|
Robert Sharpe is President of The Sharpe Group.
For nearly 30 years, Sharpe has used his extensive
fund development, gift planning, and
consulting experience to help hundreds of nonprofits
plan, develop, and implement successful major gift
planning and endowment development efforts. Here he
shares with Give & Take his outlook on fund raising in
the coming decade and beyond.
Give & Take: We are now entering the second decade
of the 21st century. What can you tell us about what
you see when considering the fund-raising landscape
that lies ahead?
Sharpe: Over the next year, regardless of what effect
the economy and adjustments in tax laws may have, we
expect to see the continued impact of broader trends
that have brought unprecedented change to all aspects
of our lives over the past decade.
The growing number of communications channels
and the rapidity with which information is distributed
make it ever more challenging for charities to get
their signals through escalating “noise levels.” It will be
increasingly difficult for some nonprofits to attract new
donors, and those that are successful may find it just as
important to help donors find their organization as it is
for them to find donors.
The demographic shifts that have been taking place
over the past decade will now accelerate as the first Baby
Boomers turn 64 this year. During the 20-year period
from 2011 to 2030, some 70 million people will reach the
age of 65. A much smaller generation will replace them
in both the workplace and among the ranks of donors.
Fundraisers will find it hard to succeed without learning
to meet the needs of a rapidly aging donor constituency.
For example, a 65-year-old couple today has a joint
life expectancy of 26 years. Given this projected longevity,
fundraisers should expect to be interacting with at
least a portion of the Baby Boomer generation for the
next 50-plus years, when the last of the Boomers born in
1964 will be approaching their early nineties.
If ever there were a time when the activity we know
as “planned giving” or “gift planning” formed a central
part of the funding mix, the demographic trends now
in motion in combination with economic conditions and
expected tax law changes seem to assure that it is now.
G&T: How do you think the projected transition to economic
recovery will impact fund raising in 2010?
Sharpe: Charitable giving did not grow 14-fold along
with the boom in the stock market in recent decades,
nor did it drop in proportion to the declines of 40 to
50% during the course of the past year. History tells us
that charitable giving tends to fluctuate less and, like
employment trends, often lags behind the overall economy
to some extent.
We expect that charitable giving will increase on
the heels of economic recovery as in the past, but the
demographic trends noted above will undoubtedly give
a different shape to the philanthropic recovery as it
takes place. Those who are prepared to help their donors
make gifts, especially larger ones, in ways that take into
account the other financial realities weighing on the
minds of an economically skittish and aging donor base
will be at the forefront of recovery.
G&T: Have you noticed any
trends in the types of gifts organizations
have been receiving in
the last year or two?
Sharpe: There is still a tremendous
amount of wealth held in
the form of non-cash assets of all
types. We have seen more interest
in gifts of real estate, art,
antiques, and other collectibles
over the past couple of years as
donors have looked for alternative
ways to fund gifts. Such
items can make very good gifts,
but charities must approach each
situation with care.
Speaking of non-cash assets,
keep in mind that donors are
entitled to deductions based on
fair market value for securities
and other capital assets held for
one year or longer. This spring
it will be over a year since some
donors bought securities at the
bottom of last year’s markets,
and they now hold stocks that
have grown in value 50% or more
since they bought them last year.
These stocks can make excellent
outright gifts or may be used to
fund gift annuities, charitable
remainder trusts, and other gifts
that provide additional cash
flow.
It is worthwhile to note
that in the most recent year for
which IRS statistics are available,
charities actually received
more support from gifts of publicly
traded securities than from
bequests (see the November
2009 issue of Give & Take). Many
nonprofits would be pleasantly
surprised by what could result
if they spent even a fraction of
the time and energy normally
spent encouraging bequests
highlighting the benefits of gifts
of securities. Both sources of income are of course vital for future success, so there
needs to be balance.
G&T: Speaking of bequests, many consider bequests to
be the “bread and butter” of their planned giving programs.
What would you recommend for those who want
to maximize their income from bequests and other gifts
that come from a donor’s estate?
Sharpe: The IRS recently reported that over 80% of
bequests from taxable estates come from persons who
die after the age of 70. Of that group, over 70% die at age
80 and older. Recent studies of just under 5,000 estates
received by 42 organizations of all types and sizes reveal
that at least 50% of bequests come from persons who
make their final wills within five years of death. Other
studies over the years confirm this. In fact, in 30 years of
conducting these studies, we have never found a single
charity for which this was not the case.
Along these lines, it is relatively rare to receive a
bequest from a will that was completed more than 10
years prior to death. That is why we have always recommended
that the bulk of an organization’s budget and
other resources be directed toward influencing bequests
from persons with a life expectancy of 15 to 20 years or
less, or those roughly 70 years of age and older.
G&T: What other planned gifts will be especially appealing
in the near future?
Sharpe: As long as the current economic environment
continues, including lower interest rates and dividends,
we will see increased interest in certain major gift planning
tools. Charitable lead trusts have been the fastest
growing of the various charitable trust vehicles since
2001, according to IRS statistics. We can expect a continuation
of that trend, especially if the current estate
tax exemption levels and rates continue. If today’s lifetime
exemption of $1 million from gift taxes is not raised
to match the current estate tax threshold of $3.5 million,
then there will be even more interest in lead trusts.
If interest rates and/or stock market values rise,
charitable remainder trusts and gift annuities should
also enjoy increased popularity. Donors appreciate that
remainder trusts allow them to make a substantial
gift while enjoying tax-free growth in assets and rising
income over time.
G&T: Which strategy will be more successful with
donors—emphasizing the tax and other financial benefits
or focusing on the philanthropic aspects of the gift?
Sharpe: Neither strategy can succeed if the other is
ignored or undervalued. If you only emphasize the tax
benefits of gifts, donors may be
convinced that your gift planning
option is indeed viable for them,
but then seek out another charity
to actually receive the gift. The
tax and other financial benefits
are essentially fungible in nature,
and at the end of the day donors
will choose a charity primarily
based on non-tax motivations.
On the other hand, if you don’t help donors decide
the best options from a tax and financial planning perspective,
even an organization with the most loyal donors
and worthiest mission in the world will never realize the
level of funding that might otherwise be possible.
All of The Sharpe Group’s services are built around
the premise that there are five parts to every gift—who
makes it, why they give, what they give, when they make
the gift, and how the gift is transferred. The best gifts for
all concerned will balance those elements in ways that
help the donor see their gift completed while maintaining
their financial security.
G&T: What advice would you give to someone just starting
out in planned giving?
Sharpe: If you are newly responsible for encouraging
bequests, gift annuities, trusts, and other similar gifts,
begin by talking to everyone you possibly can who has
already made such a gift. The donors who take the trouble
to notify you of their bequest intentions will often
be more than happy to explain their motivations to you.
You may also find a number of stories you can use in
your marketing materials to help influence others to
follow suit (see “In Your Donor’s Voice” on page 2). The
same is true for those who have entered into gift annuities
and other planned gifts.
The best way to discover prospective donors is to
learn all you can about the people who have already
given. Remember that your most valuable donors in the
future will often be those who have given in the past.
If you remain knowledgeable about gift planning, treat
everyone with the respect he or she deserves, and demonstrate
passion for your organization’s mission, you
should soon be on the path to success.
Mr. Sharpe and other faculty members will share
these and other strategies for success this year and
beyond in the upcoming seminar
“Philanthropy in 2010.”
See page 3 or visit www.sharpenet.com/seminars
for additional
information.
|
