Recipe for Cooking up a Simple Planned Giving

Program

Michael J. MontgomeryMontgomery Consulting, Inc.

Lawrence Technological University

AFP Detroit/Leave a Legacy Development Day 2011

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A Very Simple Planned Giving Program

Very simple Planned Giving program

Not recommending committee be formed

Not talking tax benefits or buying software to calculate them

Not backing into via talk about Estate Planning

PG experts may say approach here is simplistic …

True! But, DO-ABLE for most organizations

Hence, useful for: Testing the PG waters to determine if more investment is warranted Longer term use by organizations for which PG opportunities are

likely to be limited in any event

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Planned Giving doesn’t need to be so complex!

PG has historically been presented as very technical.

Heavily focused on benefits to donors… big donors w/complex fact situations and ambitious charitable and estate planning objectives.

Generally presupposes a more intimate relationship with prospects than most organizations achieve.

Probably a result of PG growing from Major Giving.

Possibly also a function of PG professional community -- focused on what professionally interesting/challenging.

Likely kept donors and organizations that could benefit from PG from participating.

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Measuring the depth of your Prospect Pool for Planned Giving: A Practical Guide

Have significant numbers of Longer Term (5-year+) donors?

These donors generally giving consistently?

Typically giving at significant levels… $500 or more a year?

Are many likely to be 50+ years old?

See evidence of more than modest wealth?

If the answer to most questions is “yes,” probably have a pretty viable PG prospect pool.

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Get basic tools in place before beginning to promote Planned Giving

1. Sample bequest language2. Instructions for donating (paid-up) whole life policies3. Instructions for giving from retirement account*4. Brokerage account for accepting gifts of securities* 5. Written policy (interim) on gift acceptance*- - - - - - -

6. Descriptions of, and contact info for, reliable sources of “off the shelf” Planned Giving instruments into which donors might place assets to benefit your organization

*Not strictly a Planned Giving topic. But, talk of PG oftengets people thinking about asset gifts!

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1. Sample Bequest Language

"I give, devise, and bequeath to NAME OF CHARITY/LOCATION, the sum of $________(or a description of the specific asset), for the benefit of NAME OF CHARITY and its general purposes."

General (like above)… also Specific, Residual and Contingency bequests.

All over the place…in fundraising texts, organization websites – above http://www.leavealegacy.org/how_give.asp.

Ask users to make organization aware of their intentions. Create an “expectancies file” and use growth of that file to monitor this part of your PG program.

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2. Gifts of Insurance

Existing Policies Older Americans believe in whole life – bought whole life

policies for many purposes for which we now use term.

If purpose accomplished, some view policies as “surplus” and are willing to consider gifting.

Seek ownership of policy -- provides more immediate benefits to donor & more flexibility for organization.

Simple (1-page) instructions on to how to gift insurance.

New Policies NOT included in simple PG program but, for many

groups, a logical next step for expansion of PG program.

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3. Gifts from Retirement Accounts

Tax benefits for gifts from IRAs “re-upped” for 2010 & 11

Allows individuals age 70½ or over to exclude from gross income up to $100,000 that is paid directly from their individual retirement accounts (Traditional and Roth) to a qualified charity.

The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs for 2010 and 2011.

May someday become permanent.

Might be better for us fundraisers if keeps being extended at last minute… impending end creates urgency!

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4. Brokerage Account for Accepting Securities

PG discussion often stimulates non-cash current giving – including securities.

Credibility of program requires responding quickly/appropriately to all offers of gifts.

If charity does not yet have account at brokerage, establish one for convenient (for donor) acceptance of gifts of securities.

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5. Basic / Interim Gift Policies

Children may say the darndest things, but donors want to leave or give you the darndest things…Art, Real Estate, Aircraft, Boats…

Donors value items more highly than market and not all well-intentioned.

Don’t have to accept anything let alone everything.

Written policy helps avoid potentially difficult situations.

Simple/interim policy… what encouraging, what will look at case-by-case. Phrase as what able to accept.

Policy should evolve with sophistication of program.

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6. “Off the shelf” PG Options: Balancing Simplicity, Risk and Relevance

Clarity of message and simplicity of implementation argue for promoting specific “off the shelf” options.

Risk in making specific recommendations. Traditionally managed risk in this area by not being specific… Promoted PG as a concept Educated about gift types Told donors to have their own advisors/pick their own instruments

Made PG sound mysterious, complex and expensive.

