Times are tough! Your organization is facing fundraising challenges on multiple fronts:
–Inflation is increasing the costs of delivering your mission, which means you have to raise more money just to maintain the same level of service.
–At the same time, the communities you serve are relying even more heavily on your services because of their own financial struggles.
–What’s more, the value of your endowment or reserves has likely declined alongside the stock market, which means the income you rely on from these assets is lower.
–To top it all off, your donors themselves are feeling the heat of economic turmoil, which makes fundraising even harder.
That’s a lot!
The community foundation is here for you. In this newsletter, we hope to offer ideas and inspiration to help make your work easier, even if just by a little.
We appreciate the opportunity to work with you as you grow your planned giving program, endowment, and reserve funds to make our community a better place through the good times, bad times, and everything in between.
Take care,
–Your friends at the community foundation
Feeling that pinch: Fundraising food for thought
The daily news may not be offering overwhelming hope for a productive giving season, but that shouldn’t stop you from charging ahead with plans to secure the philanthropic resources your organization needs to carry out its mission. Here are three ways you can take action.
First, stay in touch with the team at the community foundation. Every day, we are talking with families, individuals, and businesses about their charitable giving goals, and we help develop creative ways to meet those goals even during tough economic times. As you meet with your donors, listen closely for the desire to give tempered by hesitation in light of the wild stock market and inflation. Donors who are feeling this tension may be good candidates for planned giving commitments such as bequests and charitable remainder trusts. The community foundation is happy to help structure and facilitate those gifts alongside your team.
Second, keep talking about stock gifts. We mention this a lot, for good reason! Giving appreciated, long-term capital gains property is extremely tax-efficient for the donor, which can translate into a bigger gift to your organization. And despite Wall Street’s woes, not all stock is down. Plenty of donors still hold highly-appreciated publicly-traded stock, and many donors own highly-appreciated private company interests. The community foundation can help you structure gifts of either of these types of investments.
Third, don’t ignore your endowment. It may seem counterintuitive, but sometimes an economic downturn is the best time to start talking with donors about major legacy gifts to your endowment or reserve fund. When everyone is feeling the pain of the economy, it may be easier for donors to empathize with your organization’s need to have plenty of reserves on hand to ensure that in future periods of hard times, you will not need to turn away people who need help. Talk with the team at the community foundation about how donors can make gifts directly to your endowment fund at the community foundation.
Refining your focus on high net-worth donors
Research shows that the number of donors is declining, while the size of donations to charities is increasing. This “dollars up, donors down” phenomenon is, on one hand, unsettling, but it does present opportunities for your organization to zero in on building relationships with key donors who can truly transform your programs and significantly boost your endowment or reserves.
Here are three common-sense ideas for refining your focus to activate key donors:
Warm up your “Hot 100”
Build a “Hot 100” list of your donors who have the highest potential for arranging a planned gift, regardless of today’s economic circumstances. Certainly your donor list is much longer than 100; the discipline of selecting only the top 100 forces you to prioritize and focus. Include each donor on your Hot 100 list for a specific reason. For example, you’ll want your Hot 100 list to include donors who own real estate that continues to go up in value, donors who own businesses in industries that are doing well right now (pharmaceuticals, for example), and donors who serve in high-income corporate and executive roles whose compensation is unlikely to significantly decrease despite poor economic conditions.
Activate your inner discipline
Review your Hot 100 list daily by yourself and at least weekly as a team, identifying natural points of communication (e.g., forwarding a mission success story, meeting up at a community event, dropping a note for a birthday, etc.) Of course, you are already doing these things as part of your normal donor cultivation. What’s different about the Hot 100 approach is that you are reviewing your top prospects every single day and looking for opportunities to connect.
Adopt a “Meaningful Conversations” methodology
Consider utilizing the “Meaningful Conversations” method to cultivate these donors toward a planned gift. In this situation, a “Meaningful Conversation” is any interaction between your organization and a Hot 100 donor that materially enhances your organization’s relationship with that person, making that person more likely to work with you on a planned gift within the next 12 - 18 months. By tracking the activity (i.e., each Meaningful Conversation), you are focusing on relationship-building activities with key donors without getting hung up on closing a short-term gift. A series of Meaningful Conversations with a key donor will begin to pay off over time, especially as the economy emerges from its slump. You not only may find that your planned giving success rate increases, but your annual giving success increases, too, throughout the course of these authentic relationship-building activities.
As always, please reach out to the team at the community foundation for assistance with planned gifts, gifts to your endowment or reserve fund, or any situation where the donor may be more likely to give if the community foundation is involved as a facilitating third party.
Quick tips and updates
Rising interest rates and charitable gift annuities–a winning combination?
Clearly, your donors’ charitable giving priorities are impacted by interest rates. Charitable components of your donors’ estate and financial plans are no exception. For example, charitable gift annuities are becoming more attractive to donors. Thanks to the recent increase in rate of return assumptions for charitable gift annuities, this planned giving vehicle is now more attractive to people who like the idea of a higher payout rate for their lifetime annuity.
Charitable remainder annuity trusts–also a perk with rising rates?
A charitable remainder annuity trust can be an effective alternative to a charitable gift annuity for certain donors. Indeed, creating a charitable remainder annuity trust in a high interest rate environment, versus a low interest rate environment, drives down the present value of the donor’s income stream, which means that the value of the remainder passing to your organization’s endowment fund at the community foundation is relatively high and therefore so is the donor's up front tax deduction for the charitable portion of the gift.
More reasons to love the QCD
Qualified Charitable Distributions are already an amazing planning tool for your donors who are over the age of 70 ½. As you no doubt know, the $100,000 QCD allowance from a donor’s IRA counts toward satisfying the donor’s Required Minimum Distribution and avoids the income tax on those funds. Plus, those assets are no longer part of the donor’s estate at death, which avoids estate taxes, too. What’s more, the QCD may get a boost if the EARN Act becomes law; proposed bipartisan legislation would expand the QCD rules to allow a one-time, $50,000 QCD to a split-interest trust such as a charitable remainder trust.
Please reach out to the team at the community foundation for help with these and other planned giving transactions. In many cases, incorporating a fund at the community foundation–whether your organization’s endowment fund or the donor’s own fund–into the strategy creates benefits across the board. You’ll also benefit from our team’s behind-the-scenes assistance to help you communicate, structure, and secure the planned gift.
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.