Episode 54: Planned Giving Part 1 - Understanding the Basics and Overcoming Your Fear

Welcome to another edition of “Around with Randall”, your weekly podcast making your non-profit more effective for your community, and here is your host, the CEO and Founder of Hallett Philanthropy, Randall Hallett.’

It’s a pleasure to have you join me today on “Around with Randall”.  On this episode we jump into a four-part series about planned giving and this is going to be built out for gift officers who may not have a planned giving officer in their system. Maybe their shop’s smaller and they want some basics of how they can be more effective in working with donors regarding planned giving. Today we're going to cover the high points, why is this so important, and what are the normal hurdles that I see and what you might want to make sure you're aware of. In part two we're going to cover kind of the, what at least I believe are the most important two vehicles, keep them simple, requests and annuities. In the third part we'll cover trusts, and in the last part we'll cover the basic marketing, really what communication sounds like in a donor situation that is an indicator that there's planned giving opportunities -  who are the people you should be talking with and also some basics around gift acceptance policies and partners that you might develop again if you are a dedicated planned giving officer.

This may be elemental, but what I find is is that most gift officers and smaller shops - not large systems or even a large system -  individual foundations struggle with this concept and they run away from it. So in this episode let's start with what are the challenges, why is this so hard? So let me start with the thing I have found as someone who spent three years studying tax law and then spent a career dealing with donors in their estates and with clients and incredibly challenging situations. First and foremost, they're kind of a 1a and 1b. This involves the law at least the perception of a planned giving situation at a higher level than anything else and that as a result the 1b is, it's complicated when you throw the law and you throw a complication into a little basket together. What that generally does is make gift officers and organizations who don't deal with this very often, it pushes them away. They become skeptical that they can handle it. I’ve spent 25 years of my career trying to tell people that no one is going to ask you to draft a gift annuity or a trust, that what we need to know in the nonprofit side in the relationship side is actually quite simple it's not complicated, and just because someone like me who maybe has a specialty in it doesn't mean everybody can't do what I’ve done or others like me. 

Yes, I sat through a lot of law school classes. Yes, a lot of those were on tax law. Yes, a lot of those were on estates and trusts. While that's given me a perspective of the details i'm not sure one moment actually has helped me bring estate gifts to fruition. All it brought me was a sense of being comfortable and you don't need law school to do that. You don't need 20 years of experience to do that, and in some ways this series is built to make everyone feel better about what and how planned giving can happen. So 1a and 1b as to why this is a challenge is it deals with the law a little more extensive level, and number two it can be perceived as being very complicated. The third reason of the four that this is a challenge is that it involves a tough subject. When you're talking about a planned gift you're talking about, in some way, shape, or form, how someone wins someone, why someone might die, and generally this is not a good dinner side conversation. We don't talk about this at the dinner table often and what we have to understand is people are more comfortable talking about this particularly as they get a little older than you realize. It's not that they're looking forward to death. It’s not that they're pining for the day, but they want to know their affairs are in order, are things taken care of the way that they want, and so in some ways you don't even have to really talk about death as much as you just have to say what is it you want to have happen. But a lot of times we have gift officers who shy away from this concept of death because it's just an uncomfortable subject. The last reason it's a challenge in my opinion and this is our own fault - our organization's fault - in societal pressure we live in a world of instant gratification. 

If my cell phone blips i have it set up so the lights go off when a text message comes or my computer beeps when an email comes in. Ding. We are naturally inclined for instant gratification. It's like pavlov's dog. If you need to you can Google that. Where you naturally -  your inclination, your emotional, intellectual curiosity satisfied. The quicker you get to that response. Well, in an instant gratification world planned giving many times is about money that will not come in for a number of years and the problem, to add to that, is is that we've allowed metrics to support the idea that planned giving isn't what we should be talking about. Most organizations, normally, through the finance department but they could be through the foundation itself, only really want to deal with cash. And the second part of it is in this idea of kind of a self-inflicted wound - contrary to metrics is -  we can't count or don't count or account for a planned gift for any dollars, particularly if it's revocable meaning somebody could change their mind. And so as a result we've put in incentives for cash or pledges and disincentives for planned giving, and as a result if you're a gift officer trying to make goal, if you're an organization trying to pay bills, many of us would rather have a hundred thousand dollars in cash today rather than two million dollars at an unknown date someday in the future. We've set up the system against where the dollars are and that, in and of itself, is disappointing. One of the things that we will talk about is, you can count estate gifts in some meaningful ways without conflicting the standards of accounting or of finance. It can be done.

So those are the four complications. The challenges. It's a tough subject. It’s dealing with death law, and it's complicated. Kind of two 1a and 1b, and then it's delayed gratification or our metrics are not supporting of it. What we really need to be talking about is why this is important, what is it that we're trying to get to, and what we know is what we're trying to get to is the concept of raising money. 

So let's start with this idea of the transfer of wealth or assets. As it sits today, baby boomers are somewhere between the ages of 59 and maybe 77. and the latest estimates are, there's about just over 70 million of them. Here's the number that's crazy. The amount of money that will transfer from generation the of the boomers to something either their next generation family or to charity or to taxes. There's only three places the money can go - individuals, charity, government  - the number is somewhere between 35 and 45 trillion dollars and actuarially that's usually going to mean sometime in the next 20 to 25 years that is more than the gross domestic product of the United States for multiple years. That is anywhere from,  depending on how you count it, 10 to 12 times the size of the federal government on an annual basis. And no matter if you're in healthcare or education or anywhere else it dwarfs the amount of money we're currently raising. The largest pool of money available for nonprofits is in people's estates and yet we tend to run from that opportunity.

