The feedback I received from a recent article in these pages advocating the endowment of bequests suggests a practical problem is quite common across the charitable landscape: current priorities outweigh long-term strategy.

In plain language, charities spend the money from bequests because immediate needs are so pressing – even though they have the right to endow it . This fact does not weaken my previous argument in favour of endowments – if anything, it strengthens it. If needs are pressing now, they will be dire indeed when the bequests dry up. How can the gift planner influence this state of affairs?

First of all, you need clear direction from your Board of Directors that it supports endowments and wishes to increase them. Once that direction is given, the ball is squarely in your court. (Not all charities may choose an endowment strategy – and it may not be appropriate for all charities. If your charitable purpose could be achieved, once and for all, would endowments in perpetuity make sense?)The necessity of reaching bequest donors during their lifetime is now clear. If donors understand and accept the endowment strategy, they will direct that their bequests be endowed. Without that direction, we may wait in vain for our Boards to choose endowment over current needs when each cheque arrives.

There are two ways of delivering the endowment message: narrowcast or broadcast. The former means we will attempt to identify individual donors one at a time, perhaps a viable strategy in some close-knit organizations, but for many too labour-intensive to be practical. In the broadcast model, we try to deliver the message to the entire community by a variety of media, and encourage donor self-identification. Knowing our bequest donors opens the door to delivering a range of services and opportunities. As part of our stewardship for future gifts, we will want to reach this donor group quickly if the tax treatment of bequests changes, or with any other relevant information we might want to provide. Our ability to educate bequest donors is greatly enhanced if we know who they are!

Donor sophistication is increasing (not surprisingly, since so many charities are now throwing information at them) and there are questions about endowments you can expect to hear from donors or prospects:

• Who manages the money?
• How much did it earn last year?
• That isn’t very much. Why is that better than spending my whole donation/gift now?
• How do I know the money will be used for the purpose I want?

 

If you don’t know, learn the answers to these questions, and others that will come up as you educate yourself . Do you understand `preservation of capital’ well enough to explain it to your donors? This is as good a time as any to figure it out.

You are marketing immortality. Whatever work the charity does, it can find a way to recognize endowment gifts forever. Let your donors know that as the generations roll on, their gift will be invested and generating income. Provide simple, straightforward bequest language and be prepared to explain it. Offer draft codicils so that donors who have recently prepared their wills can endow their planned bequest easily and at minimal cost. Let immortality overlap with mortality. Show your donors how to create an endowment by making annual gifts equal to the anticipated future income from their bequest. This provides for current needs until the bequest is realized and starts generating an income stream now. Close a few of these and watch your place on the agenda rise towards the top!

One obvious question is, what about bequest donors who do not self-identify? Ultimately, this group will be the measure of our success. Many charities find 50 – 80% of bequests arrive with no prior indication from the donor. When we see a shift in these bequests towards endowment, we will have incontrovertible evidence of our powers of persuasion. We are constantly hearing that the future of fundraising is planned giving, and it can be — but only if we start acting strategically. My definition of strategic action is “that which makes the desired outcome more inevitable.”

John Webster Hochstadt is Director, Planned Gifts & Foundation Services at Mount Sinai Hospital Foundation and founder of The Webster Group, a fundraising consulting practice.