Building a Legacy Giving Program for Your Nonprofit Organization

Bob CongdonDirector of DevelopmentUniversity of New Haven

The Giving Pyramid

Series1

Legacy GiftsMajor GiftsAnnual Gifts

What Are Legacy Gifts?

• Commonly, they are transfers of assets that occur at death or when a trust terminates

• Often arise as very pleasant surprises- only 20% of bequests are known in advance

• Gifts with the largest dollar values• Ultimate expressions of donor support

Legacy Gifts vs Planned Gifts?

Types of Legacy Gifts

• Bequests• Beneficiary designations for Individual

Retirement Accounts and life insurance policies• Charitable Remainder Trusts (income to donor,

remainder to charity)• Charitable Gift Annuities (contract to make fixed

payments for lifetime to one or two annuitants in exchange for a gift, remainder to charity)

Types of Legacy Gifts

• Charitable Lead Trusts (Income to a charity for a term of years, remainder to heirs on a tax-advantaged basis)

• Retained Life Estate Agreements (Donor gives residence while retaining lifetime use; donor responsible for upkeep and property taxes)

• Pooled Income Funds- (Charity offers one or more funds similar to mutual funds; donors can make gifts and receive lifetime income based on the value of their shares in the fund)

Focus on Bequests and Beneficiary Designations!!

Giving USA 2012 Total Giving$316.23 Billion

Individuals 72%Bequests 7% = $23.4 B Foundations 15%Corporations 6%

Giving USA Bequests 1993-2012

$’s in Billions (adjusted for inflation)

1993 1998 2003 2008 20120

5

10

15

20

25

30

35

Bequests

Yale Tomorrow Campaign$707 M in Planned Gifts- 20% of $3.886 B

Bequest IntentionsRealized BequestsLife Income GiftsDonor Advised FundsCharitable IRA RolloversOther Planned Gifts

Legacy Gifts in Relation to Annual/Capital Gifts at United Methodist Homes

Year 1 Year 2 Year 3 Year 4$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Gift AnnuitiesBequestsCurrent Gifts

Why Does an Organization Need Legacy Giving?

• Potential for substantial long-term results• Discussion about legacy gifts may identify

assets available for current gifts• Opportunity for discussion with donors

focused on their goals, needs, and values

University of New HavenMaxcy Legacy Society Members

45 Known Legacy Gifts

Bequests- 30Trusts- 9Life Insurance- 4IRA designations- 2

Known Amounts = $8.7 MEstimated amounts = $1.0 MTotal expectancies = $9.7 M

Why Build an Endowment?

• Permanence• Financial stability during economic cycles• Orientation to the future• Offsets inevitable loss of steady donors as they

die• Perpetuates donors’ charitable priorities- as in • “Leaving a Legacy”• An appealing option for many donors

Are You Ready for a Legacy Giving Program?

Critical criteria- A mature development program including: • An active database of individual donors• Staff and Board support (a Board Champion)• Time commitment from staff • Marketing plan and budget

Gift Acceptance Policy Guidelines

Who can negotiate and accept gifts?What approvals are needed?What assets are acceptable- Securities? Real estate? Personal property?What gift purposes are acceptable- e.g. Permanently-restricted gifts for endowment?

Identifying Bequest Prospects

What demographic characteristics would you look for?

Identifying Bequest Prospects

• Long-term, consistent donor• Age 65+ • Children well-established financially, or no children• Frequently a widow or widower• Strong association with your organization• They think of your organization as part of their

extended family• Often not a wealthy individualAlso market to key volunteers, current and former trustees, long-term staff

What Motivates a Donor?

• Gratitude for economic success• Interest in facilitating positive change• Personal contact• Recognition and appreciation• Influence or control• Commitment to your organization

Focus on Bequests• Write instructions with specific wording to name

your organization in a will; Restricted Purpose Bequest:

I hereby bequeath to the University of New Haven, a tax-exempt organization, located at 300 Boston Post Road, West Haven, Connecticut 06516, the sum of ________ dollars (or, alternatively, ____% of residual estate, or include a description of property, assets, etc. that you wish to bequeath). It is my wish

that this gift be specifically used to support [describe specific intent here – scholarships, athletics, student services, etc.]. If it becomes inappropriate or impossible to accomplish the purpose of the gift as described herein, then the Board of Governors may designate this bequest to be used for the benefit of asubstantially similar purpose.If you are considering a Restricted Purpose Bequest, we encourage you or your attorney to contact the University of New Haven’s Office of Advancement so that we can work with you on language that will insure we can meet your intent.

Focus on Bequests• Recommend specifying a percentage of the estate

as a bequest rather than a specific amount “so that the beneficiaries of your estate, including charities, will receive the proportion you intend, even though your estate may increase or decrease in value.”

• Put bequest wording on your website, and make it available to staff and volunteers who have contact with donors

• On annual fund reply cards, include options to inform you of a bequest intention and to request more information

Focus on Bequests

• Send periodic mailings and/or email blasts with a reply mechanism; What happens when a donor responds?

• Establish a method of tracking prospective legacy donors and potential bequests

• Create recognition society; publicize it in your annual report

• Consider an annual event for members, and include them in other donor events

Focus on Bequests

• Ask each bequest donor to give a testimonial; use testimonials in mailings, newsletters, website

• Train fundraising staff (paid and volunteer) to ask loyal donors: “Have you provided for any charities in your estate plans? Would you consider including a bequest for our organization in your estate?”

