Important Opportunity... IRA Giving

Oklahoma City Community Foundation explains the renewed tax provision that expands opportunities for IRA giving

As a reminder (since many seem unaware of it), the tax law that expanded IRA giving was renewed during the recent economic stimulus package.

Thanks to the Oklahoma City Community Foundation for this nice explanation:

Here it is in brief:

For the tax years 2008 and 2009, individuals age 70½ and older can transfer up to $100,000 per year from an individual retirement account (IRA) to a charitable organization without incurring income taxes today or estate tax in the future. If married, each spouse can transfer $100,000 per year from his or her IRA. Prior to this law all lifetime distributions from IRAs were taxed even if the distribution benefited a charitable cause. The provision is time-limited; it applies only to qualified distributions made before January 1, 2010.

Here it is in full, with some examples:

http://www.occf.org/retirement.html

[where: 75223]

The Caruth legacy continues to shape Dallas' non-profit scene

Portrait of a Donor: Mabel Peters Caruth (click here for full story)

Thanks to the far-ranging vision of lifelong philanthropist Mabel Peters Caruth, who passed on her estate to the Communities Foundation of Texas in 2000, the amazing legacy of her family's generosity will continue to grow.

The Caruth family, which has been a leading part of Dallas since 1948, donated much of the land that is now the home of the Southern Methodist University (SMU). Now, thanks to Mrs. Mabel Peters Caruth's final act of generosity, the family's house will become the new home to two of Dallas' most pretigious benefactors: the Hoblitzelle and Summerlee foundation, which are both currently housed in the same building in Preston Center.

The long partnership between all three of these foundations can only be enriched and deepened by this move, which bodes well for all non-profits in Dallas. Thanks to Brent Christopher and his staff at CFT for leading the charge to forge a better future for Dallas.

Here is an article with the details:
Dallas Morning News: Foundations to occupy restored Caruth home

Are You Ready to Launch a Bequest Program?

I could not resist...

Are You Ready to Launch a Bequest Program?

Would you rather have one $100,000 donor or 2,000 $50 donors?

UPDATE: Thanks to Unfair Park, GiftHub and The Chronicle of Philanthropy for linking to this post.

The anonymous blogger at Don't Tell the Donor.org makes some interesting points but overlooks some important details in their recent blog, "The difference between philanthropy and fundraising."

In summary for those who read this blog through syndication, the blog states that:

"I know some nonprofits that rely on big gifts from a small group of philanthropists in order to keep their doors open, however I personally feel better when an organization has hundreds (maybe thousands) of individual members who give provide many nonprofits with their mandate to exist."

We could argue pretty fruitlessly about the issue of needing to validate the organization's mandate (which I only see as relevant in order to satisfy the IRS' private vs. public charity test; it's a matter of tax benefits, not public good). However, I think that some valid points can be made on the matter of how these two scenarios impact non-profit organizations (and fundraising offices in particular).

In many ways, the anonymous blogger is right that it is better to have 2,000 gifts of $50 rather than a single gift of $100,000.

First of all, this situation is more sustainable. Making a political mistake with a donor in scenario one costs you $50, rather than $100K in scenario two.

And yes, as a fundraiser whose organization relies on major donors, I can tell you that there are people who have given upwards of $100,000 per year who suddenly stopped giving because we invited the wrong speaker to an event or our CEO made a comment with which they disagreed.

This is the downside of major gift programs: the tyranny of the donors.

(See this blog from Larry James, CEO of our organization, about Justin Hudnall's fabulous article, "Giver's Greed")

Second, the mission is more likely to be the focus rather than the donors if you receive lots of small gifts rather than a few large ones. As much as I support the sort of donor-centered fundraising advocated by Jeff Brooks at the Donor Power Blog or Phil Cubeta at GiftHub, major donors can wield undue influence over organizations that can frequently distract these organizations from their mission.

And yes, in the same way that I can give you examples of major donors who have pulled their giving to Central Dallas Ministries because of silly faux pas, I can also cite several instances in which we have been driven to make unwise decisions because a large checkbook was behind them.

I am proud to say that we have also turned down lots of money along the way because it would have pulled us off strategy. And I mean 6-figure and 7-figure gifts... nothing to balk at. We've maintained our integrity in key moments when donors were pushing the organization in the wrong direction.

But we are not perfect, and major donors have wielded disproportionate influence over our work at times.

And yes, we have at times been guilty of chasing money.... writing and securing grants for new programming because the money was available, not because we had the program in place and needed to fund it.

Again, these are problems that you would not have in the scenario of relying on many small gifts rather than a few large ones.

And if you're the Salvation Army, with a bucket on every corner soliciting pennies from the public, you don't have even to worry about filing a Form 990.

There are some problems, though, with relying on the masses for the bulk of your support.

First, some practical problems for the fundraising officers:

1. If you believe in good stewardship, you send a receipt for every gift that you receive regardless of size. At $0.41, receipting 2,000 gifts is over $800 in postage. Factor in the costs of paper and printing, and your spending 1% of your gift just on bare-bones stewardship.


