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Financial Considerations When Setting Up a Legacy Giving Program

There’s a financial case for setting up a legacy giving program for your nonprofit, as legacy giving accounts for the third-largest source of charitable contributions behind individuals and foundations, respectively, but ahead of corporations.

And of all fundraising types, legacy gifts offer the highest return on investment. Organizations can expect an average return of $56.83 on every dollar spent on fundraising bequest gifts, according to research by AskRight. By comparison, major giving has a return of $33.33 per dollar, while regular giving gets $8.41 per dollar.

Creating a legacy program requires some planning and budgeting, though, and there are several considerations involved. Here is a guide to what nonprofits need to know and what steps to follow.

What is Planned Giving?

Also known as planned giving programs, gift planning, or deferred giving, legacy giving is when donors leave their money or assets to a charity of their choice after their death.

Bequests, which account for most planned gifts, make up the third-largest source of contributions for charities behind individuals and foundations, respectively, and ahead of corporations. In 2019, bequests accounted for 10% of charitable giving, according to research by Giving USA. Overall giving reached nearly $450 billion, and more than $43.2 million came from bequests.

Develop a Legacy Giving Strategy

Coming up with a strategy is the first step to creating a legacy giving program. Remember to:

  • Leverage demographics. Mine your donor-based data to develop your legacy giving donor base. Identify which donors might be interested in legacy giving based on factors such as age and years of involvement with your organization. According to Giving USA, more than half of donors surveyed contributed to the same organization for more than 20 years, with 52.8 years old being the average age when donors made their first planned gift.
  • Educate your board. Your board’s buy-in is essential. You’ll need to convince board members a legacy giving program is necessary to your organization’s long-term financial health — and thus a worthwhile investment. According to Giving USA, 7% of planned giving donors said their annual gifts to the organization they support increased after making a planned gift.
  • Determine how you will recognize donors. You can put a donor’s name on a building, scholarship, or institution to help them carry on their legacy.

Encourage Donors to Put Their Wishes into Writing

  • Motivate donors to make a will. Nearly half of Americans 55 and older do not have wills, according to 2019 findings by Merrill Lynch and Age Wave. In that age group, only 18% have the recommended essentials of a will, a health care directive or proxy, and power of attorney. Although organizations can encourage donors to create a will and offer resources such as attorneys and estate planners, a nonprofit cannot be directly involved in creating a person’s will and could face legal challenges if accused of “exerting undue influence.”
  • Remind donors to name your organization. Creating a will is just the first step to legacy giving. The donor will have to name your organization as a beneficiary to seal the deal. Individuals who include a charity in their will accounted for only 3% of Americans in 2020, according to a Give.org survey. Again, nonprofits cannot dictate to donors what they should put in their will, but they can offer printed materials such as newsletters with general guidance on how to word a bequest appropriately.

Seek Out Professional Resources

  • Bring in outside advisors and consultants. Professionals can help your nonprofit establish policies for accepting gifts and developing a legacy society.
  • Designate a planned giving contact or division in your organization. Identify individuals who can help with marketing and relationship-building with potential donors, and assign a point person to field inquiries about legacy giving. You may also consider hiring staff with experience in legacy giving.

Design a Marketing Plan

  • Invest in a marketing budget. Marketing will be essential to reaching potential donors. Set aside a reasonable budget to allow your nonprofit to promote its legacy giving program.
  • Add a planned giving page to your website. Include resources such as a planned giving calculator, contact information, and a link to where individuals can set up a legacy gift.

Take Financials into Account

  • Start small. Setting up a simple bequest program can get the ball rolling on your legacy giving initiative. Eventually, you can add more complex planned giving instruments such as annuities and trusts.
  • Implement a robust financial management system. A comprehensive financial management system is essential to a successful legacy giving program. Build relationships with reputable financial institutions, and employ a consultant who can help you scale your program over time.
  • Develop an annual financial report. Be transparent to ensure your nonprofit builds a good reputation for how to deal with money. This will help people trust your group to do its work and understand its money needs.

If you’re setting up your first legacy giving program or need to adjust your strategy, our team of financial professionals can help you navigate the financial aspects to ensure success.