Planned Giving: Opening a Door to Deeper Dialogue and Commitment
Planned giving, also referred to as gift planning or legacy giving, is the act of making a commitment to give a charitable organization a gift, typically as part of a donor’s will or estate plan. It’s something that many choruses are interested in pursuing, but don’t know where to start or worry that the process will be complicated.
Former Chorus America board member Susan Erburu Reardon is director of gift planning at the Los Angeles Philharmonic Association, as well as a board member of the Los Angeles Master Chorale and a lifelong choral singer. She spoke with president and CEO Catherine Dehoney about how to keep the process simple, why choruses should always have planned giving available as an option for donors, and the power of a legacy gift.
Catherine Dehoney: Why is planned giving an important part of fundraising? What are the benefits of having a planned giving program?
Susan Reardon: Planned giving is an essential part of what choruses should be thinking about for their long-term support. It allows you to approach your best and most loyal supporters with the idea of leaving a legacy that will benefit an organization that has become a part of their lives. The advantage of planned giving is that people are being asked to give from their assets, not from their available income the way that they are when we ask them for an annual gift. And therefore the size of that gift and its impact can be substantially greater.
A common misconception about the behavior of planned giving donors is that once they’ve made a legacy gift then they feel like they don’t have to continue to support you annually. That actually is not borne out by the data. What you see instead is that, once these supporters have made a legacy gift, they might actually increase their support in other ways. Donors that make a planned gift become even more invested stakeholders in your organization.
For any chorus that has been around for more than a decade and has a group of long-term supporters—people who have been audience members for many years, people who have been annual givers year after year—planned giving offers these people an opportunity to express their lifetime of support for the chorus in a really impactful way.
CD: I think there are some choruses out there that would like to start a planned giving program, but worry that the process will be too complicated. What would you say to that?
SR: I do think that’s a common misconception. I hear a lot of people being hesitant to start a planned giving program because they think they’re going to have to understand and be able to help donors do all this very complicated tax planning and estate planning. It is true that some types of planned gifts are complicated. But, depending on how you do it, that doesn’t have to be the case. There are many, many ways to leave a very meaningful planned gift that are really simple and, in some instances, don’t even involve going to an attorney.
CD: Where would you begin if you worked for a chorus that was new to this?
SR: If you are just wanting to dip your toe in the water of starting a planned giving program, there are two types of gifts I would recommend. They are the easiest to encourage your donors to make and the easiest to implement.
Probably the easiest one of all is what is usually referred to as a beneficiary designation. That’s a complicated set of words, but it’s actually pretty simple. Most people, over the course of their work life, invest in some kind of a retirement account, like an IRA or a 401(k). When you set up these types of accounts, you’re asked to say who you want to receive these funds once you’re gone. Most of us list our spouse or children or grandchildren, or a good friend.
What people don’t realize is that when you’ve passed away and those accounts are being settled, the people who receive those monies are going to pay income tax on them. And depending on the state in which they reside and their income tax situation, they could end up seeing a fairly small percentage of what’s in that account as the ultimate gift. That’s actually not the best asset to leave to your family members or friends because they are going to receive only a small portion of it. But if you leave it to a charity, the charity doesn’t pay income tax, so the charity gets 100 percent of what’s left in the account.
That’s one advantage of doing that kind of gift. The other advantage is that it’s easy to complete the gift. In order to designate a charity as the beneficiary of a retirement account, all you have to do is contact your plan administrator, who will send you a very simple, usually one-page form. You fill out the name of the charity, its federal tax identification number (which is usually listed on a chorus’s website or can be obtained by calling the chorus) and what percentage of that account you would like the charity to receive. It can be anywhere from 1 percent to 100 percent. And that’s a very simple way to make a gift that does not necessarily require you to consult an estate-planning attorney.
The other simple gift is what is sometimes called a bequest—a gift made in your will or in your trust. As a chorus, you can put some sample language on your website or in your annual appeal letters or any kind of communication to your subscribers or donors that tells them how they can actually leave a bequest. It can literally be one sentence that says, “I, [name], leave [either a percentage or a dollar amount] to [the name of the chorus with its federal tax ID number and where it is located].” They can also include the purpose for which they want to leave this money. We always recommend that your sample language says “for general support” because that’s the most flexible and impactful way to help a chorus, but donors can make it specific to a particular program if that’s something that’s important to them.
CD: So what does a chorus need to have in place? It sounds like implementing these two kinds of gifts is primarily a matter of communication. Should it also plan to have an attorney on call?
SR: I think every chorus likely has somebody on its board who has a legal background or who knows somebody that might. I recommend going through those connections to find an informal advisor to the chorus.
If you really want to build a stable gift planning program, I also recommend creating a list of estate-planning attorneys who are willing to have their names shared with donors as possible contacts for them to discuss their gifts. If people already have a will or trust, they’ll already have an attorney and they’ll go to that person, but there are people who have not even thought about doing a will or trust and they don’t know quite where to start. You can be very helpful to those people by providing them with these names. Include at least three names on the list that the organization has vetted in some way or that have been recommended by a knowledgeable board member.
CD: Is there a time in a chorus’s organizational lifecycle or circumstances under which you would NOT recommend a planned giving program?
SR: I’m a big proponent of gift planning and I think it should always be an option. But there’s a difference between having it as an option and proactively encouraging people to make planned gifts.