2. Someone has to enter that information into your database and print those letters. Assuming it takes 2 minutes per acknowledgment (likely a very conservative estimate), that's nearly 67 hours in staff time. At a minimum wage of $5.85 per hour, that's an additional $4,000. Since most development officers make at least twice that, you're now talking about an additional 1% of your gifts on just bare-bones processing.


3. Someone has to spend time depositing those gifts. That's more staff time, and possibly fuel costs. Likely, this is another 1% of your gift.


4. Many of those $50 gifts will come in via credit card. That's another 3-5% cut off the top.


5. You can therefore conservatively estimate that you will receive $6,000 to $8,000 less in the scenario of 2,000 $50 gifts rather than a single $100,000 gift.

These are just a few of the immediate costs associated with receiving lots of small gifts rather than a few large gifts. This doesn't even begin to include the costs of newsletters, event invitations, annual reports and other communications mailed to these donors. The costs can quickly grow to the point where these thousands of small gifts begin to contribute less and less to your organization's mission.

Let's take it to the next level: It is nearly impossible to build relationships with 2,000 donors who give you $50 compared to single donors capable of giving you $100,000. The return on investment of spending time calling $50 donors, sending them personal notes and meeting with them to tour programs is simply not there compared to cultivating major donors.

Are there people donating $50 to your organization who are capable of donating $100,000? Certainly. In fact, my organization recently received a commitment of $5,000,000 from a donor whose first gift was $100.

But this was a very rare exception to the rule. Although we eventually did a very good job cultivating this donor, his initial gift brought forth no such stewardship. In fact, he would have gone completely unnoticed without the help of an outsider -- who did not even know about his first $100 gift -- who referred him to us as a place to donate $50,000 at the end of last year.

This gift got our attention... which helped us to then add two more zeroes to that commitment within 12 months by stewarding the relationship.

We never would have done this for someone who donated $50 unless we realized that they were capable of the major gift.

On a related note, there is an insightful blog about at the Donor Power Blogcalled "The secretly wealthy donor fantasy." This blog debunks the myth of the $90,450 Direct Mail donor (in brief, they criticize that justify continually mailing the small-gift donor by saying that they may leave them money in their will when they die).

I do not believe that major giving programs should fully replace all other forms of fundraising (in fact, I previously blogged about some the problems of major gift fundraising in my November 10 blog, "UT Southwestern: A Case Study in the Core Problem with Major Gift Fundraising.").

However, if I had to choose between $100,000 from one person vs. $50 from 2,000 people, I would realize that there would be far more ramifications to my choice than simply the validation of my organization's mandate to exist.

I am thankful for the Don't Tell the Donor.org blog. At the end of the day, I think that any successful fundraising program needs to integrate both a high-volume, low-dollar annual gift program alongside a major giving program driven around a small number of high-dollar gifts.

Stay Relevant

The PlannedGiving.com Web site recently published a very insightful -- and graciously brief -- article on the problems of inundating your supporters with irrelevant emails:

Using e-Marketing or “Spam” to Promote Planned Giving? Think Again.

On a somewhat related note, my friends at Sagax Media offer some simple but strong advice on their recent blog, "Update your site."

If you have your own website, make sure you're updating it often. Not only are you providing more information for potential customers, but you're also telling the search engines that your site is becoming more useful. The search engine spiders see an active site and they see someone that's trying to be helpful to site visitors, and they'll reward that effort with higher search rankings.

Spiders are an essential part of search engine rankings. I had never realized that the recency of page updates factored into their rankings -- it would be good practice to regularly review and update every page on your site. Even if your changing a few words or one picture, it will reflect as an updated site.

Similarly, some other things that you should do:

• Change the front page of your Web site each month, or at least have some dynamic content that will show different images each time a visitors comes to your site. You want your visitors to have a reason to come back to your site and to click around. Even if the secondary pages are the same, they have a better chance of being reached if visitors have a reason to feel that there is new information on your site. For an example, visit this site and hit refresh a few times; the main picture should change each time through a simple script embedded in the page.
  
• Update your receipt letters as often as possible; at the very least, have a paragraph that you update quarterly that describes what's happened over the past few months. This will ensure that your most valuable donors -- those who give multiple times a year -- remain interested in everything that you send them. If they begin to tune you out, you're on a downward slide that is hard to reverse.
  
• Update your grant templates at least annually: set aside time at the beginning of the year to find the latest versions of the research/statistics that you cite in your proposal so that you have the most up-to-date information possible. This is especially the case if you apply to the foundation multiple years in a row.

Staying relevant is key to staying top-of-mind with your donors. As we approach the end of the year, and all of your donors are getting buried in appeals for support, you want to stand out as the first organization that they think of when it comes to end-of-year charitable gift planning.

Centers of Influence and Planned Giving

Thank you to Phil Cubeta for encouraging me to attend this week's meeting of the North Texas Chapter of the National Committee on Planned Giving. The topic was "Translating Ideals into Action: Tools for Effective Planning with Your Client or Donor."

