What Should You be Talking About with Your Donors Right Now?
The world is in a constant state of flux. Some places are coming out of COVID-19, while others are seeing a resurgence. Many of us continue to work from home. Donors are still spending a majority of their time at home too. What does this mean for giving and planned gifts in particular?
It’s an interesting time for raising planned gifts. Despite the headlines in the news, there are some silver linings for planned gifts fundraisers. Here are the planned gifts opportunities you need to be talking with your donors about right now and why:
1. Estate Planning is on the Rise
While no one wants to talk about death and dying in the current environment, you cannot ignore the fact that Americans are creating and updating their estate plans in record numbers. Some fundraisers are most comfortable with doing a “permission-based ask” for charitable bequests right now. When the donor opens the door to a discussion about wills or bequests, the fundraiser is then free to talk about the donor’s estate planning goals. Increasingly, I’m seeing fundraisers become more comfortable with a direct ask using a message about how making a gift through a will or trust could help/impact the organization’s future efforts. Simple ways to introduce the bequest topic might be by offering a wills or estate planning guide, bequest language and a list of estate planning attorney referrals. Think about you and your organization’s comfort level as you decide how to talk about bequests in the current environment. But don’t avoid the topic entirely, you could be missing out on one of the greatest opportunities in years to build ongoing sustainable revenue. And isn’t that what your organization really needs to get through times like these?
2. Gift Annuities are Still Very Marketable
While new lower American Council on Gift Annuities (ACGA) rates have just taken effect, charitable gift annuities are still extremely marketable in the current environment. The volatility in the markets has made seniors in particular look to the security of fixed income. While rates are slightly lower, a gift annuity still is a gift chocked-full of benefits for the right demographic. The average age for a gift annuity donor is 79 according to the latest ACGA data. For a donor who is charitably-minded and looking to create a secure source of lifetime payments, a gift annuity is extremely attractive. The donor receives lifetime fixed payments at a rate based on the donor’s age, a tax-saving charitable deduction (a benefit for an itemizer) and possible tax-free payments. As a fundraiser, I would contact anyone who has ever created a gift annuity with your organization and offer to show them a free no-obligation illustration with their current rate and tax benefits. The high incidence of “repeat gift annuities” means that donors who have made this gift to you in the past will make it again, especially right now if they are asked.
3. Noncash Assets are King
Recent studies by Dr. Russell James and the American Council on Gift Annuities (ACGA) show that organizations that accept gifts of noncash assets have higher fundraising results. What do I mean by gifts of noncash assets? Such gifts could include securities, real estate and collectibles. The best gifts are gifts of highly appreciated assets that would burden the taxpayer with a big tax bill if sold. These assets can be given to charity and produce a tax-saving deduction for itemizers as well as avoidance of capital gains tax. In order to receive gifts of appreciated assets, you need to market them. Donors actually really want to make gifts to support their favorite charities right now. Some of them just do not know how. Send your donors an email or print piece letting them know how they can get rid of their appreciated (currently low-performing) stocks by making a gift to support your work during this time. Let them know how they can make a gift of the vacant lot they never got around to building on or that property they are not using right now (or can’t sell) to avoid capital gains tax and benefit from a charitable tax deduction this year. Watch how your fundraising results change when you begin to consistently market noncash gifts as opposed to always talking about gifts of cash.
4. Life Estates are Growing in Popularity
Interest rates are the lowest in decades (AFR is at 0.4% for August) which makes some gifts more attractive to donors than they have been in years. We are seeing a revival of charitable life estate gifts right now. Donors are rediscovering the value of making a gift to charity of a personal residence while retaining lifetime use. A donor (typically a senior) can remain living in their home and potentially benefit from a charitable income tax deduction for making a gift today of the remainder value to support your cause. When they pass away, your organization can use or sell the home to help further your charitable work. Why are these gifts suddenly so popular? Lower interest rates mean higher charitable tax deductions for life estate gifts. For your donor who is an itemizer, a life estate gift can be a way for them to show support for your mission (particularly if they are not comfortable with making a cash gift right now) and save even more on taxes this year.
5. You Will See More Lead Trusts
While lead trusts have a very limited demographic (typically donors who can make a gift of $1 million or more to fund a non-grantor lead trust), we will see more of these gifts right now than in years. With a lead trust, a donor transfers cash or property to fund a trust that will make payments to a charity for a number of years. After the trust completes all of its charitable payments, what remains goes typically to the donor’s family. The goal of a non-grantor lead trust is often to transfer assets to family members or heirs at a reduced or zero gift cost. If created during life, the lead trust provides the donor with a charitable gift tax deduction. Lower interest rates mean higher gift tax deductions for lead trusts right now, meaning that a donor can pass-on even more to their loved ones while paying little or no tax on the transfer. When created at death, a non-grantor lead trust can be used to help a donor fulfill their charitable goals, pass an inheritance to heirs and produce an estate tax charitable deduction that can offset the taxes owed by a taxable estate.
With low interest rates, we are also seeing a resurgence of grantor lead trusts. In this variation, a grantor typically transfers cash to the trust (the funding amount here can be far less than $1 million!), the trust makes payments to a charity or charities for a number of years at the end of which the grantor receives the cash (or assets) back with potential tax-free growth (the trust assets are invested for the duration of the trust). A donor who has had a big tax event this year (like someone who exercised stock options, sold a block of stocks or a business) will love the grantor lead trust concept, because a grantor lead trust produces an income tax deduction. And you guessed it, the deduction will be a lot bigger due to the low current rates, offsetting even more in taxes this year.
Now is the Time to Talk About Planned Gifts
It may seem like planned gifts are the last thing you want to bring up with your supporters right now. But now is the best time in years to talk about these gifts. I’ve just scratched the surface on some of these gift options. If you have questions about any of these opportunities or how to market them to your donors, please contact Crescendo at 800-858-9154. The Crescendo team is here to help you and your organization thrive during this time.