Stanford Social Innovation Review recently published an article titled, "Philanthropy's Missing Trillions." Its authors, Jennifer Xia and Patrick Schmitt, began their report with this announcement:
In the next 20 years, an estimated $30 trillion will be inherited in the United States as the large and prosperous Baby Boomer generation passes its wealth on to the next generation. This is the largest wealth transfer in human history, and may be the single greatest opportunity for philanthropy in the modern era.
The article, however, goes on to cite the lack of planning on the part of nonprofits to take advantage of this massive windfall. Planned giving is just not addressed often enough or strategies are incorrect.
Although planned giving has many components, the bequest is the bread and butter of all planned giving programs. A bequest program is also easy to start and inexpensive. It's where all charitable organizations should begin to harvest their donors' generosity beyond their life spans.
What Are Bequests?
Bequests are the transfers of wealth that occur upon a donor's death. Bequests can take several forms such as:
- Specific bequest - a certain amount of cash, securities, or property.
- General bequest - property that is similar to all other items distributed, usually cash.
- Percentage bequest - a stated percentage of the donor's estate.
- Residual bequest - all or a portion of what remains of the estate after specific and general bequests are distributed.
Besides an outright bequest, donors can also set up a trust to benefit charitable organizations during or after their lifetime, such as a charitable remainder trust or charitable lead trust.
Donors can also name one or more nonprofits as beneficiaries of an insurance policy or as the recipient of an IRA or another qualified retirement fund.
Why Nonprofits Must Have a Bequest Program for Their Donors
Setting up a bequest program is easier than you may think. Now is also the time.
It's been estimated that Baby Boomers, now reaching retirement age at a rate of 10,000 per day, will pass on some $30 trillion over the next 30 to 40 years. Those figures are just for North American Baby Boomers, as set out by Accenture in its report on wealth transfer.
Successful nonprofits take bequests very seriously and often have sophisticated planned giving programs to help them capture some of this wealth transfer.
However, even small nonprofits can set up a bequest program to ensure their survival well into the future. Bequests help both nonprofits and donors. Donors often wish to leave money to their favorite causes, and they and their heirs may receive considerable tax benefits in the process.
Raising Money Through Bequests: How Your Organization Can Profit from the Biggest Intergenerational Transfer of Wealth in History, by David Valinsky and Melanie Boyd, is an easy-to-read book that takes the stress out of setting up a bequest program. Valinsky and Boyd, explain the steps to creating a bequest program, how to market it, and what to do when bequests start rolling in.
Why Do People Give?
There can be many reasons people love to give to charity, but some of the most common include:
- Donors believe in your mission. Donors are inspired by what your organization does to change or save lives in the community.
- Donors have seen the mission played out in their lives. A donor may have worked as a volunteer for your nonprofit. They may serve on the board, taken a tour or heard testimony to what your organization does.
- Donors believe you'll use their gift wisely. Donors must trust you to steward their gifts. That means you are open about finances and don't squander their money. Foster that confidence by telling donors frequently how their contributions have changed lives.
- Your organization has directly affected a donor's life or the life of a loved one. Providing exceptional service is the key to gaining gratitude as well as gifts and bequests.
- Donors feel like they know you. Continue to build relationships. Stay in touch. Reaching out to donors must be a priority.
- Giving makes donors feel good. Many donors feel that they are only trustees of the money they have earned or inherited. It is fun and fulfilling to give money to help those in need.
- Donors respect your staff and volunteer leadership. How donors view your executive director or your board president, especially their integrity, may dictate whether a donor leaves a bequest.
- Donors appreciate your organization's products and services.
- A bequest allows donors to honor or memorialize a loved one.
- Giving provides donors with acceptance and satisfies the need to belong.
How Do You Get Started with Bequests?
There are several steps to organizing a bequest program. However, one of the first, and perhaps most important, is to get your board's approval.
But how do you get the board to see the value of a bequest program?
Valinsky and Boyd, Raising Money with Bequests, suggest a presentation with these elements:
- Include a report on the history of bequests your organization has received. How many of those bequests were unsolicited? When were they received? Who were those donors? How were they connected to your charity?
- Explain how a bequest program benefits donors. The program allows you to educate people about the importance of having a will, and you can help donors make a dramatic impact on the community.
- Review the benefits to your organization and present the cost to introduce and operate your bequest program. Revenue from a bequest program takes years to realize. If board members balk at this, point out that if you had started this earlier, the organization could have been enjoying its fruits by now.
- Suggest personnel to staff the program. Although new staffing might not be needed right away, board members should understand that as time goes on and the program grows, new personnel may be required.
- Address common myths of donor bequest decision making, such as tax considerations drive donors' estate planning; and donors want to leave their entire estates to their children.
Setting Up the Bequest Advisory Committee
After convincing the board, you'll need to set up a Bequest Advisory Committee.
Valinsky and Boyd say that the best bequest committees are a mix of volunteers and board members, regardless of their profession. They do not all have to be financial wizards. Including ordinary folks who can understand the human aspect of including a charity in your will makes your group stronger and more effective.
Bequest Committee members should be expected to:
- Attend Advisory Committee meetings and actively participate.
- Assist in the creation of the bequest society, such as developing a format, establishing membership eligibility and appropriate recognition, and creating marketing plans
- Review and recommend gift acceptance policies.
- Help staff to implement and market the program.
- Serve as ambassadors and advocates to the board and in the community. This includes speaking to groups about the bequest program.
- Identify prospects and, when appropriate, accompany staff on personal visits.
- Become a member of the bequest society by naming your charity in their will.
Marketing your bequest program includes creating a brochure to introduce prospects to the program and explaining it on your website. Not to mention the need to develop your case for support. Be sure to educate donors about how bequests can help them leave a legacy that keeps working for years to come, especially through restricted gifts that fund a specific purpose.
It will all take considerable work up front, but no nonprofit should neglect setting up a bequest program. It may not result in immediate gifts but could be vital for future financial stability.
Philanthropy’s Missing Trillions, Jennifer Xia and Patrick Schmitt, Stanford Social Innovation Review, 2017
Valinsky and Boyd, Raising Money with Bequests, 2007