As the youngest baby boomers close in on retirement and begin to contemplate what their legacies will be, nonprofits and universities are looking to consistent donors for their slice of an expected multitrillion-dollar wealth transfer.
Ways of tapping potential estate gifts include targeted marketing and educating donors on easy ways to go about making that type of gift.
But a donor’s decision to include an organization in his or her estate plan almost always hinges on an existing relationship, according to Arkansas nonprofit development professionals.
Baby boomers are the most obvious target for planned gifts because they account for $48 trillion of the expected $68 trillion that nearly 45 million U.S. households will transfer to heirs and charity over the next 25 years, according to research firm Cerulli Associates of Boston.
However, nonprofit professionals said, people in their 40s or even younger who are starting families may be writing their first will and should also be approached.
“People give to things that they care about and that they have a relationship with already,” said Mary Lackie, assistant vice president of development at the University of Central Arkansas in Conway. “So what we do is really just try to engage people and have that relationship with them throughout their lifetime so that it’s then not an awkward conversation.”
J.R. Andrews, director of planned giving at the University of Arkansas at Little Rock, echoed Lackie: Relationships matter. “If you have a strong connection to an organization, you want to leave a lasting legacy with that organization,” he said. “And so that’s really the bottom line of how we do this, is just marketing and cultivating, personal touches, that kind of thing.”
Nearly all of the professionals agreed that consistent donors, no matter the amount of their gifts, are the donors who should be approached about an estate gift.
Andrews said the people who leave millions of dollars to organizations when they die can often be the same people who have been donating $25 to $50 a year for decades but weren’t capable of giving a large amount during their lifetime.
UA Little Rock and the Arkansas Community Foundation, in particular, have developed specific strategies for netting baby boomer and other estate dollars.
Chief Development Officer Ashley Coldiron said the ACF’s strategies for capturing estate dollars include its Keep 5 in Arkansas campaign that encourages people to leave 5% of their estate to the foundation. The 5% would be unrestricted funds for a community of the donor’s choice. The campaign is three years old and is “just starting to see some traction,” she said.
She said the foundation, through the Keep 5 campaign, is trying to shift some donors away from leaving restricted funds because needs are forever changing. For example, donations in the past were used to combat the polio and tuberculosis epidemics, which are no longer a factor. Today, opioids are the concern, but that could change in 10 to 20 years.
“As the needs change, this unrestricted money [coming] back to your community can make a huge difference because it can vary and it can be flexible as the needs of that community change,” Coldiron said.
‘A Complete Shift’
Still, most gifts are restricted, and that’s where the foundation’s other strategy comes into play.
Nonprofits like hers are “seeing a complete shift to deeply involved donors,” Coldiron said. Those donors know the ins and outs of organizations they support, so they know better where and how, specifically, they’d like their money to be spent when they’re no longer around.
The foundation has “legacy funds” for them. Patrons set up legacy funds during their lifetimes and name the fund in the estate plan they devise with their attorney. The foundation gets documentation on how the money will be spent.
That’s what’s unique about the foundation. It is a clearinghouse for charitable donations.
“What we say at the Community Foundation is, if you have one charity you love, we’re probably not the right resource for you,” Coldiron said. “But if you have more than one charity you love, we’re the perfect resource for you. … That really is our selling point, because they can do it with one fund with us but have multiple nonprofits that they love and want to give to. That really is what sets us apart.”
The advantage to the legacy fund is this: While they’re alive, donors who want to change how their money is spent after they die have to call just one place — the foundation — to do that. So they don’t need to consult their lawyer to change their estate plan.
In addition, many planned gifts are endowments: money or other financial assets that are invested to grow the principal and provide additional income for future investing and expenditures.
Of the more than 2,100 funds the foundation has, approximately 88% are endowed, Coldiron said, “which means that those gifts will go on for forever, and those legacies that those family members, those corporations, those foundations have left with us, that giving will go on in perpetuity. So it’s a huge percentage of what we do. This is our bread and butter.
“What we say is, if you want to give to an organization to do something today, you should give directly to that organization. If you want to give to that organization for forever, you should give through endowment and that can be done through us.”
IRA Giving
Another popular option, development professionals said, is IRA giving. At age 70 and a half, people with individual retirement accounts are required to take minimum distributions. If the distributions go to an individual, they are taxable income. The distributions are not taxable if they go directly from the IRA to a charity.
