Greetings from the community foundation!
Giving season is upon us. We know 2022 has been full of challenges and surprises! The team at the community foundation is always happy to serve as a sounding board for all things charitable giving, especially when it comes to thinking about how to grow your endowment or reserve funds even during volatile economic times.
In this issue, we’re covering innovative ways to approach your fundraising, from making the most of GivingTuesday, to encouraging donors to give “alternative” alternative assets, to resisting the temptation to dip into your reserves.
We are grateful for the opportunity to help you inspire your donors, structure complex gifts, and implement strategies to grow your rainy day funds and long-term assets.
Thank you for your partnership.
–Your community foundation
Building your endowment: Is it time to get creative?
The team at the community foundation is committed to helping nonprofit organizations in our community identify savvy ways to inspire donors to make endowment gifts, especially in challenging economic times. Indeed, helping you facilitate gifts of unusual assets is a service the community foundation loves to provide.
When you (and your donors) think about “unusual assets,” real estate and closely-held stock may come to mind first. Those assets can make excellent gifts to charity. But don’t forget about gifts of intellectual property such as royalties, patents and trademarks, which, under the right circumstances, can be strong contenders among the wide range of options for a donor to give to your endowment.
The community foundation can help you, your donor, and the donor’s advisors identify the tax rules associated with gifts of intellectual property. For starters, you and your donor will need to take note of what’s known as the “fruit of the tree” principle. In short, this rule means the IRS will not allow a taxpayer to give away an asset's income–and the corresponding tax liability--without the taxpayer also giving away the asset itself.
Valuation is also an important consideration with gifts of intellectual property assets, just as it is with any hard-to-value asset. Before your donor gets too far down the road with giving a patent, for example, it is crucial to understand how that gift will be valued in the eyes of the IRS and to what extent it is considered long-term capital gain property.
Here’s the takeaway: Talk outside the box. In your conversations with donors about year-end gifts this season, ask a general question that might open up new sources of philanthropy. A possible conversation starter: “Do you own any patents, trademarks, or other intellectual property? Many donors are exploring how to structure gifts of these assets, especially as the stock market continues to present challenges for making traditional gifts of securities.”
Even if a donor is not ready to part with the intellectual property itself, the donor–an author, for example–might be open to directing honorariums to your endowment fund at the community foundation. While honorariums are still considered taxable income to the donor, the gesture is nevertheless significant not only in terms of the actual dollars, but also as a way for the donor to publicly show support for your organization’s future and inspire other donors to support your endowment, too.
Our team looks forward to hearing about your giving season conversations. We are always happy to help!
Make your GivingTuesday campaign a journey, not a destination
Though occurring only one day a year, GivingTuesday’s impact can last months and years when your organization embraces the initiative as a meaningful way to engage both new and existing donors.
As you prepare for GivingTuesday on November 29 this year, as with any campaign, it's smart to think long term. Fortunately, the immersive nature of GivingTuesday in the media presents an outsized opportunity to garner support from not only existing donors, but also to bring new donors to your organization.
Successfully transitioning GivingTuesday donors from making an initial gift all the way to considering an endowment bequest or planned gift requires a holistic approach. Your campaign will likely begin with any or all of direct mail, email, text, social media or tried-and-true phone calls. Many communications can be customized to acknowledge a prior year GivingTuesday gift or include a nudge to repeat.
And while a monetary donation is the goal, it’s really only a start. To continue the engagement process, show immediate and continuous—but well-timed and heartfelt—gratitude. Because many GivingTuesday gifts are made online and spontaneously, digital “thank yous” work well using these channels:
–A thoughtful acknowledgement or receipt sent by email, specific to GivingTuesday in words and imagery. Add a reminder message of the day’s significance and total results for your organization.
–A social media post that updates the campaign progress (while still respecting donors’ privacy).
–A personalized text message that is direct and to the point. (Make note of donors who reply STOP. Ignoring that ask can invite future pushback or alienation.)
–A campaign wrap-up message that reports results and reminds how the gift may be used.
–An end-of-year update reinforcing accomplishments and forecasting the upcoming year’s challenges and opportunities.
Certainly, following your GivingTuesday efforts, new donors will fall into these and other standard campaign efforts; indeed, post-GivingTuesday presents a nurturing opportunity for long-term success. Consult the team at the community foundation for help and expertise to build endowment or reserve funds that go beyond the funds needed for current operations. It is never too early to begin inspiring a new donor to think about supporting your organization’s ability to provide services for generations to come.
Tapping into your endowment is risky business
Just as market declines, inflation and job worries have individuals considering their overall resources as potential spending sources, your organization and other nonprofits may be doing the same as you seek to meet the community’s increasing needs in a cautious and concerning environment.
Rightly so, the quantitative penalties, such as 10% for retirement account withdrawals before age 59.5, give many individuals pause. So does the prospect of selling devalued assets in a downturn, which individuals know can compromise or undermine their long-term savings goals. Your instincts may be telling you that your organization’s endowment fund, similar to your own stock portfolio and retirement funds, perhaps also ought not to be disturbed no matter how bad the cash crunch may get. Your instincts are correct: Endowments must be handled with care.
For nonprofits, the penalties or considerations that accompany accessing endowment funds are potentially harsh. As your colleagues and board undoubtedly understand, this is because of the restrictions set by donors or by the board itself. That is why it is so important to carefully craft and review donors’ gift instruments; that is, the documentation that can include both the solicitation (how your organization intends to use the funds) and also the restrictions spelled out by the donor. If you’ve established an endowment fund, you are certainly aware of the risks associated with ignoring the all-important notion of “donor intent.” If a donor intends for a gift to be invested in an endowment, and that intention is well-documented, your organization must respect those wishes.
So, during the giving season this year, rather than spending time and effort defensively, why not go on the offensive by redoubling efforts to obtain new, renewed or increased gifts? Time and time again, in both nonprofit and for-profit spaces, organizations have reduced or shuttered their outreach, marketing or advertising in questionable times, only to later realize that those areas should have been fed, not starved.
Despite the times, capable and impactful donors remain viable. Further, reaching them by phone call or letter with a warm and genuine ask is inexpensive, and has high potential. Other communications tactics can be adjusted, and to paraphrase an age-old maxim, it’s easier to get gifts from existing donors than new ones.
By making more asks, not fewer, and by resisting the temptation to access your endowment or reserve funds, your team might be pleasantly surprised by the level of funding you are able to secure to continue delivering on your mission and serving the community. And, chances are, you’ll be building an even larger and more loyal donor base than you had before, thanks to the unexpected opportunities you’ll discover along the way.