Individuals have traditionally comprised the largest donor segment (71% in 2015), so paying attention to this donor segment is important now – and for your long term future.
Some key philanthropic developments impact how you work with individual donors:
- Fund development is no longer primarily about transactions, e.g. events, direct mail. Today our ongoing relationships with our donors are key as we connect inclined donors to mission and impact and work for lasting connections through relationship cultivation.
- Inherited wealth from the Silent and Greatest generations has enabled philanthropy by second and third gens. They are frequently forging their own charitable paths, however, based on their own personal interests.
- A significant wealth transfer known as the Great Transfer began in 2005 with the Greatest Generation’s wealth shift to their Baby Boomer heirs. The impact is estimated at $12 trillion. As Baby Boomers die, the Greater Transfer to their heirs, estimated to be over $30 trillion, will take place up to the year 2055. In Kent County alone, a mere 5% spin off of inherited wealth to the county’s nonprofits would mean over $321 million in nonprofit fund balances between 2005 and 2055.
In this environment, having a planned giving program is key for organizational sustenance and for taking part in the wealth transfer now underway. Currently, the best prospects for a planned giving program are living, Greatest Generation donors (births in the 1920s, 1930s and early-mid 1940s) whose aggregate $12 trillion in wealth is transferring and Baby Boomers (births from 1946-1964) who will inherit these funds. Don’t assume your most elderly donors aren’t creating wills into their 80s and beyond; new research shows 65% of donors added their final charitable gifts within the last five years of their lives.
A planned giving program need not be complex. After all, 80% of all planned gifts to nonprofits are simple bequests made via wills or trusts, and they usually represent a donor’s largest gift. For those more complex plans, often prompted by unusual family issues or significant wealth or tax issues, know — and be known by — financial advisors and estate/trust attorneys in your community. They will handle the more sophisticated planned gifts, with your nonprofit a possible beneficiary.
Be ready for these opportunities! Create simple planned giving materials, and organize and promote a legacy society exclusive to your planned gift donors. With your board, consider whether an endowment — often the “depository” for planned gifts — is sensible. And always cultivate your relationships with your planned giving donors. These are among your very best friends — people who have a history of loyal support for your organization, e.g. In 3 or more of the past 5 years regardless of amount, and who wish to perpetuate their impact on your mission when they’re no longer here.
And a bonus: Lest you think that a planned gift will negatively impact annual gifts from that donor, new research shows that annual giving actually increases by 75% once a planned gift is in place.
This information was presented at our February 2017 Kennari Consulting client round table.