Demystifying Legacy Nonprofit Giving with Lori Kranczer

With so much uncertainty in philanthropic giving due to the pandemic, the Social Impact Advisory Group spoke with Lori Kranczer, the CEO and Founder of Everyday Planned Giving, about how legacy giving can broaden a nonprofit’s donor base and build stronger engagement with existing donors. Leveraging 20 years in the nonprofit space as an attorney and consultant, Lori has created and managed several substantial legacy program initiatives for large nonprofits.

The following Q&A with Lori Kranczer was edited from the original presentation for length and clarity in printed format.

What is legacy giving?

Legacy giving is the most impactful gift a donor will make. It is a very personal or “donor-centric” gift and is not necessarily about the needs of the organization. More often, it is about the donor’s values and how they are connected to the organization. It uses all asset types and requires complex planning. At the very minimum, it is anything outside of a cash or marketable security gift. A lot of organizations think that a legacy gift won’t be received for 20+ years. That is actually not true. A legacy gift can be current, collected now as part of an organization’s annual campaign, or it can be deferred.

Why is legacy giving important?

According to Giving USA, charitable bequests represented 9% of U.S. fundraising or $42 billion in 2020. I ask nonprofits whether 9% of their budget comes from bequests and if not, they need to be asking their donors for legacy gifts. The Center of Wealth and Philanthropy predicted that $6.3 trillion in charitable bequests from 93.6 million estates will occur during this current wealth transfer from 2007 to 2061. If you’re not speaking with your donors or clients about this, that’s really quite a loss. It’s not a question of whether that potential gift is going to another organization. It’s likely that no gift is being made at all.

A study done by Caring.org found that 18- to 34-year-olds increased legacy giving in 2020 while giving was pretty level for 35- to 54-year-olds. This fact is interesting, because despite COVID, individuals that should have a will—those with children, increasing wealth, estate planning issues and businesses—still have not established wills. This suggests that the overall percentage of Americans with a will has not significantly changed. Therefore, discussions about charitable and estate planning are still really important, whether you’re a nonprofit working with donors or a professional advisor, like an attorney, CPA or financial advisor, working with clients.

While no one could have predicted what happened this past year, it’s so important to reduce risk on a smaller scale. For example, a gala could be canceled, markets go down, a major donor passes away and doesn’t leave a gift. Essentially a legacy giving program creates new pipelines of dependable income.

When should my organization implement a legacy giving program?

There is an ideal gift progression to bring in revenue. An organization should start with an annual campaign to pay for salaries and operations. Once the annual campaign is up and running and pretty secure—at least 10 years in—you need to start thinking about legacy giving. What’s really nice about starting a legacy giving program after establishing the annual campaign is that the nonprofit has their committed, engaged and passionate donors already in place to transition from an annual gift donor into a legacy donor.

From there your main objective is to increase your endowment which is important to secure the future of an organization.

How do legacy gifts differ from conventional giving?

Legacy gifts are distinguishable by the way the gift is made, not the amount, so it is not considered a major gift. There’s an expression that says, “You can give your apples during your lifetime, but the tree is a legacy gift.” But that said, legacy gifts do tend to be larger because it’s the donor’s ultimate gift.

Many nonprofits that implement legacy giving programs know the pipeline of significant assets that could come into the organization.  We begin with the types of gift vehicles that could be created, the ages of donors to project revenue and then we develop innovative programming.

Legacy gifts provide budget relief, which is very important this past year, as we mentioned earlier.

Legacy giving is one way that you can grow an endowment by using surpluses that come in. If an organization has a large, unrestricted bequest it wasn’t expecting, I always suggest putting the surplus in a quasi-endowment, if they can. Legacy giving will take longer to grow the endowment than doing an endowment campaign, but it’s still effective.

Legacy giving creates a broader base of donors by offering different ways to give outside of marketable securities and cash the donor may need for day-to-day living. For example, I had a nonprofit client that had a donor who gave modest amounts during the year, maybe $200. But this donor also had inherited jewelry that didn’t have any sentimental value. The donor gave it to the organization as a five-figure gift. They never would have been able to do that if the organization didn’t have a legacy giving program. So, by offering these options to donors, you will increase the number of major gifts to that organization.