Website Tips

• Make it simple, clear and easy for older individuals to use

• Use simple font styles and basic colors• Avoid bright backgrounds with reversed text• Use a minimum font size of 12 point, but know

that showed studies show that 14 point is ideal

• Avoid multilevel menus and complicated navigation

Health and Retirement Study Data

• Federally-funded longitudinal study of 26,000 diverse Americans over the age of 50

• In-depth interviews every two years about income, work, assets, pension plans

• Links lifetime responses to distributions after death (10,000 survey participants who have died)

Analysis of charitable giving data by Russell James, professor, Texas Tech University, and Jackie Franey, Sales Director, BNY Mellon Wealth Management

1995/6 1998 2000 2002 2004 2006 2008 2010 2012 (p)30%

35%

40%

45%

50%

55%

60%

65%

55-6465-74Age 75+

US Population Age 55+ Use of Will Alone, By Age Segment

Analysis by Russell James and Jackie Franey

1995/6 1998 2000 2002 2004 2006 2008 2010 2012 (p)0%

5%

10%

15%

20%

25%

55-6465-74Age 75+

US. Population Aged 55+Use of Funded Trust by Age Segment

Analysis by Russell James and Jackie Franey

Increasing use of living trusts funded during lifetime, despite: • Increasing estate tax exemptions and • Increasing availability of non-probate

transfers, such as pay-on-death options

Distributed Estates Where Decedent Reported Having a Written and

Witnessed Will (n= 6,063)

16%

38%

10%

19%

11%

6%

No will foundWill probatedUnprobated will; nothing much of valueUnprobated will; estate otherwise distributedUnprobated will; trust distributedUnprobated will- other

Analysis by Russell James and Jackie Franey

Talk with donors about non-probate transfers, such as:• Beneficiary designations on retirement

accounts and other assets• Remainder interests in living trusts

Gift of an IRA as Part of an Estate Plan

Securities to UNH

IRA and other assets to children

$100,000 $1.9 million (Consisting of the $100,000 IRA, plus the home, cash and stock totaling $1.8 million)

Income tax $0 $25,000 (Assumed tax bracket of children = 25% x $100,000 equals $25,000)

Net $100,000 $1,875,000

Option 1: Give the IRA and other assets to the children and $100,000 in securities to UNH

IRA to UNH Real estate, cash and stock to children

$100,000 $1.9 million (Consisting of the home, cash and stock)

Income tax $0 $0

Net $100,000 $1,900,000

Option 2: Give the IRA to UNH and the cash and stock to the children

John, a widower, has a $2 million estate, including a home, securities and cash totaling $1.9 million, and an Individual Retirement Account of $100,000. John wants to leave $1.9 million to his children, and $100,000 to the University of New Haven. John’s estate is exempt from the Federal estate tax, which in 2013 applies to estates larger than $5.25 million. Depending on where John resides, there may be State estate tax considerations.

National Committee on Planned Giving Survey

• 89% of all Americans give to charity annually• Only 8% of Americans include a bequest to

charity in their will• When polled on the reasons have not planned

to leave a gift to charity, they responded:– All assets left to family– Not enough assets– Not familiar with bequests – No one asked them to make a bequest

A person age 65 today has a one in four chance of living until age 90

Take the Long View

• A 65-year-old who creates a will in 2013 will revise it at least once; precipitating factors could be the death of a spouse, the birth of grandchildren, tax reforms and health issues

• Even if charitable interests are included in the will of a 65-year-old, those charitable interests do not change, and the anticipated amount for charitable bequests remains available, the bequest may not be received for 25 years or more

Steward Your Legacy Donors

• Invest time comparable to time spent on top outright donors

• Personal visit or phone call at least once/year• Send birthday cards and holiday cards• Include in other donor events• Continue to contact even if they stop annual

giving

Legacy Gift Donors Want…

• To be appropriately thanked• To be kept informed• To have personal information kept confidential• To be listened to• To be remembered

The Role of the Board

Approve the gift acceptance policiesAllocate resources for legacy giving programPromote the effortLead by example

The larger the gift commitment, the more likely that it includes a bequest, a charitable trust, or other legacy gift

Advanced Planned Giving

Charitable Gift Annuities• Evaluate your organization’s readiness to

accept, manage and market gift annuities• ACGA suggests annuity rates• How will your annuities be invested during the

donor’s lifetime?• Who will explain gift annuities to prospective

donors, write gift annuity contracts, and communicate with donors and annuitants?

Advanced Planned Giving

Charitable Remainder Trusts:• Your organization can receive your remainder

interest in a trust without having to be involved in creating or managing the trust

• Evaluate whether you want to offer information about planning charitable trusts, either by hiring knowledgeable staff or using a consultant

• Evaluate whether your organization has the size and financial sophistication to offer trust management

Advanced Planned Giving

Provide training so development officers have a working knowledge of gift planning strategies, and can recognize opportunities when a planned gift will complement a major capital gift

Set Expectations and Measure Success

Track the number of revocable gifts (bequests, IRA and insurance beneficiary designations, trust distributions)

Set goals related to:• Number of members of your legacy society• Number of prospects who are asked to

consider a bequest

Focus on Bequests and Beneficiary Designations!!

Building a Legacy Giving Program for Your Nonprofit Organization

Bob CongdonDirector of DevelopmentUniversity of New Haven

300 Boston Post RoadWest Haven, CT 06516

203-479-4295rcongdon@newhaven.edu