Led PG to be perceived as irrelevant by many donors and organizations that really could benefit.

If not prepared for some risk, ignore next 3 slides!

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6a. Pooled Income Fund (external)

Pooled Income Fund (PIF) – Provides variable monthly income to non charitable beneficiary based on investment performance and assets or future income to charitable beneficiary at maturity. Investment “fund” of underlying investments assembled by sponsor.

Simple, easy to understand.

Income-producing, low-minimum… $10,000, $20,000..

Pooled Income Fund options are now available. No longer have to create one of your own!

Different events at maturity. Some relay assets to charity… like CRT. Others put asset into fund providing income to charity.

PIFs of first type from charitable units of financial services firm.

PIFs of second type operated by some Community Foundations.

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6b.Charitable Gift Annuity Program (external)

Provides fixed income to non charitable beneficiary. Provides benefit to charitable beneficiary at maturity. So far, only from Community Foundations Requires:

Possibly higher minimum than PIF (CFSEM $10k) In one case, needs $100,000 fund benefiting

agency already in place at CF. “Hand off” of prospect to CF staff relatively early.

At maturity, assets can ONLY go into fund at CF which then provides income to agency.

Generally more appropriate for larger donors.

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6c.Charitable Remainder Trust (packaged)

Some financial services companies now promote apparently “stock” CRT offerings. Donor, however, still has a choice of multiple underlying investments.

Really more a change in how they promote CRT than how they do CRT.

Economics clearer – set up costs, admin fee & minimum (generally $250,000) much more clearly stated.

MUCH easier/clearer than old world in which it was often hard for donors and agencies to quickly/easily understand economics of CRT or to put one in place.

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How to promote (once you know what you will proactively promote)

Use regular donor communications -- newsletter, website, annual report, solicitation instruments.

Also regularly use your solicitations -- “check off” box on gift replies (“Would you like to receive information on Planned Giving?”)

Have a more detailed package on instruments, options you are encouraging/offering and their benefits. Use to respond to queries and with selected major givers. Can buy standard and custom publications from multiple sellers. Providers of “off the shelf” PG products have own publications.

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An appealing message for prospects new to Planned Giving -- Endow your gift

Personally, not very tax benefit-oriented … not strongest selling point… stress the work/benefit to community.

Long term donors often respond well to the idea that the need your agency meets/work you do is permanent.

Consistent annual givers are sometimes drawn to the idea of endowing their annual gift. In a healthy economy, a $500/year donor can do this with a

$10,000 Planned Gift going to endowment. Such a $10,000 PG could be structured through an off-the-shelf

Pooled Income Fund that puts assets into endowment at maturity.

Makes PG accessible conceptually and financially to a much wider audience than where traditionally applied.

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A series of PG stories or messages

#1 -- Introduces PG as a concept and describes program.

#2 -- Highlights givers making PGs, discusses charitable and non charitable goals & describes instruments.

#3 -- Introduces donor society for PG (honor them while they live).

#4 -- As PG options that agency is encouraging expand, features them (and those using them) in communications.

#5 – And thereafter, features new PG donors, PG instruments and activities of PG society.

Pick people your target audience for PG can “relate to”.

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Evaluation/Next Steps

Monitor progress for fair trial period – 2 or 3 years minimum.

Best probable case Year One -- Casual interest/initial inquiries/maybe a

commitment or two Year Two -- Serious inquiries/a few PG

commitments Year Three – Growth in PG commitments and

maybe a maturity or two

If/when working, consider increasing investment to support more aggressive and sophisticated program.

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Michael J. Montgomery

Mike Montgomery is a Detroit-based fundraising and economic development consultant with his own firm, Montgomery Consulting, and an alliance with the Remington Group. He is also an adjunct professor in the College of Management at Lawrence Technological University.

At LTU, he teaches “Mgt 6083 - Comprehensive Fund Development for Nonprofits” (a 3 credit hour grad class) as well as an intensive two-day non-credit introductory program for fundraisers and grant seekers.

Earlier in his career he was the head fundraiser for Focus: HOPE, a staff fundraiser for Wayne State, a program consultant to the Hudson-Webber Foundation, and a US Department of State Foreign Service Officer.

He holds an M.A. from the University of Michigan and an A.B. from Columbia University.

Email: mjm12940@aol.com