Unrestricted gifts: Helping your donors break through the myths
The team at the community foundation frequently hears from nonprofit professionals about how difficult it is to communicate to donors the value and importance of unrestricted gifts. This is especially the case when you and your colleagues are striving to attract dollars to boost your operating reserve or endowment fund.
Here are five cut-and-paste talking points you can use in your donor communications to help break through the myths that often surround unrestricted giving.
Myth: A charity can use unrestricted dollars for anything it wants.
Reality: When a donor makes an unrestricted gift to a charity, it means that the charity has the flexibility to use the funds where they are needed most within the charity’s overall mission. A charity has a legal and ethical responsibility to use all donations–whether unrestricted or restricted–to carry out its charitable purpose.
Myth: Unrestricted gifts have to be big to make a difference.
Reality: Any size unrestricted donation, whether to a charity’s current programs and operations or to its endowment fund, is meaningful. To fund their missions, charities rely on all levels of donations from a wide variety of donors. Even very small donations help charities build relationships with new donors and expand the circle of awareness.
Myth: Donations that are restricted to supporting actual programs make the biggest difference.
Reality: A charity is like any other organization, whether for-profit or nonprofit, in that there are critically important expenses required to do its work. Rent, utilities, technology, and insurance aren’t technically “program” expenses, but without these expenses, a charity cannot function. Unrestricted gifts often help support these essential line items in a charity’s budget.
Myth: It’s hard to see the impact of unrestricted gifts.
Reality: Unrestricted gifts are vital for a charity’s overall sustainability and allow it to carry on year after year. Indeed, a donor who gives an unrestricted gift can look at the entirety of the organization’s impact and know that the gift helped make it all possible.
Myth: An unrestricted gift is not a “strategic” philanthropic investment.
Reality: Unrestricted gifts are arguably the most strategic type of giving because they demonstrate trust in the charity’s leadership to make the best decisions in carrying out the charity’s mission. An unrestricted gift also sends a signal to other donors that the organization’s leadership and staff are strong, which in turn attracts more support.
Please reach out to the community foundation for more ideas about how you can communicate the value of unrestricted and endowment giving to your donors. We are here to help!
Donor-advised funds: Your new best friend?
A donor-advised fund is one of many types of funds that an individual, family, or business can establish with the community foundation. You’re likely more aware of donor-advised funds than other types of funds because they are frequently covered in financial media and also because your organization might have received grants from donor-advised funds.
The team at the community foundation is happy to talk anytime to help demystify these popular vehicles. At the very least, however, you’ll want to check out the recently-released DAF Fundraising Report that sheds new light on the overall role of donor-advised funds in philanthropy and the significant value donor-advised funds provide to charities.
For example, the report revealed that when a donor starts giving from a donor-advised fund, their annual giving increases by 96%! Donor-advised funds are also helping keep philanthropy strong. According to the report, the number of donors using donor-advised funds has grown by 79% in an environment where the number of other types of donors has declined by 6%.
It’s absolutely worth your time to learn the basics of how a donor-advised fund works. You and your team also should consider developing strategies to identify and cultivate relationships with your donors who are using their donor-advised funds to support your organization. Dollars in donor-advised funds are already set aside for charitable giving, and it’s very convenient for donors to use their funds to support favorite organizations–like yours.
It’s also important to know that the team at the community foundation encourages donors to give directly to their favorite charities when that’s the best strategy to achieve a donor’s estate planning, tax, and charitable goals. Many times, though, both the donor and the charity benefit from the donor using a donor-advised or other type of fund at the community foundation. Examples include cases where the donor wants to give a complex asset, such as real estate or closely-held stock, or needs to plan out several years of giving to address fluctuating income levels and tax liability.
We are always happy to review how the community foundation works with donors through donor-advised funds and other vehicles to support your organization and others in the community. We look forward to hearing from you!
Planned giving and big gifts go hand in hand
The news about large gifts keeps coming! And “big bet” philanthropy in general has been in the news recently, reportedly because donors’ approach to giving at scale is changing thanks to a greater focus on relying on the experts in organizations to deploy resources for maximum impact and trusting them to do so. It’s also encouraging that donors are trending toward giving gifts in dollar amounts that are appropriate to tackle the scale of the challenge to be addressed rather than basing donations solely on the organization's current capacity and budget.
The team at the community foundation can help you maximize your ability to receive large gifts to your reserve fund or endowment fund. We do this by offering structure and services for you to house your fund with us. This, in turn, allows our team to help you with crucial fundamentals for planned giving tools to attract and accept large gifts, including:
–Support to accept complex gifts of alternative assets, such as real estate, closely-held stock, and even large blocks of publicly-traded stock
–Support to establish and administer charitable planning vehicles to benefit your organization, such as charitable remainder trusts and designated funds
–Support to help a donor establish a bequest to your organization in a will, trust, or–and especially tax-savvy for the donor–via beneficiary designation on an IRA or other qualified retirement plan
Indeed, planned giving, especially via bequests, continues to be an important source of funds for nonprofit organizations across the country. Some researchers have estimated that the historical average size of a charitable bequest falls somewhere between $37,000 and $78,360. That’s hundreds of times larger than the average one-time donation a living donor typically makes, which historically has been identified as hovering a bit over $100.
Please reach out to the team at the community foundation to learn how we can help you grow your organization’s endowment or reserve fund. If your organization has not yet established its fund with the community foundation, let’s talk! Now is the time to make sure your planned giving and endowment infrastructure is firmly in place so you can lean into the “big bet” philanthropy trend.