The speakers included:

• Dodee Frost Crockett, CFP, First Vice President and Senior Financial Advisor, Merrill Lynch;
  
• Kathryn Henkel, JD, Partner, Hughes and Luce, LLP;
  
• Michelle Monse, JD, President, Carl B. and Florence E. King Foundation; and
  
• moderator Jayne Grimes, CFP, Carter Financial Management, North Texas Chapter NCPG board member

The presentation was very informative, and reminded me a great deal of some recent conversations we've had at Central Dallas Ministries about working to engage the "centers of influence" who can affect our top prospects. For example, finding ways to educate financial planners and estate attorneys about CDM, so that they can refer their clients to us.

We are very grateful to the work of New York Life's Phil Cubeta in this regard, as well as our extremely devoted volunteer Bryan Cook, from UBS.

At one point in the presentation, the panelists were asked if they ever recommend specific charities to their clients. They all agreed that it is hard enough for planners to even ask their clients if they have charitable intent, let alone urge them to give to a specific charity. This was discouraging to me, but I understand the difficulty that they face. Asking about charitable intent is a loaded question for an advisor, akin to "are you or are you not a good neighbor?" or "how much or how little do you care about other people?" The client could feel very pressured to be or act a certain way, which is not the case when asked about their risk tolerance or even their feelings about leaving wealth to their children.

The panelists agreed that the only way they've ever recommended a charity is at the client's request, and then it is usually for advice on what sort of charity addresses a cause they already care about (i.e. "I want to help orphans in Dallas -- who does that?"). So, it's very unlikely that a wealthy donor will ask their financial planner, "Can you recommend a good charity to be the beneficiary of this foundation we're setting up?" (and even less likely that the answer will be your organization).

One of the planners did say that they keep an updated file on the "big charities in town.... Children's, the DMA, the Opera, UT Southwestern." No social services agencies were mentioned.

However, what really struck me was that the advisors all agreed that, when asked for advice on what sort of charity is involved in a particular cause, they call someone like the Dallas Foundation, the Communities Foundation of Texas or the Communities Foundation of North Texas to see "who is doing the best work in that area right now."

This confirms my belief that every local non-profit should submit a grant proposal to each of these foundations for every deadline that they have. And if you're like Central Dallas Ministries and have multiple services, submit for a different program each time so that they learn about your various services.

I think it's still wise to consider opportunities to engage advisors in learning about your organization's work for the purposes of referring clients to you, however unlikely it might be.

However, what is probably more valuable is to find ways to engage your current donors in considering ways to plan their lifetime giving.... and no, not just to your organization. Create forums in which they can consider the variety of organizations that they care about, and causes that resonate within their soul. Empower your donors with the ability to dream.

I think you'll find that our donors appreciate your concern for securing your relationship them, not with their estate. And I honestly believe that the funds will still be there for you.

And then, you need to be ready to have an advanced conversation with donors about what their giving options are. We don't all need to be experts on financial planning -- that's what people like Phil Cubeta and Bryan Cook are for. However, you need to be familiar with concepts like charitable remainder trusts and be able to explain them to donors.

I truly believe that fundraisers need to think of themselves less as marketers and more as financial planners.

Perhaps we should change our titles from things like "Director of Development" to "Philanthropic Advisor" or "Charitable Coach"?

I wonder how the title "Wealth Counselor" would look, embossed in gold, on a business card?

Speaking of counselors....

RANDOM QUESTIONS: Did they ever need philanthropy in Star Trek?

Three Ways Fundraisers can Dramatically Increase Gifts from their Best Donors, While Making the Donor Delighted

Lest I simply turn my blog into a giant arrow pointing at Phil Cubeta's blog, I will paste my comments about today's article below the link:

Gift Hub: Inspired Legacy Partnerships - Three Ways Fundraisers can Dramatically Increase Gifts from their Best Donors, While Making the Donor Delighted

I believe that this idea is noble and timely, and my hope is that the current trend for "giving now" moves beyond the famously wealthy (Warren Buffett, Boone Pickens, etc.) and down to the less famously, but still extravangently, wealthy people of our world.

My concern with implementation is single: we non-profits rarely are in a position to focus on the long-term cultivation of donors necessary for such a quest. It is one thing for Charles Collier of Harvard to adopt such a stance, as he sits atop one of the world's largest piles of gold (Harvard's endowment). For him, there is no desperation to pay his own salary or keep the lights on in the library.

That being said, I think that the first step is to get non-profits' boards involved in this process. Anyone willing to step up to the plate to serve as a trustee should be willing to spend a few hours additional time pondering the impact of their life's philanthropy.

Of course, every board is different. I currently work for an organization that struggles to get a quorum at our quarterly meetings (that's right, not monthly but quarterly). I am afraid that we would struggle to get anyone to attend an event like this... even though our intent would be pure, the perception would be that we want them to write us even more heavily into their will (i.e. we are thinking of killing them off to get the big bucks).

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On a slightly related note.... this blog challenges the inherent selfishness of some donors' philanthropic pursuits:

Give and Take: Message to Donors: It's Not About You

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What do you think?