“I’m surprised I haven’t seen more of it. I think that’s some low-hanging fruit for charities,” said Dan Young with the Rose Law Firm in Little Rock.
The Arkansas Community Foundation also offers text that can be inserted into a will, written with or without an attorney.
Like the foundation, UA Little Rock has some structured planned giving strategies.
First, each college has a dedicated development director. Then there’s Andrews, its director of planned giving.
“What I do is try to create a culture of identifying planned giving prospects within their own donor base and collaborate with them as far as approaching planned giving prospects,” he said.
Targeted marketing is a big part of the strategy, too, he said. Donors receive a digital newsletter, but it is segmented to give slightly different messages to different age groups (40-54, 55-69 and 70 and older).
UA Little Rock also hosts about six estate planning/planned giving seminars per year, targeted to boomers. “Our seminars are not necessarily solicitations of planned gifts. It’s more information, to spread the word that you need an estate plan for various reasons,” Andrews said. “And what we try to do, what I try to do, is tell folks, if you are so inclined, we try to give you information and the tools to allow you to integrate your philanthropy within your overall estate and financial plan.”
The university didn’t always have such a “robust” planned giving program, he said, but many public institutions are refocusing on that as state dollars lag behind growing expenses.
Right now, 10%-15% of the gifts UA Little Rock receives each year are planned gifts, Andrews said. That amounts to $2 million-$3 million. His goal is to see those annual numbers rise to 20%-25%, or $5 million-$7 million, in the next five years.
A standard goal, Andrews said, is having a quarter of the gifts being planned gifts. Organizations still need current gifts to fund current projects.
However, “A lot of organizations want to look at the bottom line year to year, what money have we, what actual dollars have we pulled in this year. That’s a very short-sighted outlook,” he said. “We’re lucky here because administration in advancement and even overall recognizes the importance of estate gifts, future gifts, because those grow over time.”
Having a Long-Term Impact
Lance King, chief development officer for the Clinton Foundation, said planned giving is important because of its long-term impact.
“When you look at our long-term financial sustainability, much of that plan is through our endowment, which we work to continue to grow,” he said. “What we know nationally and historically about planned gifts, particularly bequests, is that 80% of bequests are earmarked for endowment at most organizations. So bequests in particular really help organizations to grow their endowment, which ultimately leads to longer-term fiscal sustainability and some predictability for the long term.”
On the other hand, for some organizations, long-term thinking is just now becoming a possibility because they haven’t been around very long. Crystal Bridges Museum of American Art, for instance, does not have a formal planned giving program. The Bentonville museum will celebrate its eighth year in November.
Director of Development Emily Ironside said it takes time to generate interest, and an annual giving program must come before a planned giving program.
Nevertheless, two years ago, the museum engaged in a direct-mail campaign to its existing donors to let them know that planned giving was an option. The brochure they sent out included information on how to make a planned gift.
With any type of giving, the strategy doesn’t change, Ironside said. Crystal Bridges takes a “donor-centered” approach either way, and “whether or not an organization has an official [planned giving] society, it really is about relationships with donors and understanding their individual desire for impact,” she said. “Any meaningful gift is going to come through conversation and an established relationship and really understanding that impact. … It does take that one-on-one time for sure.”
The Clinton Foundation also doesn’t have a formal planned giving program, but it’s working on that. The foundation’s board recently approved a planned giving donor recognition society that is set to be rolled out by the end of this year, King said. He said the best strategy for organizations that are seeking planned gifts is to simplify the process for donors by educating them on their options.
It’s important to thank people while they’re alive, too, King said.
Andrews, with UA Little Rock, expressed the same sentiment.
“We treat our estate givers who have expressed an intent to leave an estate gift with us as family because, if we’re included in the estate plan, you’re talking about kids, grandkids. And, beyond family, No. 1 is church and then you may have one or two other nonprofits involved,” he said. “In order to do that, they obviously feel very connected and very passionate if they’re going to go to that extent to leave a gift, and we treat them as such.”
(Correction: A previous version of this article incorrectly attributed one direct quote and a few indirect quotes. Lance King, the Clinton Foundation’s chief development officer, was the source of the quotes, not Brian Cookstra, its director of communications. We have corrected the errors.)
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