Volume 8: Planned Giving

GSbanner

 

vol_8r

Planned Giving

The Best Way to Build a Strong Endowment

 

 

© 1999, GOETTLER ASSOCIATES, INC. • COLUMBUS, OHIO

 

What nonprofit organization would not like to build a strong endowment fund? Properly managed, an endowment can provide a reliable source of income to help underwrite the operating budget; to provide for emergencies; and to respond quickly to new opportunities. With a substantial endowment, secondary schools, colleges and universities can control tuition increases; museums and cultural organizations can provide more programming; and human service organizations can become less dependent on government support.

Today, more and more capital campaigns include an endowment objective even though many development officers consider it “hard to sell,” and some donors may view endowment as a “bottomless pit.” We are told that people prefer to invest in capital projects tangible assets that can provide a permanent and visible testimonial to a donor’s generosity.


Planned giving has assumed an importance equal to that of annual and capital giving in securing the financial future of America’s nonprofit organizations.


In fact, over a period of several years, most worthwhile organizations can build a substantial endowment — but only with the proper tools. First, the organization must develop a credible strategic plan which demonstrates exactly how endowment funds will be used to strengthen the organization, and provide more benefits to those it serves. When donors can see a specific, timely and quantifiable “return on investment,” giving to endowment makes more sense.

Second, few organizations today can raise large amounts of endowment funds without putting into place an active program of planned giving with particular emphasis on the deferred gifts that enable donors to make long-term commitments many times larger than what they could pledge with cash over a period of three to five years.

In recent years, as donors have become more sophisticated, and a broad array of charitable techniques have been developed, planned giving has become an important area of specialization in the fund-raising profession. No longer an esoteric field limited to those with business or law degrees, planned giving has assumed an importance equal to that of annual and capital giving in securing the perpetual, financial future of America’s nonprofit organizations. Yet many still find it a complex and intimidating subject.

Just as every organization can benefit from a strong endowment, every trustee and development professional can benefit from a basic knowledge of planned giving. Accordingly, this article describes the major planned giving vehicles and the donor constituencies for whom they are best suited. It also explains how to establish a basic planned giving program for your organization.

Endowment Building In Perspective

By “endowment,” we mean a permanent fund that is invested and managed, with all or part of the annual earnings expended and the principal left intact. The fund may be part of a consolidated endowment managed by the organization or its agents; or it may be a dedicated trust managed by a financial institution or community foundation. Some organizations have “quasi-endowment” funds which function more like a cash reserve, but they do not enter into this discussion.

Endowment building is but one element of a fund-raising program that is part of a larger financial plan. That financial plan, in turn, supports the program goals and objectives central to an organization’s mission. These relationships are illustrated by the chart below.

Pyramid

The success of an organization’s overall fund- raising effort will depend on its strategic plan. In a highly competitive fund-raising marketplace, donors have become increasingly sophisticated about where they contribute dollars. The institution which is clear about its mission and goals will be better positioned to secure the financial resources needed to achieve them. Out of such planning comes the case for support, on which all successful fund raising is built.

The Importance of Endowment

Endowment serves a threefold purpose. First, it provides a buffer against changing economic circumstances and thus provides stability, security and confidence in an organization among its leaders, members and supporters alike. Such a buffer permits the staff and board to focus on the organization’s mission, rather than constantly fighting financial “brush fires” that consume both time and energy.


Sophisticated fund-raising professionals recognize that there are really only two kinds of gifts: planned and unplanned.


Second, endowment serves as a cushion for unanticipated emergencies. And third, the endowment fund provides a resource for timely response to new opportunities, enabling nonprofit organizations to improve, expand and better serve their communities.

Business leaders understand that working capital is the lifeblood of business. Without it, banks cannot lend, insurance companies cannot underwrite and manufacturers cannot respond flexibly to the rapid changes of the marketplace. Companies that are starved for working capital soon go under.

Endowment income provides the “working capital” of nonprofit organizations. With adequate endowment funds, strong organizations become stronger.

