Blended Gifts A funding key to growing endowment

Blended Gifts A funding key to growing endowment resources Association Foundation Group Edge Conference, August 2020 James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists www. connellandassoc. com for PDF of presentation www. connellandassoc. com/articles

Woman leaves $13 M fortune to pet cat § § Tommaso the Italian Cat, from the streets of Rome to a villa in Milan and Calabria § “Without putting in the hard work of generating planned gifts - 90% of donor mortality will simply result in lost current giving” Only 5. 3% of older Americans have made a charitable bequest commitment While 33% are willing to consider such a gift (source: Russell James)

Donor matrix and motivations

Agenda n n n n n Three kinds of gifting Traditional vs Planned giving Blended gifts stages & combinations Wealth and age gift matrix Donor life stage planning at any age Endowment gifts steps to success Blended gift options Case studies Marketing matrix Resources

Three kinds of gifts OUTRIGHT GIFTS • Immediate gifts • QCDs • Bargain sale • Installment bargain sale • Retained life estate • Donor advised funds ESTATE LIFE INCOME GIFTS • Will or Trust bequest • Beneficiary designations • Life insurance • Retirement plans • POD or TOD • Testamentary pledge • Gift annuity • Charitable trusts

What gifts can do for you

What gifts can do for you Key: CGA – charitable gift annuity CRT – charitable remainder trust, CRUT – Unitrust, CRAT Annuity trust, NICRUT – net income makeup unitrust, Flip-CRUT PIF – pooled income fund

Traditional VS Planned Gifts n Tell donor about current needs that are real and urgent n n n Donor gives on the basis of a specific ask n n Donor makes immediate gift or pledge Ask donor what their needs and goals are Donors give because of their values Donors need time to plan how they will structure their gift and accomplish their personal, financial and estate objectives

Traditional VS Planned Gifts n n Donor’s gift is from their income Approach used involves n List of current projects, programs and needs n Identification of prospect n Cultivation of prospect n Ask for gift n Special events n n Donor’s gift is from their assets Planned gift approach begins with identification of those who already have n Ownership n Gift history n Leadership n Volunteer history

Rules of the road to success in planned giving n 1. If you are not asking your prospect for planned gifts, some else is n n Eventually that some else will steal your cash gifts too 2. Cash starved times are the best times for planned giving. Covid-19 created a rush to planning, +400% increase for On-Line will makers, https: //www. investopedia. com/best-online-will-makers-4843732 n 3. Charities who even dabble in planned giving eventually generate 50% to 100% more than those who don’t

Rules of the road to success in planned giving n 4. Typical planned gift is 200 to 300 times the size of a donor’s largest annual gift n n Respect the lifetime giving capacity of donors 5. Planned gifts do not have to effect the prospect’s cash flow 6. Prospects are eager to make a planned gift, but simply don’t know how 7. Prospects making gifts through their wills typically increase their annual support, n Russell James study annual support increases 75%, after an estate plan includes charity, see appendix

Stages of blended gifts n Stage 1 - Why and what n n Why this donor What is their passion n n What is the strategy n n How will donor be effected by blended gift proposal Do we have a dollar goal for this donor What is our relationship strength with this donor Do we have a strong case for support n n What impact will a blended gift have on our organization What is donor capacity n n Specific or general in nature Is this the best time for a blended gift approach Stage 2 – How – connecting the dots

Blended gifts n n n Blended gifts may be transformational gifts Help achieve aggressive campaign goals Blended gifts are donor centric strategies n Create personalized philanthropy n n n Philanthropic Financial Family or personal A blended gift ask does not leave any assets on the table No negative effect on outright giving n Membership in Legacy Society increases ownership of mission which leads to increased annual giving

Why donors like blended gifts n n n Only some donors can make the entire gift outright with no strings attached - philanthropic capacity Many donors want lifetime access to principal & income therefore bequests become the main option Some donors will donate principal if they receive income n n Gift annuities and Charitable trusts Some will donate income and/or principal if heirs ultimately receive some benefit, percentage beneficiaries n Life insurance and retirement plans

Blended gift combinations Something now n n n Something in between Cash Securities Real estate n Art & Collectibles n Personal property n Income interests § Gift annuity § CRUTs Something later § Will and Trust § IRA & Retirement plans § CRATs § Life insurance § Bargain sale § POD or TOD § Retained life § Commercial estate § product beneficiary designations Donor advised fund designation

Philanthropic – Financial – Family legacy Transformational Proposals Financial planning Philanthropic Donor Passions Family legacy Explore donor passions first and match interest with organizational priorities

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Wealth and Age Matrix 18

Stages of our financial life $100 $90 Distribution $80 $70 $60 Conservation $50 $40 $30 Accumulation $20 $10 $0 22 30 31 35 36 40 41 45 46 55 55 60 61 65 66 70 71 75 76 80 81 85 86+

Planned giving at any age Brochure Link

Planned giving at any age

Planned giving at any age

Planned giving at any age

Planned giving at any age

Endowment gifts 5 steps to success n 1. Establish endowment policies and protocols n n 2. Securing money for endowment priorities n n Investment policy statement, asset allocation, risk controls 4. Developing a spending formula n n Bequest challenge, capital effort, % of current annual funds, counting procedures 3. Investing for endowment growth n n Endowment task force, resolution, sample protocols, communication plan, minimum gift amounts % of 3 year average fair market value, % of earning from previous year, % of end of year total return 5. Building a budget surplus % from parent NPO

