Greg Lassonde, CFRE
Planned Giving is Dead. Long Live Legacy Giving – Part 1
The king is dead. Long live the king.
The dead “king,” as we’ll discuss in this three-part article, is planned giving. The new king is legacy giving.
Tempting as it is to continue with the “king” metaphor, I’m really talking about a paradigm shift. For ease and framing of our discussion, I’ll use “legacy giving” to define the new paradigm, and “planned giving” to define the old.
Let’s explore ten shifts in fund development practices employed by forward-thinking nonprofits that have moved on to the new paradigm and are enjoying greater success.
A Rose by Any Other Name …
“Planned giving” is, by far, the most common label used to describe the work we do. I call this the old paradigm. But it was once the new paradigm.
Until the mid-1980s planned giving was called “deferred giving.” In fact, this now-quaint phrase is still sometimes used to encompass the entirety of our work, rather than simply referring to a gift postponed until death. And who wants to so blatantly remind our supporters of their own demise? Still, deferred giving was the main title for our field going back many decades.
By the mid-1980s several local groups had arisen around the country, many calling themselves “councils.” It was from national meetings of these groups that our field came to be labeled planned giving. This was formally recognized in the creation of the National Committee on Planned Giving (NCPG) in 1988. We were finally making progress in getting rid of that dastardly “deferred” reference to death.
And so it was that planned giving became the most frequent name for our field until the mid-1990’s when a trend emerged to use “gift planning” to describe our work. This did not change the practice of most nonprofits and professional advisors continuing to use the phrase planned giving. However, many of us on the nonprofit side, myself included, used the phrase gift planning in our titles, such as Director of Gift Planning. And many of us still do.
All throughout this time there were spirited debates about what constitutes a planned gift. Some went as far as to say that, at least to some extent, all gifts are planned, and therefore all gifts are planned gifts. While current gifts are commonly felt to have a higher value than deferred ones, viewing all gifts as planned was confusing to the broader fund development community because it ignored the distinct characteristic of planned gifts, the vast majority of which are deferred rather than current. However, the labeling story for our field does not end there.
In 2007, the NCPG announced that it would henceforth be known as the Partnership for Philanthropic Planning (PPP). With the announcement, local planned giving councils (this label was still used) were encouraged to adapt this new phrase into their local council name, though only a handful have done so.
I was a delegate at the 2007 National Assembly of Delegates of NCPG, where this change was announced. I proposed the name change to a local council of which I was a board member, the Northern California Planned Giving Council. I was met with blank stares, and rightly so. That’s because what all of these labels have in common is that they use “us” language. Deferred giving, planned giving, gift planning, and philanthropic planning (the first mention of that term) are all about us from the donor’s point of view. Our colleagues in the direct mail industry say that an “us” approach means we are focused inwardly on what we do. On the other hand, a “you” approach is thinking from the perspective of our donors, on what they are thinking about when they make the gift.
So why does the phrase “legacy giving” work better? We’ve used the word “legacy” for many decades in our marketing materials. We’ve had local, regional, and national “leave a legacy” campaigns to promote such gifts. Canada and the United Kingdom have used “legacy giving” for many years to describe this method of giving. Legacy giving is a “you” phrase. You, meaning the donors, leave a legacy. With all of the talk in recent years about donor-centric fund development—the “you” approach—isn’t it time for those of us in the United States to catch up with other English-speaking, donor-centric approaches?
As for how one defines legacy giving? I don’t think we’ll ever arrive at a universal definition. There is so much variety out there in secondary literature. Several years ago a colleague of mine, Caleb Rick, persuaded me to adopt the phrase “legacy giving.” He agrees about the wide variety of definitions and that a universal is unlikely. In his trainings, he has come up with two definitions: 1) To convey one's values through creation of a (usually) future gift to charity; 2) A foresighted action to strengthen a favorite cause.
What Gift is Most Important?
In the old planned giving paradigm, the phrase, “planned gifts and bequests” commonly appeared in articles and presentations and it is still in use today. A slightly better variation—“bequests and planned gifts ”—puts more emphasis on bequests by listing it first. Generally speaking, though, both versions needlessly separate bequests from the broader category of planned or legacy gifts. This results in an overemphasis on the technical side of gifts, most often life income plans (charitable gift annuities, charitable remainder trusts, and pooled income funds). Why? Life income plans are irrevocable gifts. Historically many organizations have coveted and overemphasized these gifts because they are irrevocable and can be recorded as assets.
Using the same logic, bequest commitments have been undervalued because they can’t be booked. Yet even though bequest commitments are revocable, we know that around 90 percent are received by charity.
In the legacy giving paradigm, the most important gift, in both numbers and dollars, is a bequest. While there are currently no exact industry standards, my experience is that the range of bequests, as the total number of gifts in a nonprofit’s legacy inventory, is somewhere between two-thirds and 100 percent, with most closer to between 90 and 100 percent. This is true even for most large institutions.
When describing types of legacy gifts, either when talking among ourselves or through marketing channels, I suggest we abandon the confusing language described above. Instead, explain that we have a range of legacy giving opportunities including bequests, beneficiary designations, life income arrangements, and more. These seem to capture the broadest categories in roughly their order of occurrence.
Also, one could easily suggest that endowment gifts fit the second definition of legacy gifts: “a foresighted action to strengthen a favorite cause.” Two streams of gifts build endowment: current and deferred. Staff and volunteers involved full time in legacy giving (about 10 percent of us working in this field) most often secure gifts for the deferred stream. Employees and volunteers wearing multiple fund development hats (about 90 percent of us) simply by job description are more inclined to think broadly about the donor making a legacy gift through either current or deferred streams. From the donor’s point of view, a legacy gift—whether current or deferred—can be created during life.
To continue with the legacy paradigm in what gift is most important, from the “you” perspective it is helpful to talk about gifts by ease of execution—from simplest to most difficult. The simplest is the beneficiary form, with no cost to the donor and a minimum of time invested. These include bank accounts (saving and checking), stocks and bonds, IRAs and other pension funds (broadly defined), life insurance policies, commercial annuities, and donor advised funds.
Continuing in ascending order of difficulty from a donor’s point of view, after beneficiary designation gifts is a bequest in a will or living trust. Having such a provision almost always includes a visit with an attorney. For many, the cost and perceived time involved in creating or updating an estate plan leads to caution and delay. So for a bequest provision to charity, it’s all about the donor’s timing. Rarely does a donor create or update a will or living trust only to include a bequest provision (even if your cause is the donor’s favorite and you ask nicely).
Next in order of difficulty is a charitable gift annuity—a type of life-income gift. For most donors setting up this annuity for the first time, there is a lot of information to absorb. Fortunately, though, there is rarely any cost involved for the donor. The expense is typically absorbed by the nonprofit. Also, annuity contracts are short and simple and they are written in easily understood language.
On the other hand, the trust version of a life income gift, a charitable remainder trust, presents a whole new level of complexity. And there are many other types of similarly complex gift instruments.