Greetings!
The team at the community foundation is honored to help our nonprofit partners grow donors’ legacy giving and build endowments.
In this month's newsletter, we highlight two issues to watch as 2022 gets into full swing: How to leverage the emotional components of endowment fundraising, and how to navigate increased public scrutiny and IRS enforcement (yikes--but we are here for you!).
As always, the community foundation welcomes the opportunity to be your partner as you grow your donors' gifts. Please reach out anytime.
--Your Community Foundation Team
Maximizing legacy giving’s emotional components
During annual fundraising campaigns or other initiatives to raise current dollars, many philanthropy professionals rely heavily on the emotional components of their interactions with donors, such as the human needs being served by the nonprofit’s programs and stories of successful outcomes. This focus is wise because research tells us that emotional intelligence is critical to successful fundraising.
By contrast, philanthropy professionals frequently lean toward approaching charitable gift planning as a mostly rational exercise, probably because of the heavy tax and legal components involved in structuring trusts, bequests, foundations, donor-advised funds, beneficiary designations, and so on. Indeed, it’s critical to nail those tax and legal components to ensure that a donor’s charitable intentions are carried out in a financially-savvy manner.
But the emotional side of charitable gift planning is powerful and should not be overlooked. Any type of giving delivers psychological benefits to the giver. Think about the notion of an endowment gift. Its permanence can create a sense of immortality that is very important to the donor. What’s more, the donor’s values live on through the types of causes they support through legacy and endowment gifts, especially if the gift instrument clearly defines the donor’s intent and the impact the donor is hoping to achieve. Finally, many donors feel that making an endowment gift, especially through a bequest, is a fitting way to culminate–and in some ways make permanent–a long history of annual giving to an organization.
The key for nonprofit organizations is to balance the emotional and the rational during the legacy fundraising process. Engaging donors’ hearts and minds will lead to more success than cultivating an endowment gift using only one or the other approach. Sometimes it’s hard, though, to balance both parts of the conversation. That’s where the community foundation can help. When your organization has established its endowment or other legacy fund through the community foundation, our team can work alongside your team to cultivate endowment gifts. We’ll bring the tax and legal considerations to the table so that you can focus on tapping into the donor’s emotional desire to make a meaningful gift that lasts well beyond the donor’s lifetime.
What do increased IRS enforcement and public perception mean for your endowment-building efforts?
Increased IRS enforcement has been included as a major revenue component in various iterations of the proposed (and now stalled) Build Back Better Act. It remains to be seen what this legislation ultimately will include when (and if) it becomes law. Nevertheless, the IRS is already discussing its enforcement focus in what may be an emerging era of renewed energy for tax collection. In particular, the IRS has noted that it will be hiring more enforcement personnel specifically in its Tax Exempt & Government Entities division. At the same time, donors continue to read mainstream media stories about bad actors in the charitable world, and overall public trust in nonprofits continues to be shaky.
For nonprofit organization leaders who are intent on growing their endowments, the current environment is stressful. Fundraising and building an endowment have never been more important to preserving your organization’s mission, and the last thing you need are IRS enforcement and public trust headwinds!
The community foundation can help. By working with the community foundation to manage your endowment, you are adding an extra element of credibility to instill even more confidence among your donors. The community foundation is an independently-governed nonprofit organization that is dedicated to philanthropy in our region and committed to helping nonprofits improve the quality of life for the people they serve. Our team can help ensure that the i’s are dotted and the t’s are crossed so that you can fundraise with confidence and build a healthy endowment based solidly in donor trust.