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Five Common Myths About Planned Giving

Resource Center - Foundation

By Michael J. Rosen, CFRE

(April 19, 2011) A number of myths surround the professional practice of philanthropic planning. These myths can lead organizations to take no action or to take the wrong action where planned giving is concerned. Here are five common myths rebutted.

Myth 1: Planned giving is very difficult.

The best kept secret about planned giving is that it is just not that difficult. Admittedly, for a wide variety of reasons, there are plenty of people who like to think that planned giving is daunting. From time to time, planned giving can even pose a real challenge that can lead people to believe it is always very complicated. However, for the most part, planned giving is simple. If one knows how to generate current gifts, she is well on her way to being able to secure planned gifts. After all, planned giving is just like every other type of fundraising: one has to identify prospects, cultivate them, and ask for the gift.

Most large nonprofit organizations may employ an entire, well-staffed gift planning department to handle all types of planned gifts, while most smaller organizations simply add planned giving to the director of development or major gift officer portfolio of responsibilities. Too many small, and even mid-sized organizations, simply ignore planned giving altogether. However, with the vast majority of planned gifts falling into one of three simple categories -- bequests, CGAs, and gifts of stock -- there is no reason why all organizations cannot be engaged in some form of planned giving program.

While some organizations may never move beyond simply promoting bequest giving and other organizations may grow their program over time to include more sophisticated giving options, virtually all organizations can do something to encourage some type of planned giving.

Myth 2: One needs to be a planned giving expert to be involved in gift planning.

One does not need to be an expert. However, one does need to be knowledgeable. Fortunately, of all planned gifts, the vast majority are simple bequests. Charitable gift annuities and stock gifts are also popular forms of planned giving. The more complex forms of planned giving (i.e., charitable lead trusts, charitable remainder annuity trusts, real estate gifts, etc.) make up only a small fraction of all planned gifts. For the more complex transactions, one simply needs to be aware of them and know who to call for assistance when the need arises.

The Partnership for Philanthropic Planning (formerly the National Committee on Planned Giving) has found that since 2000, there are fewer planned giving specialists employed by nonprofit organizations and more development professionals now doing gift planning along with their other responsibilities. Increasingly, organizations are taking a more holistic approach to fundraising and development professionals are expected to know just enough to know when to suggest an appropriate planned gift instead of a current gift option. For technical advice, donors are more often seeking input from professional advisers other than development professionals. The Partnership has found that even with the simple bequest, 4 percent of such donors reported hearing of this option from a legal or financial adviser in 1992 compared with 28 percent in 2000. Among CRT donors, 70 percent learned of this giving option from a legal or financial adviser.

So, a development professional does not need to be the technical expert for the donor. However, development professionals must be knowledgeable enough to earn a seat at the table with the donor and their trusted advisors in order to assist the donor in fulfilling his philanthropic aspirations while taking care of other needs.

Myth 3: All planned gifts are deferred gifts.

Many organizations are reluctant to commit the necessary resources to planned giving because they incorrectly believe that all planned gifts are deferred gifts that will take decades to be realized. While it is certainly true that bequest expectancies represent deferred gifts, they are not necessarily deferred for decades. Depending on the size and age of the pool of bequest expectancies, some gifts will be realized within three to five years of commitment based on basic actuarial forecasts, and sometimes sooner. Other types of planned gifts such as CGAs represent an immediately bookable asset for nonprofit organizations. Gifts of Stock also represent an immediately bookable contribution. So, organizations that commit resources to planned gift marketing can see a return on investment in a very reasonable timeframe.

Myth 4: Good marketing focuses on organizational needs.

While it is essential for an organization to have a compelling case for support, a great marketing effort will focus on the donor. Understanding what motivates a donor and knowing what a donor's interests are, then matching the organization's needs to the donor's motivations and interests is part of the core of donor-centered marketing.

There are plenty of good causes out there. Show a donor how an organization can help realize his philanthropic aspirations while ensuring that the needs of loved ones are met, and one will be more likely to secure the gift. By focusing exclusively on the organization's needs, one will be less likely to secure a gift. By treating a donor file as a homogenous group, one will be less likely to secure a gift. "Donor-centered marketing," and not just "marketing," will help build stronger relationships and secure more gifts.

Myth 5: Planned gift marketing should be passive.

Except when working with major donors, many organizations believe that planned gift marketing should be relatively passive. In other words, planned gift donors should self-identify their interest before they are asked for a gift. Organizations that would never think twice of picking up the telephone and soliciting annual fund gifts would never use the telephone to solicit CGAs. After all, if someone is interested in a CGA, she would respond to the advertisement in the newsletter. The reality is that those organizations that are proactive in their marketing are enjoying greater success than would otherwise be possible. Planned giving is fundraising. The same fundamental principles apply.

Michael J. Rosen, CFRE, is president of ML Innovations, Inc., in Philadelphia. This article is an excerpt of his book, Donor-Centered Planned Gift Marketing, part of the AFP Nonprofit Essentials Series and recipient of this year's top research award from AFP, the Skystone Partners Prize for Research on Fundraising and Philanthropy.

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