Advancing Philanthropy

Perspectives—Philanthropic Planning: A Model for Transformative Gifts

photo of a man and woman sitting on a couch planning

Philanthropy can be transformative. Philanthropic planning is a powerful way for individuals to give to the charities they believe in and care about to ensure the charities’ long-term futures while also meeting personal planning objectives. It is an integrated solution meeting the needs of both the family and the charity for today and tomorrow, which makes charitable giving most meaningful.

Donor-centered philanthropic planning is an emerging model for raising funds. Instead of asking what individuals can do for particular charities, it asks what philanthropists need to accomplish for themselves, their families, and their futures. It seeks out what is really important to them in their lives. It then asks how charity can be integrated into their tax, estate, and financial planning to help meet these goals. The people and tools of philanthropic planning provide donors with the ability to meet both their personal planning objectives and their philanthropic goals to leave a more meaningful and lasting legacy.

equation for philanthropic planning

While a few sophisticated charities today utilize this model, most traditional nonprofits still use a charity-centered planned-giving or deferred-giving model. Regrettably, these two terms, along with the more modern “gift planning,” are often used interchangeably in the industry, so prospects and professional advisers have no real way to know whether the charity involved is focused on the needs of the charity, the tools, or the donor.

What Model Do You Use to Reach Your Constituents?

As our research has shown, charities must use a donor-centered approach to appeal to the New Philanthropists, all those born after 1946, including the older and younger boomers, Gen X, and millennial donors. This group now makes up more than 93 percent of all living donors (and that number is growing each year). If you continue to market to all donors with charity-centered appeals, you will only reach 7 percent of your prospects, the Traditionalists—all those born before 1946.

While each of the Traditionalist cohorts is unique and as a result behaves differently, fundraising for this group has largely been the same. In fact, it was due to the behavior of these three cohorts—the Depression, World War II, and postwar—that fundraising programs were built over the last 50 years. For all their differences, each of the Traditionalists came of age at times when they could trust charities. If charities showed that they had a valuable mission, the Traditionalists would support them, often with modest annual and major gifts, and then larger gifts at death. Most of the time, these gifts were unrestricted, with the donor trusting the charity to put the gifts to good use where the need was greatest.

Understanding the New Philanthropists

Unfortunately for charities, the experiences of the generations born after 1945 have been less favorable when it comes to trust, and charities no longer receive large, unrestricted gifts from this group. Older boomers, the first generation that had predominantly dual-income families, had little time to volunteer during their working years, but now that they have retired, they have time and may show interest in getting more engaged with their favorite charity as they age. They have directed and restricted their gifts much more than any prior generation. They do not trust charities to use their hard-earned money effectively, so instead they want to control how their gifts are allocated. They need to understand and be shown the impact a gift will have and the long-term outcome it will create. They need to verify that charities are using their gifts the way they’d intended, or they will not make additional gifts. They have generally indicated that they intend to spend their savings, to the extent they have them. Interestingly, this is the first generation that is looking forward to the inheritances it will receive rather than the ones it will leave.

Younger boomers came of age during a recession with high inflation, so they tend to love to haggle and look for value. Charities who use matching gift and challenge programs will achieve good results with this cohort. Similarly, gift structures that allow younger boomers to meet a personal planning objective, such as supplementing retirement income, should be successful. Charities need to show younger boomers the impacts their gifts will have and the outcomes they will create, in addition to verifying the usage of the funds and providing accountability by showing the gifts at work. If you don’t make giving convenient and easy and you don’t verify their gifts, younger boomers won’t give.

Due to the difficult time in which they came of age, with the stock market crash of October 1987, the recession of the early ’90s, and government scandals, Generation Xers are the most fiscally conservative cohort since the World War II generation, and they have little faith in government social welfare programs. Thus, they have participated at a higher rate in retirement savings programs. They are price-conscious and lack brand loyalty. If charities do not deliver impact, outcomes, accountability, and verifiability, as well as involve the donor in the gift, expect Gen Xers to make their next gift elsewhere. They prefer custom solutions, so gift plans that allow them to structure their own gifts in a way to fit their own needs will be ideal.

Millenials are now the most talked-about generation, and the most technologically savvy of the cohorts, but they do not have patience for the way that charities do business. They have yet to develop significant resources, so while it is fun to talk about appealing to them through social media, they lack the funds to make large major gifts now. They are brand-conscious and brand loyal and do have time, so if charities can offer meaningful volunteer opportunities and develop strong relationships, this group will give when their financial circumstances allow.

With the Knowledge of Generational Cohorts, Integrate Their Needs With a Comprehensive Strategy

To complete the transformation to philanthropic planning, particularly for the top 10 percent of all donors, you need to take the next step of integrating charitable gift planning with the needs of the New Philanthropists in a more sophisticated way using a comprehensive strategy. Not only does such an approach make it more likely that donors will maximize their philanthropy but it also ensures that they will craft a more meaningful legacy for their families and the charities they support.

It will require charities to develop significant relationships with their donors to understand what impact they want to have today, what outcomes they hope to achieve for tomorrow, and what legacies they desire to create during their lifetimes and beyond.

In order to reach this goal, charities can no longer work directly with their top donors without involving professional advisers. These valued advisers have access to the important details about their clients’ tax, estate, and financial planning. Their expertise is critical to the philanthropic planning matrix. Charities, donors, and professional advisers must work collaboratively to coordinate all of the different variables to fully integrate donor wishes into overall planning. When such an approach is implemented, the result is the creation of overall plans that:

  • Meet donor personal planning goals
  • Reinforce and pass donor values to future generations
  • Create meaningful legacies for the donor, the donor’s family, and the charities the donor supports

These combined charitable, estate, and financial plans will be tax-efficient and values-based, ensuring that the donor/client is able to realize a vision of philanthropy. They often allow for a blended gift (both a major and planned gift) that incorporates the best strategy for their situation.

So, get to know your donors, and collaborate with their advisers. Take a donor-centered approach and look to meet the needs of your prospects. The results should be exciting for your donors and may be transformative for your charity.

photo of Robert E. WahlersRobert E. Wahlers, MS, CFRE, is president of PEAK Philanthropic, LLC, a gift-planning consulting firm. Along with his co-author, Brian M. Sagrestano, JD, CFRE, Robert has written three books, including The Philanthropic Planning Companion: The Fundraisers’ and Professional Advisors’ Guide to Charitable Gift Planning, published by Wiley. Their work earned them the AFP/Skystone Partners Prize for Research on Fundraising and Philanthropy in 2013. Robert has more than 25 years of experience as a professional fundraiser and expert in major and planned giving. He is an adjunct faculty member at Columbia University in their master’s program in nonprofit management, where he teaches major and leadership giving. For more information, feel free to reach out to Robert at 732-740-6164 or via email at robert@peakphilanthropic.com.

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