A New Perspective on Giving

Traditionally, fund-raising programs have been organized to secure three kinds of gifts:

  • Annual gifts—to support ongoing operations.
  • Capital gifts—to construct physical facilities and purchase equipment.
  • Endowment gifts—to build financial reserves.

For the most part, annual gifts have been made from cash, written from the donor’s checkbook. Capital gifts have often involved the transfer of capital assets securities or real estate. Endowment has been built primarily through bequests and in more recent years, through other types of planned gifts.

Of course, donors can and do make outright gifts for endowment. And deferred gifts can be designated for support of current operations when they are eventually realized. This implies a new, and perhaps more useful, perspective on giving.

Planned and Unplanned Gifts

Rather than thinking in terms of annual gifts, capital gifts and endowment gifts, or in terms of outright and deferred giving, sophisticated fund-raising professionals have come to recognize that there are really only two kinds of gifts: planned and unplanned. Consider this commonplace example of an unplanned annual gift:

In a given year, a donor who regularly trades stock for reinvestment purposes writes a check to your organization for his normal $500 annual gift. This donor’s contribution is an unplanned gift. Why? The donor could have given $500 worth of the appreciated stock to your organization and avoided all capital gains tax on the transfer. The cash he or she gave would have then been available for reinvestment.

Consider further:

Even if the donor likes the appreciated stock and does not intend to sell, he or she has missed a planning opportunity. By giving some stock to your organization and using cash to purchase equivalent shares of that same stock in the open market, the donor could have beneficially increased his or her cost basis in that stock.

Should the donor then sell at a future date, there will be less appreciation on which to pay capital gains tax; or conversely, if the market has dropped, the capital loss can be used to offset the tax consequences of other income or gain. This is what planned giving is all about. This approach integrates a donor’s personal financial planning and personal philanthropy for the maximum benefit of both the donor and the organization.

Ideally, all gifts whether outright, for operating purposes and capital programs, or deferred gifts for endowment building should be planned gifts. Further, the interactive manner of evaluating and analyzing the most effective manner to make a charitable contribution is now often referred to as gift planning.

Effective gift planning, then, starts with the donor; his or her interests in your organization; and his or her assets and financial objectives. Planned giving asks the question, “How can the gift be made the appropriate amount, the best asset for gifting, and the timing of the gift?” This is nothing more than the “marketplace perspective” the ability to see the transaction from the viewpoint of the prospect (for more information on “The Marketplace Perspective,” see Volume 3 of The Goettler Series).

The organization that understands this approach and that takes the time to know its donors will benefit measurably, particularly in the area of major gifts. As we can see, a planned gift may or may not be a deferred gift. But deferred gifts, by their very nature, involve planning.

Deferred Gifts and Endowment Building

Deferred gift money, by definition, is not available for use by the organization until some future date so these gifts cannot be used to fund immediate operations or near-term capital projects. However, since endowment is generally viewed as a way of building future reserves, deferred gifts are particularly well-suited for that purpose.

Deferred gifts, for example, can be used to build a fund to meet the operating costs associated with current or future building expansion, or a fund to provide additional financial aid resources that will be needed as part of an anticipated enrollment or membership increase. Or these gifts may simply provide some “slack” in an operating budget that is too tight.

From the donor’s financial perspectives and estate planning, a deferred gift is often the right gift or the best gift to make. If so, then the deferred gift could result in a major commitment from a donor who might otherwise make only a token gift, or no gift at all. It could also make possible a gift of six or seven figures from a donor who might otherwise make a gift of simply a nominal expression of support.

Deferred Giving Vehicles

for Building Endowment

 

Bequest

The easiest deferred gift to secure is the bequest, since it involves no change in the donor’s immediate financial position. A donor can either revise an existing will or add a codicil to provide for your organization. This testamentary provision could be for a specific amount or a percentage of the residual estate (what remains after debts are paid and bequests to family and friends are made). Or it could be a contingent bequest i.e., “If both my wife and son predecease me, their interests in the estate shall pass to Organization X.”