There's two other things that you need to consider that are a part of this. The first is not meant to be funny but it's true. There are not many people that say, “Hey I want to leave my money to the government,”  and we're at a point in time where we really don't know how much the government is going to change its tax laws. Right now, today, a person can can leave, you know, somewhere between right about $11.6 million without being taxed to an individual. A couple, little over $23 million, ballpark. That may change depending on the president and congress but it's not going up, it's going to go down. Very few people say, “I cannot wait to give my money to the government.” The other thing that we know is, particularly those who have not extreme amounts of wealth but moderate levels of wealth, have said , “I’m not leaving all of it to my children. I want them to go out and earn their own way in life,” and if they don't want to give it to the government that only leaves one place left, and that's charity, nonprofit work. So we're going to have to become more comfortable with this because, number one it's the largest pool of money, number two the government's not on everyone's top three list, and number three we hear more and more parents - in particular grandparents - say i'm not leaving all of this to my kids or grandkids. The other thing is is that there are signs out there all the time of people wanting to say gosh i'm interested in what i'm going to want to do. 

Some of the impetus that people have for making estate gifts are based on guilt, based on gratitude, based on impact, based on concern. Guilt that they got this kind of wealth any kind of wealth and they don't know why someone else did. Gratitude that they got the wealth, the opportunities, the great fortune and want to give it back. Impact - they want to make the world a better place… something about this organization or what you do is something that they believe in or they're concerned, meaning I want my grandkids to have a better world so I’m going to give resources to organizations that are going to make that happen. Those have nothing to do with the law, those are all about reasons people choose to give, which is, by the way, exactly what gift officers deal with every day when we talk about a $10,000 cash gift pledged or paid, but you add the term planned giving everybody gets a little queasy. It's the same process and we'll talk more about that in episode four. The other thing is is that if you get into someone's estate in kind of a secondary or tertiary level of gift - I’ll explain that in a second - or priority, you end up staying there. 

What do i mean by that? I’ll use me myself as an example. My wife and I obviously have estate plans and god forbid, but if something happens to one the other gets obviously everything, and then we have two kids. But we have provisions in the estate that if something were to happen to both of us our assets will go somewhere and in our case it's a technical term, poor over trust, meaning that if and when if we were to both pass at the same moment we're closely connected that there would be a trust set up to take care of our kids. But even one step further so kind of a third in line in succession, if you think about it, that way is as if all four of us god forbid were in an accident and we all died, our assets have to go somewhere and half of those assets we've given to charity the other half we've given to -  certain we would give to certain members of our family to help take care of them.

What we know is is that if you get in no one's asking you to, if you're in my shoes, no one's asking me to say what’s, how do we get ahead of your kids, because they're not going to. But if you're one of those limited charity charities that, or nonprofits that we have identified, god forbid, if something happens to all four of us the chances are they will never be removed from our estate plan, and as we get older hopefully, and our kids become older and hopefully successful, what we find is is that the percentage and the opportunity for those nonprofits to go from last in line to next in line actually is quite good. So even if you're dealing with a young person having the conversation - we'll talk about this in the next episode - when we talk about requests of just being listed in the worst case scenario gives you a better opportunity down the road of increasing that likelihood. Once you're in somebody's estate, generally, they don't pull you out. It happens but we find most often is that it doesn’t.

So what's the tactical in all of this? So the the first thing is, everyone needs to become more comfortable with the conversation of planned giving. It's a mentality. It's an acceptance. It's the willingness and the ability to say, “We're gonna do this, I’m gonna do this.” The second is building out knowledge. Once you're okay with it or willing to become okay, listen to the next three podcasts, do a little bit of reading, grow your education. You don't have to go to law school to do this. You don't have to be a planned giving expert. No one is going to ask any gift officer to draw up a legal document. There are people to do that. What we need are better relationships, deeper relationships, and ones that are based on trust where we can have these kind of conversations with our donors who are the most likely to want to support us as part of their legacy, and if we can do that now we can begin to figure out how to do it, which is really what the next three episodes are all about.

I hope today it gives you a sense of just being a little bit more comfortable with the process, with the concept, and then we'll get into the details as we go. That hopefully will increase that level of comfortable comfortableness, comfortability, making you more effective. 

Don't forget - check out the website hallettphilanthropy.com - posting blogs there every two or three days, find different things to write about connected to our profession or or indirectly. connected just something to think about 90-second reads if you want to communicate with me Send me an email podcast@hallettphilanthropy.com or if you want to complain or say i missed something or you think i'm just plain crazy reeks r-e-e-k-s at hallettphilanthropy.com. 

This is an amazing professional opportunity. If you're in the nonprofit world I hope you're embracing it. I hope you're grabbing it because I can't imagine doing anything else because we get to help people. We can help our community. Don't forget my all-time favorite saying, “some people make things happen, some people watch things happen, then there are those who wondered what happened,” and in life when we fall into any one of those categories it's the people who make things happen for the people who are wondering what happened that are the difference makers and nonprofit work in our charities and not in nonprofit organizations they're the catalyst to do just that and I hope you feel that way today and every day as you go to work making your organization, your community, a better place. We'll see you next time when we talk about annuities and bequests as we take our four-part series of planned giving to the next podcast, right here on “Around with Randall,” and don't forget make it a great day.