A widely publicized report published in 2000 got the nation’s charitable services sector’s attention with its look at the coming transfer of wealth between generations to take place over the next 50 years.
The Planned Giving Design Center’s study, by Paul Schervish and John Havens, predicted that from 1998 to 2052, more than $41 trillion would be transferred between the generations.
Despite the 2008 recession and subsequent continuing financial challenges, the study’s authors maintain their predictions are still correct. While the ultimate size of the figure may be scaled back, the decision points this data represents are of vital importance to nonprofits seeking large donations.
How can your nonprofit benefit from these dynamics to do the important work of its mission?
First you must have a strategy for courting donors who are thinking about estate planning, based on an assessment of what is reasonable for your size and level of development.
Are you ready for this endeavor? Only if you can cover your program and operational spending first and still feel there is fundraising juice left for courting bequests. And you must be able to demonstrate stability and longevity. Few donors will want to give to an organization whose future appears uncertain.
Your nonprofit must be prepared to show donors their bequest will go toward something lasting, such as a new building, an endowment fund or a scholarship program. Since an endowment fund is such a critical foundation to help nonprofits to weather financial ups and downs, this is an excellent option if your nonprofit meets the above guidelines.
To some, endowments are the holy grail of nonprofit stability.
Envisioned as restricted funds from which only the annual accrued interest can be spent, for many donors they are a mark of good management and fiscal responsibility. However, care should be taken that the endowment fund is in line with the size of the organization and not siphoning off large sums of money that would otherwise go to programs.
Too large an endowment for your organization’s size can invite public criticism, as well as cause donors to feel assistance is not needed. Such problems are more likely to arise in large institutions, of course.
To begin thinking through what an endowment program might look like for your nonprofit, you should establish the ultimate goal and what you believe can be raised for it annually. This will be a long term endeavor as such donors need to be cultivated over time, but it can be started with a small amount of money.
You should have policies in place about the endowment’s allowed use, when or if the principle can be tapped, and what you will use annually from accrued interest. Other internal policies that can support the endowment, such as the application of a percent of all unrestricted donations to that account or possible annual endowment fundraising event, should be decided on.
While you need not become versed in all the intricacies of estate planning, you should have general information available and visible that may spur your donors to begin thinking and an expert who can discuss the deeper considerations with your supporters.
And you need to be able to identify donors who are genuine prospects for endowment fundraising. That will be those who are interested in leaving a legacy and who already support your organization.
Sarah Todd Clark is founder of Calhoun Enterprises, a resource for positive social change encompassing fundraising and organization development consulting. She can be reached at calhounent@gmail.com or 912-224-2120.
By Sarah Todd Clark