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Planned-Giving Programs & the Small Nonprofit: Getting Started - Part Two

NOTE: This is Part Two of a four-part cover story from the September/October 2002 issue of Advancing Philanthropy.

Parts 1 | 2 | 3 | 4 | Full Version

How to Tell if You're Ready

The experts whom Advancing Philanthropy interviewed agree that the focus of a small nonprofit's planned giving program should be--at least at the beginning and maybe always--bequests. But even a bequest program requires upfront assessment and preparation.

"I look at whether or not to start a planned giving program, however small, from a business perspective," says Kathryn W. Miree, JD, who for 15 years worked in bank trust departments before launching her own planned giving firm. Miree says that a nonprofit must have these characteristics before launching a program:

* Strong donor base. According to Miree, the organization should be at least 10 years old, raise an increasing amount of money every year, and have matured from annual fund contributions to major gifts.

* Strong board commitment. The board and senior management must understand and support a planned giving program.

* Solid infrastructure. The organization needs to invest the time and resources to develop gift acceptance and investment management policies, as well as systems to market and administer planned gifts.

Planned gifts are future contributions and will not meet immediate needs, and the leadership of an organization must recognize that. In fact, says Katelyn Quynn, coauthor of Planned Giving for Small Nonprofits, unrealistic expectations can doom a program before it ever gets off the ground. "A trustee might say 'we need a planned giving program,' but that doesn't mean that donors will flock to it," she says. That can lead to unmet expectations.

Johnson estimates that it may take from 7 to 10 years before a nonprofit begins to receive significant funds from planned gifts. If the organization is unwilling or unable to invest considerable resources before seeing such a return, a planned giving program is not a good strategy.

"It's like planting an apple orchard," says Minton. "You have to invest in the seedlings and nurture the trees until they bear any fruit. The board must make an investment in the future for a planned giving program to be successful."

The Infrastructure Must Be Set

The amount of resources we're talking about varies depending on the complexity of the program. Douglas E. Smith, a senior consultant with John Brown, Limited, identifies three elements that must be in place for even the smallest of planned giving programs to work:

* A real person to answer the phone. "A donor needs to hear a person on the other end of the phone and not a looped tape--even if it's a 'hand-off person' and not a 'solution person.'"

* A person to answer questions. "Someone should be quickly available to answer a donor's technical questions about the mechanics of a planned gift."

* A communication plan. "It's important to send a consistent message to donors about the planned-gift program--newsletters, direct mail, a website."

"You have to think through what you can do relative to your resources," Smith adds. "At a basic level, you might detail some aspect of planned giving in your newsletter, which will cause a donor to come to you with an inquiry. Some infrastructure and capacity is required to follow up on the inquiry."

Fundraisers new to all this can learn the basics of planned giving through books or courses, but they'll need to call on specialists for the details. (The AFP Bookstore offers several resources.) When a donor starts asking about planning alternatives, tax implications, illustrations of how a gift annuity would provide income, and other specifics, it's time to turn to an expert. Instead of having to pay for that kind of expertise on staff full time to handle the occasional inquiry, nonprofits have many options for "on-call" expertise, including consultants, financial institutions, and volunteer experts.

Many fundraisers in small nonprofits have found that planned giving committees are an important asset. "In one small nonprofit I was involved with, I was very strategic about having an expert in estate planning and an attorney on the board," says E. Ramone Segree, CFRE, chair of the AFP Foundation for Philanthropy and a fundraiser with more than two decades of experience. "A planned giving program in a larger shop might not need a committee, but it can help the smaller shop."

Quynn, however, warns against relying on volunteers too heavily. "A smaller nonprofit has few resources, so you may feel that you have to accept the generosity of a trustee or volunteer who says they will do the work for free," she says. "But you get what you pay for. In getting together a planned giving program, you need to identify an experienced outside attorney and make the investment to pay for the expertise needed."

In a growing number of cities, community foundations are providing small nonprofits with some of the expertise and structure they need to get into planning giving. For example, The Philadelphia Foundation, itself a public charity, offers services that "small nonprofits can use as a back office to work with donors and their advisors," says Heather Gee, CFRE, director of development services. The Foundation has set up a pooled-income fund through which small nonprofits can accept gifts. It also manages 500 individual funds, "no two of which are exactly alike," acting as a "professional clearinghouse" that's "like having your own foundation without the headaches," according to the website ( Foundation staff help donors evaluate nonprofit organizations in a five-county region so grants and memorials will do the most good.

In addition to the mechanics involved in accepting bequests and other planned gifts, establishing a gift-acceptance policy is essential, says Miree. She recommends that the staff, the CEO, and the board's committee responsible for oversight collaborate with a professional advisor on a gift-acceptance policy. The board should approve it and periodically review it. Each organization's policy must suit its own needs, but policies generally spell out

* what types of gifts the nonprofit will accept (cash is easy, but what about a piece of sculpture or closely held securities?),

* under what circumstances a gift can be accepted (should your charity pay off a mortgage in order to receive a piece of real estate?), and

* through what means a gift can be accepted (who has authority to accept a gift on behalf of your organization?).

Go to Part Three»

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