If your chorus needs current funds, like outright gifts of cash or other assets, you probably do not want to emphasize planned giving, because it may take many years before you ever receive the proceeds of a legacy gift. For example, if you’re running a capital campaign to raise money for a home for your chorus, you don’t want to distract from your efforts to reach that immediate cash goal to focus on planned giving. I would always have it as an option—because otherwise you are missing an opportunity—but not always as a focus.
CD: Let’s say that a chorus has taken some of the steps you recommended. Now it’s ready to do more. What’s next?
SR: Once you get a critical mass of people who have actually left a gift to the organization, then I would encourage the chorus to create what’s called a legacy society. That allows you to gather together the people who have already made a legacy gift to thank them, but also to help them be ambassadors for your planned giving program and encourage others to get involved. You might arrange an annual “thank you” gathering to bring this group together—perhaps the program might include learning something interesting about the chorus’s past as well as hearing about plans for the future. This keeps the focus on the joy of giving, and sharing that joy with others who have made the same kind of gift.
As your legacy society gets organized, I would also work on putting together an advisory council of people who work with planned giving in some kind of professional capacity. This might include accountants, or estate planning lawyers, or insurance agents, because in some cases legacy gifts can be made using an insurance policy. You could host occasional information sessions for people that you think might be interested in planned giving, and then these contacts are available to people who are actually thinking about putting together one of the more complicated type of legacy gifts, such as a charitable remainder trust or a legacy gift of real estate. You need to make it clear to your donors that this is not a replacement for them getting their own advice—it’s very important that they consult their own advisors. But these people can walk them through what that gift might look like and the possible benefits it can have for both the donor and the chorus.
This advisory council can also make recommendations to the chorus about what kinds of gifts you should and should not accept. Sometimes somebody will come to you and say, “I want to leave you an asset that has a lot of liabilities attached” (a property such as a gas station might be one example, because of environmental clean-up issues), and you may not want to take that gift. If your chorus is implementing a comprehensive planned giving program, you should work with your board to develop a clear gift acceptance policy.
CD: I know some people worry that planned giving can be a sensitive topic to bring up for the first time. What advice would you offer someone who is about to broach this conversation with a major donor?
SR: I think the best way to begin this conversation is by talking with donors about how they would like to be remembered. I personally like to use the term “legacy giving” rather than “planned giving.” I want people to focus on what the impact of their gift is going to be rather than the mechanism by which they will accomplish that impact.
If you sit down and talk with supporters about how they want to be remembered, you’re giving them an opportunity to talk to you about themselves as complete individuals. By virtue of having this conversation about legacy, you’ve been able to hear what’s really important to them. And then you can talk to them about what’s really important for the organization and you can begin to have a dialogue about philanthropy, in the pure sense of love and accomplishing something beneficial for the community and for the world at large.
CD: Are there types of messaging or methods of communicating that you’ve found to be particularly effective?
SR: One concrete example is to describe a gift left through a will or trust with just those words, rather than saying “an estate-planning gift,” or “a bequest,” or particular legal terms. If you use the terms “estate planning” or “bequest,” a lot of times the reader’s reaction is, “Oh that’s not for me, that’s the kind of gift that only wealthy people can leave.” But when you talk to them about wills and trusts, which are terms people tend to be more familiar with, and the assets that they have as distinct from their income, they realize they actually do have the resources to make this kind of gift.
I highly recommend doing a survey as a way of being proactive about your planned giving program. You might send it to your donors or longtime subscribers to ask how they got involved with the chorus, what it is that’s important to them about the chorus, even how they came to love choral music—questions that allow them to think about the past and people who have been important in their lives. And then the very last question of the survey is, “Have you either made or considered making a gift through your will or trust?” You give people options to indicate whether they’ve already left a legacy gift, are thinking about it now, or might consider it in the future.
Oftentimes you’ll find out that there are some people who have left you a gift and you didn’t know about it. And now you do. And now you can thank them. Or if it was an anonymous survey, now you know you have some gifts out there that are part of your planned giving program that you didn’t know were there to begin with.
CD: Okay, so here’s your last question. With your background as a choral singer, and an attorney, and everything else, you have personally chosen to work as a gift planning professional. What do you find most fulfilling about your work?
SR: The thing that I enjoy most about my work is getting to know people who are passionate about the LA Phil and hearing about their hopes and dreams for the future of the organization. And then I get to help them to realize those hopes and dreams by creating these legacy gifts. That’s very powerful.
Planned giving is about a lot more than taxes and trusts. Being familiar with all the technical ways of making gifts is important, but not nearly as important as being able to listen to what supporters are saying and figuring out what kind of gift is going to make them feel happy to have chosen this way to invest in the organization that they love.
Planned Giving Tips
- Start by talking with donors about designating your chorus as a beneficiary. It’s a simple process, and while there are tax implications for designated individuals, there are not for nonprofit organizations.
- Use accessible language like “wills and trusts” instead of terms like “bequests and estate planning.”
- Gather a short list of vetted estate attorneys to have on hand as a resource for your donors.
- Survey your supporters. It can be a great way to get more proactive about your planned giving program, and to better understand what kind of intentions your donors may have.
- Point out that, despite what many people believe, legacy giving is not only for the wealthy. Because legacy gifts come from donors’ assets rather than their annual income, it’s a way for donors of more moderate means to make a big impact.