Blended gifts structural options

Case study #1 Today + 5 years + estate n n n Margaret dies and Jim establishes a scholarship fund Goal $100, 000 scholarship fund n Withdrawal amount 5% or $5, 000 whichever is greater Scholarships of $1, 000 to 5 students for health related studies Initial gift $25, 000 Current gift to fund all first year scholarships $5, 000 Pledge of $5, 000/year for 5 years n Backup estate gift to fund unpaid balance, if not completed within 5 years. Client and personal gifts complete funding n 2019 report - $89, 125 awarded to 98 students, FMV $152, 435 n

Case study #2 Major gift + income replacement + estate n n n n n Jody, age 77, 2 children, recently remarried, opera board Trust fund supports children Comfortable investment income for travel & gifting In-kind support for opera gala and other events $1, 000 request for named singer endowment Capacity known but not comfortable with a today gift 10 -year blended gift proposal $100, 000 today (funded with stock) 5 years of $100, 000 - 6. 0% gift annuities to replace lost income Estate commitment for any balance due

Case study #3 Gift annuities+ estate n n Fred, GM retiree, divorced, no children, 80 s Memorial gift $1, 000 to hospice, then $10, 000 QCD Over many years establishes 9 CGAs, value $251, 525 Approached for building naming opportunity n Refused for multiple reasons: n n Completes a documented estate commitment for $1, 000 n n not the time, friends will know I have money, need income from assets Minus previous gifts, including CGA Dies in 2018, building named in his honor

The blended gift road to success has may routes to get there n n Chronicle listings: A $250, 000 bequest from Mary and Rolf Shepard will endow a scholarship from their estate for the School of Nursing. n The fund will also benefit from 15 $10, 000 charitable gift annuities the Shepards established over the past 15 years. Occidental College: Bob Winter, Faculty Emeritus – Blended gift, Retain life estate & charitable annuity Link to Bob’s full story

Simple marketing opportunities n 1. Consider a bequest challenge campaign to increase your endowments which also has an annual giving component n Not strictly a blended gift as it may involve multiple people Bequest Primer download

Simple marketing opportunities n n n 2. Put - “Remember XXXXXX in your will or living trust and estate plan” on your letterhead and in your email signature 3. Put - Bequest wording examples on your web site. Be sure to include your exact name and tax exempt number in wording. 4. Print – Sample bequest wording flyer and send it to all attorneys and professional advisors in your universe 5. Write – Separate articles on each type of bequest options for your publications and social media 6. Write – Stories on bequests received

Simple marketing opportunities n 7. n 8. n 9. n 10. Web site - Put downloadable file of bequest flyer developed for professional Place – Bequest society brochures in a convenient place next to recognition plaques or on a brochure takeaway table Website – Put current Bequest Society brochure as a downloadable file advisors n n Stuff – Bequest options and gift annuity (Word) flyers in gift thank you notes or receipts Add a codicil example in print format 11. Web site - Put current list of bequest society members on your web site n n Alternative is a PDF download file of current and deceased members as separate tribute listing Add pictures of current members being inducted to society at your recognition event

Simple marketing opportunities n 12. Web site – Construct a mission video for your main page or development page which links to your support/ bequest/planned giving pages n 13. Social media – Place a bequest story on your social media page n 14. Social media - Construct an estate planning quiz that drives inquires to your web site n 15. Turn your board into Bequest Ambassadors by creating a Planned Giving and Bequest Handbook n 16. Put a Meet Our Donors with pictures and stories on your website. They have powerful messages n 17. If you form a Professional Advisor Counsel put a Meet Our Advisors page with pictures and full contact information on your website. n 18. Develop laminated 4 X 6 card with stock transfer information for advisors and include bequest wording on back

Web site providers n Crescendo Interactive n www. crescendointeractive. com n Various costs estimate $5, 000 n Future Focus n n n www. futurefocus. net n Set up $500, Annual $799, plus optional calculator n Pentera n n https: //pentera. com Various price options Plannedgiving. com Sharpe Group n n n https: //plannedgiving. com $495+ set up for various levels www. sharpenet. com Various costs estimate $5, 000, includes calculator Stelter Group n n www. stelter. com Various plans estimate $2, 000 - $5, 000

Gift annuity providers n The National Gift Annuity Foundation n n https: //charitablesolutionsllc. com/national-gift-annuity-foundation/ $20, 000 minimum, age 55 All states except Hawaii Raymond James Charitable n n n https: //raymondjamescharitable. org/charitable_gift_annuity. htm $50, 000 minimum Not available in AL, AR, CA, HI, MD, NJ, NY, WA or WI Online applications and agreements Also offers charity advised endowment accounts n n Minimum $25, 000 Charitable Gift America n https: //cgaamerica. org/

Real estate gifts n Realty Gift Fund n n https: //www. realtygiftfund. org/ The Philanthropy Alliance n n Charitable gifts of real estate simplified Copy and paste: https: //www. realestateforcharities. org/wp-content/uploads/2019/03/THEPHILANTHROPY-ALLIANCE-Email-Attachment-002. pdf

Blended Gifts A funding key to growing endowment resources

Fear prompts estate planning Covid 19 fallout Russell James study