Here’s the issue in a nutshell…
–
40
thYear Reunion Class Gift: $1.2 million
–
50
thYear Reunion Class Gift: $5.5 million
What do you suppose accounted for the
difference?
Major
Yesterday:
Traditional Large Gift “Silos”
Major Gifts
• Gifts received during a donor’s lifetime.
• Usually solicited in a capital campaign.
• Paid off in 3-5 year pledge period.
• Most often earmarked for specified purposes.
• Development staff and volunteers did soliciting.
• Solicitors generally had minimal knowledge of tax laws involving giving.
• Handed off prospects to Deferred Gifts staff if outright gift was not forthcoming.
Deferred Gifts
• Assets usually received after a donor died.
• ‘Passively’ generated via low-key mailing and
advertising program, and estate planning council.
• Bequests, CRUTs, Pooled Income Fund, gift annuities.
• Few restrictions on gift use.
• Arcane gift vehicles
understood by only a few development staff.
• Often received referrals from Major Gifts staff after solicitations had ‘failed.’
Today:
Continued “Silo” Approach to
Large Gifts Fund Raising
Major (‘Simple’) Gifts
– Cash
– Stock in publicly traded company
– Select real estate
Planned (‘Complex’) Gifts
– Charitable life estate of
residence or vacation property
– Bargain sale of residence
– Charitable gift annuity
– Charitable remainder trust
– Pooled income fund
– Charitable lead trust
– Commercial real estate
– Life insurance policy
– Energy or timber rights
– Stock in private company
– SEC Rule 144 stock
Then the light bulb
went on!
A visit to the
Mayo’s approach: increase $$$ yield of traditional major
gifts approaches by always employing time-tested planned giving techniques.
– All major gifts field staff were required to be skilled in proposing and negotiating planned gifts – a radical concept at that time.
– No distinction was made between ‘major gift’ prospects and ‘planned gift’ prospects.
– The result? $100-150 million per year in total gifts, including one bequest of $120 million.
Configuration of Gifts from Leading
Scripps Benefactors (pre-1999)
$105 million: a 509(a)(3) Type II supporting organization $54 million: 50-50 cash / bequest
$27 million: mostly cash, some CRUT, some bequest $26 million: mostly LEGA, small CRUT
$18 million: all cash
$14 million: mostly cash, some CRUT, some bequest $9 million: mostly grantor lead trust, some cash
$7 million: all bequest
$7 million: 50-50 cash / CRUT $6 million: 50-50 CRUT / cash $5 million: nearly all bequest $5 million: all grantor lead trust
Tomorrow:
Synthesis of Major and Planned Gifts
Basic Premise: Planned gifts don’t compete with
outright gifts…they complement outright gifts.
Why not maximize your donors’ overall giving
capability, rather than simply focus on what they can give you today?
Capitalize on donor’s inclination to give, not just
respond to your organization’s financial needs.
Employ full range of estate planning vehicles to
unlock less obvious assets.
Tomorrow:
Synthesis of Major and Planned Gifts
Acknowledge realities of uncertain economy and
escalating living expenses in retirement years.
Blur distinction between outright and deferred gifts:
Planned gifts are no longer 2nd class citizens!!
Alleviates concerns over issue of gift ‘credit’: most
irrevocable deferred gifts can be ‘booked.’
Deferred gift planning can trigger major outright
gifts – not just the other way around.
All large gifts staff should be capable of applying
Segregating Major Gifts from
Planned Gifts is like….
• Using separate remotes for your TV, DVD player, VCR, and stereo.
• Receiving separate bills from your hospital, clinical lab, and
doctors.
• Going to separate experts for advice on trusts, life insurance, and
investments.
• Today’s picky consumers prefer a seamless approach to business
that eliminates traditional boundaries.
• Businesses that achieve seamless integration: Kaiser, Walmart,
Google, FedEx/Kinko’s) are what today’s consumers seek.
Typical Assets for a
Traditional Major Gift
Income from employment or
inheritance
Money market funds
Mutual fund holdings
Stocks with rapid liquidity
Viable Assets for a
Comprehensive Large Gift Approach
Income from employment
or inheritance
Money market funds Mutual fund holdings
Stocks with rapid liquidity
PLUS:
Life insurance policy
403(b) and 401(k) plans, and IRAs Residence Ranch or farm Vacation condo Residential rental property Office building Industrial facility Golf course Marina Hotel / motel Undeveloped parcel Art, automobile, boat,
airplane
Unrealized stock options Stock in pre-IPO start-up
tech company
Critical Issues to Address
How soon do you need the gift funds?
–
Construction: 3-5 years
–
Equipment acquisition: 1-3 years
–
New programs: 1-5 years
–
Current services / programs: now and in
perpetuity
–
Unanticipated needs: in perpetuity
–
Endowment: now and in perpetuity
Critical Issues to Address
Which development staff have access to which
prospects, and who markets traditional life
income gifts (e.g., gift annuities, CRUTs, etc.)?
– Division between Planned Giving staff and Major Gift staff creates counterproductive barriers to
cooperation.
– Donors have little tolerance for competition between development staff and program silos.
– Challenge is to create an effective incentive and performance evaluation system to reward separate
Critical Issues to Address
How do you handle a donor who is interested
in supporting multiple charities?
How does the harmonic convergence
influence your own career path and
marketability?
Critical Issues to Address
You need to know when and how to apply these
giving vehicles:
•
Outright Gift of Cash, Stock, or Real Property
•
Bequest
•
Gift Annuity (if you have a license)
•
Life Insurance or Retirement Assets
•
Life Estate of Residence
•
Life Estate with Gift Annuity
•
CRUT and CRAT
•
Pooled Income Fund
•
Lead Trust
Summary:
Harmonizing Major & Planned Gifts
Planned gifts don’t compete with outright gifts…they
complement outright gifts.
Maximize donor’s overall giving capability and strengthen
donor’s inclination to give through a team approach.
Avoid ‘leaving anything on the table’ through array of
gifting options.
Acknowledge the realities of increased living expenses in
retirement years and donor reticence for outright gifts.
Blur distinction between outright and deferred gifts.
