Much of the time that a nonprofit organization’s staff and volunteers spend on fundraising is devoted to securing small gifts from individuals’ disposable incomes. While this type of funding will yield immediate, short-term success, it results in smaller overall contributions and a significant lost opportunity: when the donor dies, the giving ends. Legacy giving, often called planned giving, is a way for donors to insure that their favorite charities will reap benefits beyond their lifetime and for nonprofit organizations to increase their long-term sustainability.
Dave Pier, executive director of the Boys & Girls Clubs of Sonoma Valley, said, “Planned giving is an important aspect of the Boys & Girls Clubs of Sonoma Valley’s strategic plan, and ought to be something that every nonprofit organization considers a priority. Planned giving, or legacy giving, creates an opportunity for someone who believes in the mission of an organization to help support that mission well after their lifetime. No gift is too small, and there are many simple ways that it can be done to fit into a person’s overall estate planning. Legacy giving is the cornerstone of developing the perpetuity of the Boys & Girls Clubs of Sonoma Valley and beginning with many of our board members and staff who have committed a legacy gift, we have begun an effort to create awareness around this need and opportunity that will benefit Sonoma’s youth for many years to come.”
Most planned gifts are gifts that anyone can afford, and most are actually gifts which cost the donor nothing during his or her lifetime. According to the Association of Fundraising Professionals, legacy giving can take one of two forms. The first involves an outright or current gift, a complete transfer, or realized gift, of cash or stock as part of an estate plan. The second is a deferred gift, testamentary giving or life income arrangements to be realized in the future, such as bequests made in a donor’s will and charitable gift annuities involving a contract between the donor and the nonprofit through which the donor exchanges cash, stocks, or other assets for an agreed-upon income for life.
Deferred gift instruments can include IRA or 401k retirement funds, allowing the donor of a defined age to exclude from his/her income on a tax return any funds withdrawn and transferred to a charity and life insurance payable to a nonprofit upon the donor’s death. A charitable remainder trust may be used by donors to transfer assets to a trust, which then goes to the charity after the death of the last beneficiary, while enabling the donor to retain a fixed or variable income for life. A life estate contract is an agreement transferring a home or farm deed to a nonprofit, while enabling the donor or someone else to live on or use the property for life. Still other deferred gift tools include charitable lead trusts established by a donor transferring assets to a trust that provides income to a nonprofit organization for a set number of years, then reverts either to the donor or the donor’s designees and pooled income funds that are similar to mutual funds.
Barbara Hughes, president and CEO of Community Foundation Sonoma County said, “We know how vital donor cultivation and planned giving is for the long-term viability of any nonprofit organization. Our affiliate, the Sonoma Valley Fund, is pleased to partner with the nonprofits in Sonoma Valley to promote legacy giving. Donors appreciate knowing that their gifts will continue to support the organization long after they are gone. Through legacy gifts, endowment funds can be built, and an organization can diversify its revenue sources and not be so heavily reliant on grants and event fundraising.”
Nonprofit leaders must develop deep, long-term relationships with their donors before they ask them to consider a legacy gift. They need to educate donors about planned giving options and find ways to make their donors feel a special and unique connection to the organization. And when those nonprofit organization representatives do request that gift, they need to insure that the donor receives the recognition he or she wants and deserves and on-going communication regarding how that donor’s gift will continue to create a lasting legacy in the community.
Dr. B.J. Bischoff is the owner of Bischoff Performance Improvement Consulting, a Sonoma firm specializing in building the capacity of nonprofit organizations and government agencies to better serve their stakeholders. She is a member of the Impact100 Sonoma Board of Directors and can be contacted at bjbischoff@bjbischoff.com.
