequest. Interestingly enough, wealth level was not a factor in whether the donor considered a charitable bequest. 1
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Bequest Donors: Demographics and Motivations of Potential and Actual Donors, Center on Philanthropy at Indiana University (2007).
o Another study indicated that 25% of those 65 years old and older said that they would consider a legacy gift to charity. o By 2020, Hawaii’s 60+ population is expected to account for approximately 25% of our total population. 2 That’s 350,000 senior residents! Family & Life Events o Dr. Russell James of Texas Tech University analyzed a 20-year longitudinal study3 and found that the strongest predictor of adding a charitable gift to an estate plan is being in the final years of life. Other strong predictors include: Mortality –related events Decline in self-reported health Diagnosis of cancer, stroke, or heart problems Change in Family Structure Becoming a widow or widower Divorce First grandchild. o Other studies have indicated that the arrival of one or more grandchildren changes estate planning priorities.
Double Edged Demographics: Keep mind that mortality-related events and change in family structure may cause a donor to remove a charitable gift from his or her estate plan. Thoughtful stewardship to deepen the relationship may help to mitigate this. Keep asking older donors and volunteers to consider making a legacy gift even if their annual giving has changed.
Relationship o The strongest indicator of likelihood of making a gift of assets (as opposed to income) to charity after death is regularity of giving plus volunteering, followed closely by regularity of giving. Affinity an important factor – volunteer groups, advisory councils, grateful patients, community members, alumni.
What School You Wen Grad From?: A system predicated on building and maintaining sincere relationships is the key to a successful legacy program. This is especially true in Hawaii. IV. Tailor Marketing/Educational Outreach The biggest challenge to adding new legacy gift commitments to the legacy gifts pipeline continues to be that over 51% of U.S. citizens age 55 to 64 do not have estate plans.4 It wouldn’t be a surprise if the national average is representative of Hawaii’s average. Many others have plans that are outdated.
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Hawaii State Plan on Aging 2008-2011, State of Hawaii Executive Office on Aging (2007). The American Charitable Bequest Demographics (1992 - 2012), Russell James (2013). 4 Americans’ Ostrich Approach to Estate Planning, Forbes - Quoting survey conducted by Rocket Lawyer (April 9, 2014). 3
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Education/marketing must start here by reminding the public of the consequences and fallout that occurs when one become disabled or dies without a meaningful estate plan (i.e., intestacy, probate, disputes, unintended beneficiaries, etc.). The largest influence on giving to a local nonprofit is having a personal relationship with that organization. According to a recent study, 59% of all Hawaii donors surveyed said that this was the strongest influence on their giving. For wealthier households, this increased to 75%.5 Ways to communicate with likely donors about the need for legacy gifts and the many ways that such gifts can be structured include: o Publications and printed materials – move away from newsletters to shorter, more concise pieces to most loyal donors; o A Blackbaud study found that baby boomers – the largest group of current givers to charity – prefer e-mail marketing; o Age-segmented e-mail marketing has been successful for many colleges and universities, resulting in more traffic to website and more donors calling with questions after reviewing web site information; o Phone calls to loyal donor segments to discover gifts in place or interest in learning more about donor’s values, belief, financial and lifestyle goals and/or legacy gifts; o Donor stories about gift motivations, gift decision process, gift option, desired impact through in-person testimonials, stories in publications, and videos; and o Social media marketing – give through will or trust, name us as a beneficiary, get a life income, loan us assets, could all be options in the “Make a Gift” section.
V. Make the Ask Of course new legacy gift commitments are not made if individuals are not asked to do so. Despite the fact that 93% of Hawai’i residents give cash, goods or their time to charity, only 21% have charitable gifts as part of their estate plan.6 Coupled with a finding in another study that the number one response indicated that donors did not include a charitable bequest because it had never occurred to them,7 it’s clear that asking your donor to consider a legacy gift is of paramount importance. Many members of the organization, including staff and volunteers, should be expected to encourage legacy gift commitments, including: President/CEO/Executive Director; Current and former Board Chairs; Current and former Board members; and Legacy gift donors/members of Legacy Society.
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Id at 6. Hawai’i Giving Study, Prepared for the Hawaii Community Foundation by SMS Research & Marketing Services Survey of 878 tax-defined households throughout the State of Hawai`i (May, 2015). 7 Id at 5. 6
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All development personnel should be empowered to encourage bequests and beneficiary designations. Training on making “the ask” and how legacy gifts can be made is essential to increasing the number of staff and volunteers who will enthusiastically encourage and close such gifts. VI. Celebrate and Maintain Gifts in the Pipeline Maintaining legacy gifts in the pipeline requires ongoing and deliberate stewardship efforts, including: Donor recognition society (decide purpose); Celebrate intent/desire to make a future gift; Communicate the impact previously received gifts have made at the organization; What documentation is required for membership; What are the membership benefits, both tangible and intangible; Stewardship schedule with assignment of stewardship responsibility – staff and volunteers, including governing board; Annual contact expectation and tracking; and Regular reports to staff, facility and program managers, about gifts in the pipeline and likely future distributions to garner and maintain their enthusiasm and support for the future gifts effort and budget allocation. VII. Maintain Budget Support Ongoing budget support to build and maintain a pipeline of legacy gifts is critical to the success of these efforts, so it is important to demonstrate momentum to the organization’s governing board and/or finance committee. Since much of the revenue from the new gift commitments won’t be received until future years, board members can conclude that the annual budget investment is not generating sufficient revenue. Focusing on the investment and resulting commitments over a 3, 5, 10 year period can move the evaluation away from a purely bottom line analysis of dollars received annually. Ways to demonstrate momentum include: Board/staff is notified of new legacy gift commitments (other than anonymous) with assignment to send note or e-mail of thanks; Board members are Involved in donor identification and solicitations; A periodic (at least annual) pipeline report of known future gifts – type of gift, total # and $ amount – is distributed showing changes from prior year; A report of the # and $ amount of legacy gift distributions received during the fiscal year, the last 3 years, the last 5 years, the last 10 years, during the lifetime of such receipts is distributed annually; and Mature programs with regular annual distributions from the pipeline may project the total dollar amount of likely distributions in future 5 year segments. VIII. Monitor Probate and Non-Probate Distribution of Gifts Determine which staff position(s), either alone or in conjunction with the board or board committee, have the authority to: (1) accept testamentary distributions and execute receipt of distributions; (2) monitor the distribution of probate and non-probate gifts; (3) seek court 4
interpretation or instruction when the estate or other transfer documents are vague and/or unclear; and (4) engage legal counsel to file or respond to a suit on behalf of the organization. If staff is for whatever reason not able to monitor your matured legacy gifts, consider hiring outside assistance to perform these functions. Organization’s policies or guidelines must align itself with the above. Make sure the appropriate rules are in place to authorize one or more staff positions or agents to accept or decline a legacy gift, acknowledge receipt of distributions and act on behalf of the organization when official action is needed to protect or defend the best interests of the organization. Procedures should be established to assure that legacy gifts are being received in timely manner according to the state law that governs probate and non-probate processes and distributions. Such procedures should include regular audits of legacy gift documents and distributions to assure that gifts are credited to correct accounts and used as the donor intended. The next wave of legacy gift distributions will be from members of the baby boomer generation. Keep in mind that the average baby boomer has significant assets that pass outside a will or trust - life insurance proceeds, retirement plan and IRA balances, jointly owned property, bank and brokerage accounts. These are sometimes the easiest assets to commit as a legacy gift because doing so is easier relative to the complexity of preparing or updating an estate plan and, in the case of retirement assets, may provide a double tax benefit of both income AND estate tax minimization.
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