Saturday, February 28, 2015

Bequests - "You Never Know..."

One of the most important, but most difficult to acquire, sources of funds for nonprofits, are the result of what is called "planned giving." This is a euphemism for what donors plan to do with assets designated for charity after they leave this planet. Such gifts take many different forms, the simplest of which is a bequest in a will, the more complex are instruments like charitable lead trusts, which may also have tax benefits during a lifetime.. All require some form of legal advice to navigate the treacherous waterways of our tax code. A warmer name, gaining more use, is "legacy gift"  for a donation that comes through an estate

The difficulty for nonprofits lies in the uncertainty of what any donor might be planning and typically the long lead-time required in identifying and  then cultivating potential donors. Also, nonprofit managers are so consumed by the need for dollars NOW that the time required to undertake a planned giving effort can fade away. Some donors will inform the nonprofit of their planned giving intentions. Nonprofit staff may even work with them on the details, including their gift being recognized publicly during their lifetimes.

Of course, donors can change their minds. I had experience with a couple who had set up a sizable charitable trust, but one that was revocable. It was clearly intended as a cudgel to make sure the organization followed their bidding. It was indeed thus wielded, but too often. The board eventually refused a specific demand. The trust was then revoked,. But by that time, other wealthy and less demanding donors had come forward, whose gifts would more than make up the loss.

Nonprofits sometimes make the mistake of assuming that only large annual  donors are suitable prospects for legacy giving. They are of course, but other supporters, such as members and volunteers should not be ignored, especially if they have a long history of support at whatever level, that  demonstrate their commitment to the organization's mission. Some of these supporters fall under the "you never know" category, where a person of apparently meager means turns out to be just the opposite.

A recent story in February out of Brattleboro Vermont. is illustrative. The headline read "Former Janitor Leaves $6 million to hospital and library in Vermont." Ronald Read, who died at age 92, was described as wearing clothes "held together by safety pins." He had been a janitor at a local J.C.Penney store for 17 years. The only clue to his other life  would have been knowing he subscribed to the Wall Street Journal. The lawyer who handled his estate was quoted as saying: " He had two lifetime hobbies - investing and cutting wood."

The above has to be classified as  a windfall, where the stunned beneficiaries were unaware of the gift until it was given. But it was likely people at the hospital and library had at one time or another been kind to Mr. Read. There is a lesson there. Another helpful hint is to get to know local lawyers who specialize in trusts and estates. There may be times when a client asks advice on where a bequest might be made.

With a large and often unknown universe of potential legacy donors, unless the nonprofit has the resources to have staff dedicated to that task, the best alternative is to have printed or online material prepared with a simple description of planned giving options. Those can be mailed, linked or presented personally to prospects. A hindrance to effective fundraising for this purpose is the reluctance to discuss with donors a matter that necessarily involves their eventual demise. If the prospect is someone already engaged in support, an approach  might be that a legacy gift continues on the work begun in their lifetime.

Two statistics need to mentioned regarding this topic. First is that it is estimated only 55% of Americans have prepared wills or other estate plans. The other is that just approximately 5% of  giving to nonprofits comes through estate planning. That figure illustrates the difficulties of attracting such generosity. Families, if they have them, will come first in most donors' minds. Working towards some kind of a program to invite legacy gifts can, in the long run - and often it is very long -yield great benefit to the nonprofit, as such gifts are sometimes quite large. They are of  a size often used to build endowment.

In 2007, Michael Dunn of Derby VT,  in the "Northeast Kingdom," died suddenly, leaving his entire estate of $10 million to New York's Museum of Modern Art. Its director Glenn Lowry, although a summer resident  of a nearby town, had never heard of Mr. Dunn, who turned out to be a low level supporter of MOMA. Like Mr. Read of Brattleboro, Dunn had no family, Unlike Mr. Read, he was gregarious and active in the town.  Yet no one there had a clue of the size of his wealth or where it was headed after his death.

"You never know..."  and what is it about these Vermonters?