As we look to the future, it is obvious that philanthropy will take on a greater level of significance in meeting the needs of society. Governments are meeting limits on how much they can or will invest in helping those with great needs. Nonprofits will need to increase their efforts and effectiveness if they are to rise to the occasion. They will—out of necessity—increase the dollars raised to achieve their missions. Organizations will need to be more thoughtful, strategic, and successful in their advancement efforts. They will need to have more conversations with donors, which will lead to larger and more frequent gifts. One question which needs to be raised is, “What gifts are we leaving on the table?” Another way of asking the questions is, “What would our organization look like today or in 10 years if our fund development processes were performing at the highest level?”
While as an industry we have dramatically improved training and support for fundraising professionals, we still face the old question of loyalty. Should we be donor-centered or nonprofit-centered? We desire the first, but reality forces us to select the second. Is there a balance? Are these two mutually exclusive? We believe a balance can and should be achieved.
The key to our success in being donor- and nonprofit-centered comes to fruition during conversations with donors. Can we match their needs and desires while raising the necessary dollars to support our organization’s mission? The answer is an emphatic yes!
Why do people give hard-earned money to help us achieve our missions? What motivates them? Understanding the various types of donors is crucial to fundraising success. The better you understand who a person is deep down inside, the greater you will be able to steward a gift for your organization. The wise appreciation of donor motivations helps us focus our attention on the types of charitable approaches that change lives. Deep and thoughtful conversations are a requirement to understand a donor’s motivation. This prerequisite demands a commitment of time.
The majority of donors who give institutional-changing gifts may be difficult to find because we approach all donors the same way. As you read this book, it is important to realize there are at least three types of donors:
Habitual. The majority of your donors give out of habit. They give the same amount of money year after year. They usually give the same time each year. They are reliable and a very important part of your annual fund campaign. They are open to upgrading their gifts, but they must be asked to change their habits.
Emotional. A small percent of your donor base gives because something has touched them emotionally. They can add "heart, spirit and soul" to our fundraising program. They are more than happy to ask others to join them in giving to something special. The challenge with emotional donors is that while their gifts tend to be larger than habitual donors—their gifts are less frequent. The challenge with these emotional donors is to encourage them to give more frequently.
Strategic. A very small percent of your donors are strategic donors. They may be 5-7% of your donor base, but they can change the future of your organization in dramatic ways! They may not even be on your radar. These donors tend to be very conservative in financial matters. They can be very thrifty. They expect thrift from organizations they support. They may drive cars much longer than the average person. They may live in a much smaller house than they can afford. They read everything you send them carefully and thoughtfully. They don’t make gifts; they make investments. They look at gifts to charity with the same approach they make in other investments. They require detailed information before making a gift. They believe in long-term relationships with nonprofits. They can be very generous once they are educated on achieving their goals. They are amazing prospects for institutional-changing gifts! Yet, they are often ignored by nonprofits because their annual gift may be too small to place them on the radar.
We believe it is important to provide opportunities to give to all three types of donors. It seems that the strategic donor is lost in the shuffle to secure discretionary dollars. Therefore, strategic donors are ignored. But they are excellent prospects for annual, deferred, planned, and blended gifts.
There are three types of gifts donors make to nonprofit organizations:
Gifts from discretionary income
Gifts of net worth
Gifts from discretionary income and net worth (blended gifts)
Most organizations are excellent in securing discretionary gifts and a few have also discovered the value of gifts of net worth. The most successful organizations realize the greatest potential is maximized in blending gifts of net worth with discretionary funds.
There are four types of giving techniques revealed in the following stories:
1. Bequests – four types
Specific Bequest: A donor leaves a specific item or dollar amount to a charity.
Percentage Bequest: A donor leaves a percentage of his or her estate or trust to a charity.
Residuary Bequest: A donor leaves whatever is left after making specific bequests to other heirs or charity.
Contingent Remote Bequest: This bequest states, “If everybody in my family has passed away, along with all of my friends, acquaintances, and pets, then whatever is left goes to the following charities.” This, by the way, is the most frequent charitable bequest.
2. Gifts From Contractual Arrangements
These gifts are the result of a donor designating the charity as the beneficiary of a retirement account, IRA, life insurance policy, commercial annuity and in some cases, investment accounts. The use of these gifts is frequently overlooked by donors, but there is enormous potential in asking your donors to include your organization on their beneficiary forms.
3. Split Interest Gifts
These gifts provide benefits to both individuals and charity:
Charitable gift annuities (CGA): a transfer of cash or property to charity in return for its promise to pay an annual (or more frequent mode) annuity to one or two individuals for their lifetime. A deferred CGA is used when the donor wants the payments to begin at a future date; although infrequently used, the CGA can also be established to begin at the donor’s death—a testamentary CGA with payments to selected individuals;
Charitable remainder trust (CRT): a transfer of cash or property to a trust that pays a fixed dollar amount or percentage of the value of the trust’s assets to one or more individuals for either their lifetime or a term of years and then passes to charity. The CRT can also be established to begin at the donor’s death—a testamentary CRT with payments to selected individuals;
Charitable lead trust (CLT): a transfer of cash or property to a trust that pays a fixed dollar amount or percentage of the value of the trust’s assets to charity for either the lifetime of a designated individual or a term of years and then passes to selected individuals or back to the donor. The CLT can also be established to begin at the donor’s death—a testamentary CLT with payments to selected charities; and,
Retained life estate: a charitable gift in which the donor gives the remainder interest in a personal residence or farm while maintaining a life estate typically for the life of the donor. With the life estate, the donor retains the right to use the property for the remainder of his or her life. It doesn’t necessarily mean the donor has to live on the property. The retained life estate can also be established to begin at the donor’s death—with the life estate given to selected individuals starting upon the death of the donor.
4. Outright Gifts
Outright gifts are those the donor makes now as opposed to a deferred gift that comes to fruition at some point in the future. The outright gifts described throughout these stories are major, rather than annual gifts. Examples include gifts of cash, real estate, life insurance policy ownership, and gifts into donor advised funds. All major gifts are considered planned gifts in that the donors need time to plan and often plan with the help of their advisors. Yet as the adage goes, “Not all planned gifts are deferred.”
We believed a book should be written to help all professionals to consider all three types of donors and the various types of giving techniques. We want to inspire development officers to take the time for meaningful conversations with folks who want to make a difference in the lives of others. We wanted a book that shares wisdom revealed through actual stories and reveals the enormous benefits of a donor-centered approach to fundraising.
Finally, while techniques should be a part of each story, this book is not intended to be a technical manual. It is intended to be a collection of life-changing experiences. We hope you agree that it is.