Outlook for Bequests and Other Planned Gifts Improves, Experts Say

Better times for charity fund raising are just ahead, two leading experts on planned giving told participants at the Partnership for Philanthropic Planning’s national conference here this month.

By 2020, America will have far more millionaires than today and they will be motivated by even greater tax incentives to give to charity, said Charles Schultz, chief executive of Crescendo Interactive, a planned-giving software and consulting company, in Camarillo, Calif.

And Robert F. Sharpe, a Memphis fund-raising consultant, assured fund raisers frustrated by the economy that history does, in fact, repeat itself.

Armed with financial, tax, and gift data going back more than 100 years, and old newspaper accounts of donations, Mr. Sharpe demonstrated the ups and downs — and ups — of philanthropy over time. Perhaps most heartening: His research shows that by 1937, charitable giving had returned to pre-Depression levels, and continued to grow from there.

“What I was trying to do is give people confidence that we’ve been through it before and will get through it again,” Mr. Sharpe said in an interview.

He told his audience at the meeting that during the Depression, like now, outright large gifts had dropped at many organizations, but that bequests and other estate gifts had continued. Deferred gifts get added attention during economic down cycles, Mr. Sharpe said, and it’s up to fund raisers to help donors choose the right way to give at the right time.

One bright spot already on the horizon, Mr. Sharpe said, is the potential for gifts of appreciated securities from donors who bought stocks over the last year when the prices were especially low. “Last fall when everyone was selling, somebody was buying,” Mr. Sharpe said.

And by early next year, as the market continues to recover, he said, those buyers will have newly appreciated stock ripe for charitable contributions.

Mr. Schultz sees wealth growing, too. He said that today many charities have at least 700 potential supporters with estates worth at least $1-million. By 2020, he said, that number will rise to 1,000.

And, he said, at the same time wealth will have grown, taxes will have gone up, too — with rates up to 50 percent, he predicted, plus additional taxes to pay for Social Security and Medicare. As a result, many donors may want to give to charity as a way to save money on their taxes.

Charities are likely to benefit, too, he said, from the involvement of professional advisers — like financial planners, accountants, and lawyers — who will be more likely to recommend charitable giving as part of estate and tax plans. At least half of all gifts will come at the prompting of professional advisers, he said, up from 30 to 40 percent today.

Charities and their fund raisers will increasingly turn to e-mail, Web sites, and other ways to attract, contact, and interact with donors online.

By 2020, he said, 90 percent of contacts with donors will be electronic and 10 percent in print.

One prediction Mr. Schultz offered for the not-so-distant future: increased interest in charitable remainder trusts. He said the number of such gifts will surge next year before capital-gains tax rates are scheduled to change in 2011.

A charitable remainder trust enables a donor to designate a gift to a charity, take a tax deduction for the donation, and receive regular income payments from the gift (or designate someone else to receive them). After a set period of years, or upon the death of the donor (or other beneficiaries of the trust), the trust assets go to the charity.

Charities might see interest in such gifts grow for other reasons besides market and tax considerations — donors might simply be learning more about trusts and other deferred gifts, and at a younger age.

According to two researchers at Columbia College, in Missouri, more charities are now actively promoting bequests and other planned gifts than did so 10 years ago. They are also making their pitch to even younger donors.

In 1999, Michael Kateman, executive director of development at Columbia, asked the country’s top 40 fund-raising organizations, based on The Chronicle’s Philanthropy 400, about how they encourage people to make planned gifts. This year, Mr. Kateman’s colleague at the college, Brendon Steenbergen, did the same thing.

Comparing the groups, the researchers found that 91 percent were actively promoting planned gifts, up from 82 percent 10 years ago. And while organizations in both years said the bulk of their marketing efforts were designed to reach potential donors age 55 and older, 19 percent this year, compared with 9 percent in 1999, said they were also focusing on donors as young as 45.

In both surveys, organizations were most likely to say that education and awareness were the top benefits of promoting planned gifts. But groups in this year’s survey were less likely than the groups 10 years ago to cite landing big gifts as another top benefit of their marketing program. Mr. Kateman attributed the change to a growing sophistication among fund raisers and charities about how to measure the success of efforts to solicit planned gifts.

“It’s not just an immediate dollar goal, but how many proposals were sent out, visits made, touches,” he said.

He said that fund raisers are also more clearly identifying themselves as stewards of donors’ money, making sure marketing materials demonstrate to donors how their gifts will be used and what the impact will be. That shows, he said, in the increase in the share of organizations — from 3 to 14 percent — that listed “donor reassurance” as a top benefit of plannedgiving marketing.

“They’re trying to avoid buyers’ remorse,” Mr. Kateman said, before noting the phenomenon in philanthropy parlance: “gifting remorse.”

Larry Stelter, a consultant in Des Moines, Iowa, and J. Ann Selzer, a pollster, delivered a message to charities about how to promote deferred gifts: Stop using the phrase “planned giving.”

A survey they conducted found that more than six out of 10 Americans said they were not familiar with the term. At the same time, the survey found, many more people knew specific ways to make planned gifts, such as by leaving money to a charity in a will.

“The jargon of planned giving may in fact be an obstacle rather than an open door,” Ms. Selzer said.

Mr. Stelter suggested that charities adopt new terminology and adjust the way they reach out to prospective donors, such as by changing wording on their Web sites.

“It says, Click here for planned giving, but 62 percent of the people don’t understand it,” he said. He offered alternative phrases, such as charitable gift planning, giving options, and opportunities to give.

Mr. Stelter noted that the Partnership for Philanthropic Planning was itself already one step ahead of the game: This year, the organization changed its name from the National Committee on Planned Giving.