A nonprofit also enhances its relationship with donors through legacy giving. Less known is that once donors make or intend to make a legacy gift, they feel more invested in the organization and their annual gifts tend go up. Some nonprofits may believe they won’t get their annual gift or they’ll have a gap in the budget if they receive a legacy gift from a regular, annual donor but studies have shown that legacy donors increase their annual gift by 70%.

Why is legacy giving important for donors?

Because legacy giving is a donor-centric gift, it really connects the donors’ values to the organization.

Legacy giving donors have better engagement with the organization. As donors age, they can get more involved starting with becoming a board member. Or maybe they retired or sold their business and involvement with the nonprofit becomes a second career.

Legacy giving donors get more recognition which some donors really thrive on. They may get their family involved, which is more likely when the donor has given a legacy gift. There are lots of different ways to get the family involved. For example, some donors want to make the gift multi-generational.

And of course, there are tax and financial benefits associated with legacy gifts. Donors often don’t decide to give a legacy gift based on the tax and financial benefits alone, because there are other ways to get tax benefits. But tax benefits can be a factor for some donors,

What questions do nonprofits need to answer before implementing a legacy giving program?

It’s always important to think about the nonprofit’s long-term and short-term goals. For example, are they building financial stability with an endowment? How are they looking to diversify funding? Do they need only unrestricted legacy gifts? Do they need immediate planned gifts? Or are they going global? Do they need new facilities? By knowing short-term and long-term goals, the organization can work backwards to project funding needs and ask for gifts that meet those needs.

What are the various legacy giving options available to donors?

There is a planned gift for everyone! Whenever I hear that a donor does not want to do legacy gift, it’s usually because they don’t understand the options. For example, I was advising a nonprofit Executive Director who asked her board member for a legacy gift. He said no because he assumed legacy gifts were only a million dollars and up, which is a common misconception. When engaging with a prospective donor about legacy giving, it’s really important to help the donor understand what a legacy gift is and that there is a planned gift for everyone’s needs.

When you talk with the donors, determine their level of engagement with the organization, the stage of life they’re in, where they are in their career, their tax or financial considerations and their family goals. These factors help to match the appropriate gift option to the donor’s goals. Sometimes this means engaging the donor’s professional advisors to work with their clients on matching the right option. I really think that there isn’t enough collaboration between the nonprofit and the donor’s advisors. Often professional advisors believe their client is speaking with a nonprofit about their charitable giving when that’s not the case. So I think we need to communicate more between all the parties.

When requesting a legacy gift, what skills are needed?

Requesting a legacy gift requires thoughtful listening. It’s understanding your donors’ values. What’s important to them. This is not a 20-minute ask — just asking for a donation and then leaving with a check. These are multiple conversations that could take potentially years, depending on the complexity of the estate and the donor. Some example questions a nonprofit or a professional consultant might want to ask a donor or client as part of a more in-depth discussion would be:

• What are you passionate about?

• What has been the most meaningful moments in your life?

• What do you hope to accomplish with your philanthropy regardless of the amount?

• What ways do you give now and how would you like your giving to change?

• Do you volunteer?

• Do you want include a charity in your estate plan?

• What is your tax situation?

• Do you have an interest in incorporating your philanthropy into other financial goals?

• Do you care about social impact investing or fulfilling your philanthropic goals in ways other than traditional giving?

Legacy giving is the best way for your donors or clients to connect their philanthropy to their values as their ultimate gift. Nonprofits and professional advisors have an opportunity to work together to better accomplish donor goals.

If your nonprofit has any questions about starting a legacy giving program or you are an advisor who wants to know how to develop charitable giving processes with your clients, please visit Lori Kranczer’s website at www.everydayplannedgiving.com.

Talk to the financial experts at Fairlight Advisors to learn more about managing your nonprofit’s investments. Schedule a free consultation today!