Because bequest intentions are revocable (or can be changed), most organizations do not count bequests as gifts until they are actually realized. That is appropriate but it is no reason to overlook or downplay the bequest program, as organizations too often do. This is a strategic mistake for bequest expectancies provide the greatest potential source of lifetime deferred gifts. Other testamentary gifts may include beneficiary designations of funds, such as IRAs/qualified retirement plans, savings and checking accounts, and life insurance policies (discussed later herein). The double-layer of taxation (income taxes and estate taxes) of qualified retirement plan funds are not well-understood by donors, and, as with any IRD asset, these assets are sometimes ideal to plan as charitable gifts while other assets are more appropriate to pass on to family and heirs.

Life Income Plans

Most popular among planned gifts are the various life income plans. An overview of their benefits will suggest both the natural constituencies for such gifts and their marketing possibilities.


Life income plans benefit both the donor and the organization during the donor’s lifetime.


Life income plans benefit both the donor and the organization during the donor’s lifetime. In atypical life income plan, the donor transfers cash, securities, or other marketable assets in return for a life income for self, spouse, and/or others with the remainder principal passing to the organization at the death of the last surviving beneficiary (or, in some cases, after a term of years).

The donor gains a current and immediate income tax deduction for the present value of the projected remainder interest (generally about half the value of the total transfer). And if appreciated assets are used to fund the life income plan, the donor avoids capital gains tax on the transfer (certain limitations may apply).

Let’s consider some implications of those benefits. Generally, a life income plan:

  • Provides life income for one or more persons.

Prospects:
The donor who might like to make a major gift, but doesn’t feel sufficiently well off to give up the income derived from some assets.
The donor who has managed family assets and is concerned about the financial well-being of a spouse or loved one.

The widow who might like to be relieved of the expense and burden of managing assets.

The childless widow or widower who at death might like to provide a life income for a brother or sister, with the principal then passing to a favorite charity.

  • Provides a current income tax deduction.

Prospects:

Of most benefit to older donors since the present value of the projected remainder interest, and also the tax deduction, diminishes for longer life expectancies.

Always of interest to high-income donors. Also, look for donors who experience an exceptional income year.

  • Avoids capital gains tax on appreciated assets.

Prospects:

Donors who tend to be long-term holders of stocks and bonds.

Donors who hold stock in a company about to be acquired by another company. In many cases, such holders will realize a forced recognition of gain.

Owners of closely held family corporations.

Donors who hold real estate.

This feature avoiding capital gains tax on the transfer of appreciated assets used to fund a lifeincome plan warrants special emphasis. It presents perhaps the greatest opportunity for marketingdeferred gifts in the current tax climate.


Through a life income plan, it is often possible for donors to do well for themselves while doing good for your organization.


Many donors who hold high appreciation/low yield stocks, bonds or real estate would like to reinvest them for higher yield. But the capital gains tax would so reduce the proceeds from the sale that even when these assets were reinvested at higher yield, their current income would belittle improved. By reinvesting such “locked-in” assets through a charitable life income plan,donors can avoid capital gains tax; often double or triple their yield from those assets; and receive a current income tax deduction as well.
In this situation, it is often possible for donors to do well for themselves while doing good for your organization. Those organizations that are prepared to capitalize on this opportunity will raise more money.

The general benefits of life income plans outlined above suggest natural marketing opportunities for a deferred gifts program. A prospective donor seeking one or more of these benefits is likely to be interested in a life income deferred gift. Now, let’s look at some of the specifics.

There are four basic life income plans, with some additional variations. The following overviewprovides some specific suggestions for marketing opportunities.

Charitable Gift Annuity

The charitable gift annuity pays a fixed income for one or two lives. If funded with cash, the annual payments are partly nontaxable. If funded with appreciated assets, there is no capital gains tax on the transfer, but part of the “nontaxable” portion of the annual payments is taxed as capital gift income.

The charitable gift annuity is backed by the full faith and credit of the institution. It is easy to write (a one- or two-page contract) and easy to administer. Most organizations will write gift annuities for as little as $5,000.

