How to Position Your Nonprofit for the Wealth Transfer

Every charity seems to have a story about the bequest that fell into their lap. But as competition ramps up for a share of the Great Wealth Transfer, those unanticipated legacy gifts will be harder to come by. Planned-giving officers have a lot to consider — whom to target, what appeals to donors, how to know when a donor is ready, and how to work with advisers.

Here are tips to make sure some of the upcoming wealth transfer ends up at your charity.

Encourage estate planning.

The key to winning planned gifts is getting donors engaged in estate planning. When charities are aware of the planning, they can find an appropriate time to sneak in a pitch: “By the way, if you’d like to include a gift for us, here’s how to do it.”

Many charities are well positioned to bring up the idea, but few have it as good as animal-welfare organizations, says Patrick Schmitt, a co-founder of FreeWill, which provides will-making software. The classic is a pet photo with the tagline: “If something happens to you, what would happen to me?”

Animal nonprofits and organizations associated with aging — hospices, retirement homes, hospitals, disease-focused charities — naturally come into contact with people nearing the end of life. People tend to revise estate plans in their 80s and 90s, so these groups often get written into wills.

If your charity doesn’t have this natural contact with older people, you’re at risk of getting written out. That’s why it’s important to automate contact with older donors regardless of the feedback you’re getting, says Russell James, a professor at Texas Tech who studies planned giving.

“If you do nothing else, just check the tick box that once they’ve reached a magic age — call it 75, whatever you pick — that you will never stop communicating with them,” James says.

Make sure your charity gets mentioned when planning happens.

The American Cancer Society realizes $170 million per year from bequests and other planned gifts, so it makes sense that the charity’s 35 planned-giving officers spend half their time with donors. Where they are the other half might surprise you — that’s spent with estate-planning attorneys and financial advisers, according to Bobby Collier, who supervises the charity’s planned-giving team.

Estate planners often hear from clients about half-formed charitable ideas — the person wants to combat homelessness or provide scholarships. It’s up to fundraisers to make sure their charities are top of mind when these discussions occur.

“The more that advisers know about your nonprofit or your community foundation, the better off you’re going to be,” says Michael Moody, a professor of philanthropic studies at Indiana University. “You want the adviser to say, ‘Oh, yes, I know about this local nonprofit that does great work.’”

But not all estate planners have charitable giving on their checklist of items to cover. That’s where will-planning software can give charities an edge. At FreeWill, “that’s being asked hand in hand with the free service,” says Julia Masucci, planned-giving officer at SPCA International, an animal-rescue charity. Will makers on FreeWill are prompted to consider a gift to SPCA International under a contract the charity has with the company. SPCA International has gained $38 million in bequest commitments where the charity is the primary beneficiary and 1,670 new legacy donors.

Identify existing donors who are ready to make a planned gift.

If a donor starts making large qualified charitable distributions directly from their retirement account to a charity, that suggests the donor may have a sizable retirement account. Tax-deferred retirement accounts tend to be taxable to the people that inherit them, so it’s typically one of the least desirable assets to pass on to family members. A charity would pay no tax on a donated individual retirement account.

“You know that they have an IRA that they are using to make gifts to the organization already, usually to help offset their own taxes,” says Trish Davis, vice president of major gifts and planned giving at Komen, a breast-cancer charity. “So it’s great to have those conversations: ‘Have you thought about who your beneficiaries are, and potentially leaving a portion of that to charity?’”

Appeal to donors’ desire for permanence.

Nonprofits have been pushing for years for more latitude from donors — including more general operating support and fewer restricted gifts and donor contingencies. Forget about all that if you want to secure a major estate gift, James says.

As donors face death, he says, many want the opportunity for permanence. It’s why so many wealthy people set up private foundations. The large charities that typically attract large estate gifts meet the need for permanence in similar ways — through endowed professorships or named hospital wings.

“The question of what motivates major estate gifts is kind of an answered question,” James says. “It’s something that has those characteristics of the private family foundation. It lives forever. It’s legally required to follow the donor’s rules forever. And it’s typically named after the donor or the donor’s family.”

Don’t ignore small donors.

Plenty of donors who aren’t capable of making large gifts during their lifetime could be in a position to make a very large estate gift. People who don’t consider themselves rich may nevertheless own real estate that has appreciated for decades, especially in expensive markets like New York or San Francisco.

“Someone who is giving you $20 a month may be living in a $1.5 million house,” Schmitt says. “And there are lots of those folks.”

Go for percentage gifts, rather than specific dollars.

By seeking a gift based on a percentage of the estate, charities can meet donors’ needs and improve their own prospects in the process, experts say. Spending in retirement can be unpredictable — no donor wants to run so low on money that they have to cut back on essentials or tell their kids a promised inheritance has vanished. A percentage gift will float up and down with the estate’s value — and provide psychological comfort that the bequest itself is unlikely to become a burden.

Odds are good that the donor’s finances will be just fine — or better than fine, in which case the charity shares in the upside.

“People underestimate their assets,” Schmitt says. “Assets tend to grow — it’s not always true week to week, but it’s almost always true decade to decade.”

Make women a top priority.

Women’s wealth is growing at a faster rate than that of men, and women are more likely to consider charitable gifts. The growth rate is likely to accelerate, as many women will inherit twice — once from their parents and a second time from their spouse. (American women outlive men, on average, by about five years.)

More than half of women over 65 are unmarried, divorced, or widowed, according to the Bowling Green State University’s National Center for Family & Marriage Research.

Half of the total giving on FreeWill’s site comes from people who are not married and have no survivors, even though the same group has made only 16 percent of the wills, the company says.

At Komen, more than 60 percent of the donors are women. Single women are leaving some of the biggest bequests, sometimes in the seven figures, Davis says. She says they aren’t always obvious prospects; some are teachers or flight attendants. One single woman with no children and a significant estate is planning to leave 100 percent of her wealth to Komen, she says.

“Because they’re unmarried and they don’t have children, everything at the end of their life is going to support causes that they care about,” Davis says.

Joanne Florino, a distinguished fellow at the Philanthropy Roundtable, who will turn 74 this year, sees a potential fundraising boom for charities that support women and girls, as well as those that focus on reproductive rights. “We are the birth-control generation.”