Prospects:

Attractive to older donors who like the idea of a guaranteed payment amount.

For those approaching retirement, a tax-wise way to reinvest appreciated stocks in order to shift a portfolio balance toward a greater proportion of fixed-income investments.

An option for donors with modest assets.

Deferred Charitable Gift Annuity

In this version of the charitable gift annuity, payments do not begin until some future date (at least one year from date of gift); they then continue for life. By deferring payments for a period of years, younger donors can secure an immediate income tax deduction for almost the full amount transferred; receive an attractive payment once payments begin; and avoid capital gains tax if appreciated assets are used to fund the gift annuity.

Prospects:

An attractive retirement alternative for donors 25 to 55 years old whose income is too high to permit a deduction for IRA (individual retirement account) contributions under the 1986 Tax Act.

Pooled Life Income Fund

This vehicle is somewhat similar to a balanced “growth and income” mutual fund. The donor’s gift purchases units within the fund at the going rate (current unit market value). The fund income is distributed proportionately among the beneficiaries, according to the number of units they hold. Payments are taxed fully as ordinary income, but have the potential to increase in time.

The pooled income fund is, legally, a trust. Payments are backed only by the trust’s assets, not the full faith and credit of the institution. The organization must register with the state. The pooled income fund is a bit more complex to establish, administer and report on, but not too difficult to manage once in place.

Most institutions require a minimum initial gift of $2,500 to $5,000, with smaller additions then permitted.

Prospects:

An option for donors with only moderate assets.

Of interest to pre-retirement donors who are concerned about the erosion of the purchasing power of their payments due to inflation.

May be used with younger donors for occasional gifts to simultaneously build a philanthropic fund and increase income.

Charitable Remainder Trust

This trust pays income to one or more beneficiaries for life or a term of years not exceeding twenty. Payments are backed by the assets of the trust. Payments to beneficiaries are taxed according to the way the trust has earned income: Any undistributed regular income which the trust has realized must first be utilized to meet the payout obligation. Undistributed capital gains income, if needed, is paid out next.

Only when these two sources of undistributed income have been fully paid out may tax- exempt income earned by the trust be distributed. Finally, nontaxable return of principal, if needed, is utilized to meet the payout obligation.


Since charitable remainder trusts are more complicated than gift annuities, most organizations require a larger transfer.


Donors to the trust cannot both “have their cake and eat it, too.” That is, they can avoid capital gains tax when funding the trust with appreciated securities; but they cannot also then expect to receive tax-exempt income. For when the trust sells these highly appreciated assets, it will accumulate a large amount of capital gains income all of which must be paid out prior to paying out any tax-exempt income the trust might earn.

Charitable remainder trusts are more complicated than charitable gift annuities to write and administer. Therefore, organizations generally require a larger transfer $100,000 or more. There are two basic types, each uniquely suited for particular situations:

Charitable Remainder Annuity Trust

Like the gift annuity, this trust pays a fixed amount each year for the life of the beneficiary or aterm of years.

Prospects:

Same as for gift annuities, plus:

Donors with appreciated tax-exempt bonds can donate them to fund the trust. If these assets are retained by the trust and are earning sufficient income to meet the payout requirement, the income paid to the beneficiaries will be tax-exempt.

Similarly, high-income donors who might like tax-exempt income can fund the trust with cash,which can then be used to purchase tax-exempt bonds for the trust. Income to the beneficiaries will be tax-exempt.

This vehicle is also useful for parents of college-bound students. They can establish the trust for a term of years (perhaps five to eight), with the college student as beneficiary. By restricting the term of the trust, parents can receive a substantial “down front” income tax deduction. And payments will be taxed at the child’s low rate.

Charitable Remainder Unitrust

Like the pooled income fund, this trust pays a variable amount that has the potential to keep up with inflation. Specifically, it pays a pre-specified percentage of the market value of the trust’s assets, as determined from year to year.


A charitable remainder unitrust pays a variable amount that has the potential to keep up with inflation.


The unitrust is more flexible than the annuity trust in two ways. First, unlike the annuity trust, aunitrust can be augmented by future contributions. Secondly, the unitrust can be restricted to paying out the lesser of either the contracted payout percentage or the actual regular income earned by the trust, with a provision that any excess regular income earned in a given year above and beyond the contracted payout can also be paid out to make up for prior-year payout deficiencies. This is called a “net income plus make-up” unitrust.

Prospects:

The “net income plus make-up” unitrust is uniquely suited for receiving gifts of real estate meant to fund a life income. This version of the unitrust protects the organization against having to sell at a loss in order to meet payout requirements.

The “net income plus make-up” unitrust can also be promoted as a retirement buildup plan for middle-aged, high-income executives and professionals. Trust assets can be invested in low-yield, maximum-growth assets in the early years. Little income is paid out during that time, when the donor has a high income anyway and is being taxed at maximum rates. Meanwhile, payout deficiencies are accumulated during those years, and the assets in the trust are appreciating at a substantial rate.

At the donor’s retirement, the substantially appreciated trust assets are converted to high-yield instruments. The donor now receives not only the contracted percentage of a much greater asset market value, but also any excess income earned until all prior-year deficiencies are made up. Because it is a unitrust, the donor has the option to contribute additional funds to the trust during its buildup years.

Other Deferred Gifts

In addition to the life income plans, there are other deferred gifts that can be useful in building an endowment.

Life Insurance (Existing Policy)

Many donors hold fully paid-up life insurance policies which they no longer need; the policy’s face amount decreases in real value with each passing year of inflation. By naming a charitable organization the owner and beneficiary of such a policy, donors can receive a current income tax deduction for the policy’s replacement value or the total amount of premiums paid, whichever is less.

Prospects:

Donors aged approximately 55 to 65 whose children have completed college and who have paid off the home mortgage. They no longer need the insurance, and with their income at an all-time high and exemptions at an all-time low, they need the tax deduction.

Life Insurance (New Policy)

A new insurance policy may be designed to create a specific gift amount. The policy, purchased on the life of the donor or an insurable relative, has a limited premium payment period. The organization may purchase the policy directly, or the donor may purchase it and assign it to the organization. Premium payments are contributed to the organization and are therefore tax deductible.

The policy appreciates in value as funds accumulate within it, and the organization may borrow the money if necessary. Once the premium is paid, the organization begins receiving annual earnings from the policy. At the death of the insured, the organization receives the full amount of the death benefit without waiting for the estate to be probated.

Prospects:

This type of insurance enables younger, less affluent donors and those with limited discretionary income to make a significant endowment gift. This group includes recent college graduates, young couples, professionals with children in college and single persons with moderate incomes.

Retained Life Estate

Many donors own fully paid-up homes and may have provided for your organization in a will.One easy way to accelerate these bequest intentions and receive an immediate income tax deduction is for the donor to simply put a sentence in the deed which indicates that upon his or her death, a residence or vacation home shall pass to your organization. The donor continues to live in the home, paying taxes and insurance and maintaining the residence; at death, the property passes to your organization. The donor receives an immediate income tax deduction for a portion of the current appraised value of the property.

Prospects:

Donors who might want to do something now for your organization, but have few assets to work with other than the home.

Charitable Lead Trusts

Through a charitable lead trust, a donor may pass assets to family members undiminished by a giftor estate tax.


Charitable lead trusts allow a donor to pass assets to family members undiminished by a gift or estate tax.


These trusts work just the opposite of the charitable remainder trusts described above. In the charitable lead trust, the income from trust assets goes to the charitable organization for a term of years. At the end of this term, the principal typically reverts to the donor or family members.There are two types of charitable lead trusts, each well-suited for a particular purpose.

Grantor Charitable Lead Trust

Here, the donor receives a large income tax deduction in the year of transfer, but must pay income tax each year on the trust’s income even though it is paid to the organization.

Prospects:

Useful for a high-income donor who expects to move into a lower marginal tax bracket in future years, such as at retirement. The large deduction at the current high tax rate will more than offset future tax at lower rates on income paid to the organization. In a sense, this represents a “bunching” of deductions for maximum benefit at current high rates.

Non-grantor Charitable Lead Trust

Here, the income goes to the organization for a period of years, with the asset then passing to thedonor’s children. There is no current income tax deduction, but if the trust is structured properly,all gift tax can be virtually eliminated. After the organization’s lead interest is paid, the assetspass to the children at a substantially appreciated value — with no gift or estate tax due.

Prospects:

Useful for wealthy donors who wish to pass assets to family members undiminished by transfer taxes.

Establishing Your

Planned Giving Program

What Expertise is Needed?

As this overview suggests, planned giving can become quite complex. Does that mean the staff person responsible for planned and deferred giving must be an attorney? No. On the other hand, he or she will need to become well-versed in the technicalities and nuances of deferred giving. As your program grows, you will need a backup relationship with legal counsel competent in the area of charitable giving.


One of the most effective approaches to planned giving is the traditional volunteer/staff team presentation.


A professional consultant can provide the technical training and resources needed to begin a deferred gifts program — including legal assistance, if none is available at the local level. And a number of software packages provide convenient computation and highlight the comparative advantages of various deferred giving plans.

Beyond technical expertise, the effective planned giving officer must have some facility in mathematics and financial concepts. He or she must also possess the personal traits characteristic of any good fund-raising professional. These include a knowledge of and strong belief in the mission and goals of the organization; good interpersonal and communications skills; and high personal integrity.

The Role of Volunteers

Volunteers can be useful in several important ways. First, those with financial planning expertise trust officers, estate planning attorneys, certified life insurance underwriters, tax accountants and financial planners can provide technical guidance, feedback and counsel to your planned giving program as members of an official advisory committee of an informal “sounding board.”

Such an advisory group might help to organize or actually conduct financial or estate planning workshops for interested members of your constituency.

Volunteers without specific financial planning expertise can be utilized to open doors to prospective donors. One of the most effective approaches to planned giving is the traditional volunteer/staff team presentation: The volunteer sets the appointment with a member of his or her peer group, then joins the staff member in presenting the organization’s case.

The volunteer’s involvement lends instant credibility to the visit, and staff involvement provides the technical expertise needed to bolster the volunteer’s confidence. Once an initial relationship is established with the prospective donor, the staff can generally provide appropriate follow-up. Those donors who have already contributed major or planned gifts are excellent for testimonials and “door openers.”

Marketing Deferred Giving

There are three basic ways to market a deferred giving program. The first, most effective manner is to identify your primary prospects for such gifts and arrange to visit with them, one-on-one. The purpose of such visits is twofold: to share information about your organization’s goals and ways in which supporters can help; and to learn about your donor’s interests, assets, personal and philanthropic objectives.

This approach often involves building a relationship over time through several visits, until you know your donor’s circumstances well enough to present the right proposal for his or her consideration. It is a time-consuming process that requires a significant amount of staff effort and patience but ultimately, the returns will far outweigh the expenditure of time and money.

A second approach is to promote and conduct a series of informational seminars for interested persons. These can range from occasional presentations at meetings of your board to special workshops, such as “wills clinics” or sessions on retirement or financial planning. This form of marketing is especially effective if the audience consists of similar cohorts, such as women, retirees, physicians, etc.

The primary focus of such workshops is non-charitable and educational in nature, but relevant charitable giving plans are incorporated as appropriate. These meetings can be held in local communities or offered in conjunction with special events, such as an alumni or homecoming weekend or a family camping program. Lay experts are often recruited to conduct the workshops, and they may in fact be jointly sponsored by the organization and a financial services company, such as a bank or a brokerage or insurance firm.

This is a more cost-effective way to market planned giving, and a way to cultivate persons who might not initially be open to a visit from your staff.

By far the most broad-based manner to market planned giving is through a direct-mail program. This may consist of a periodic “financial and gift planning” newsletter mailed to your primary constituency for deferred giving; or a series of direct-mail brochures, each highlighting one of the many vehicles available. A return card is included for donors interested in knowing more. Through this approach, donors identify themselves as prospects for deferred gifts. These newsletters, produced in-house or by an outside source, offer space to highlight recent gifts to your organization and the personal stories of your planned giving donors.

Several consulting firms provide appropriate brochures, newsletters and even mail processing services to supplement an organization’s in-house expertise and capabilities, and these materials are offered at various levels of personalization. As your program and capabilities evolve, you will learn to better segment your donor constituency and target your plans and messages for maximum effect.


While direct mail is an efficient way to identify prospects, it is effective in producing gifts only when combined with personal follow-up.


For example, a message about the unitrust as a retirement buildup plan could be marketed to physicians and business executives aged 45 to 55. A message about the deferred gift annuity as an alternative to no-longer-deductible IRA deposits could be marketed to younger professionals aged 25 to 45.

Remember that while direct mail is an efficient way to identify prospects, it is effective in producing gift commitments only when combined with personal follow-up.

Where Do You Begin?

Although the breadth of planned giving options may seem overwhelming, the initial steps can be taken with little added expense or training.

Most organizations start by establishing a strong bequest expectancy program. Little staff training is needed, and there is no administrative burden on the organization. Creating a “legacy society,” organizing a “wills clinic” and perhaps purchasing a quarterly direct-mail brochure program to promote bequests are traditional ways of getting started.

Once a bequest program is in place, the next step is to “accelerate bequest intentions” by marketing life income plans. A charitable gift annuity program and pooled income fund will provide the fixed and variable payment options needed for this phase of your deferred giving program. Gifts of life insurance and retained life estates can also be emphasized. Other testamentary gifts, such as beneficiary designations of IRA’s and qualified retirement plan fund, deserve mention and publicity.

As your program evolves, charitable remainder trusts and other deferred giving plans can be added, and a newsletter and/or direct-mail program can be used to market the full range of plans available through your organization.

The Endowment Campaign

What if an organization feels the need to substantially bolster its endowment now? Must it wait until it has a mature deferred giving program in place?
The answer is no. Many organizations have utilized time-tested fund-raising techniques to build endowment through an intensive, short-term campaign.


The endowment plan relates endowment building to the goals and objectives of the organization’s strategic plan.


The traditional capital campaign remains the most efficient and cost-effective way to raise significant funds — whether to construct facilities, purchase equipment, create an endowment, or accomplish some combination of these. The only difference is that an endowment campaign or a broader development campaign that includes an endowment objective provides donors with added flexibility. Outright gifts and multi-year pledges are still aggressively sought; but deferred gifts also become a major component.

Preparing an Endowment Plan

This brings us back to the beginning the larger picture, the strategic plan. Where is your organization going, and how are you going to get there? What role will fund raising play in helping to achieve your objectives? How does endowment building fit into your goals and aspirations?

A written endowment plan specifies the programs, services and activities which will be supported by the income from new endowment funds. This plan relates endowment building to the goals and objectives of the organization’s strategic plan. It demonstrates the measurable impact of increased endowment on the quality of the organization and the benefits it provides to its constituents. Finally, the endowment plan provides a clear agenda for the development staff and an array of attractive “investment opportunities” for the donor.

With a credible endowment plan and an active program of planned giving, your organization has the necessary tools to build a substantial endowment and a more secure financial future.

Your First Priority

As you can plainly see, the details that revolve around planned giving are complex, and involve carefully thought-out decisions. However, before all of these elements and factors are weighed, every donor must first decide on one thing: that is to support your organization and your mission in the first place.

In other words, while it is helpful to know the difference between a bequest and a charitable gift annuity, it is still secondary to what being a fund raiser is all about. Familiarity with these concepts are effective only when they are a part of a larger, ongoing process of donor cultivation.

Before all else, your first challenge is to inform, cultivate, and win your donors’ ownership and commitment to your mission.

Once you have achieved this very important objective, how donors choose to exercise that ownership and express their commitment is secondary. It may be through direct annual contributions, a five-year pledge to a campaign, and/or through the many available options of planned giving.