Posted October 1st, 1998

Are Your Bequest Expectancy Donors Telling the Truth?

Recently, while helping a client study its bequest files and planned gift expectancies, the following question was raised: “Many people tell us that we are in their will or trust and become members of our recognition society. The problem is that in a significant percentage of cases, when the donor dies it turns out that no gift is received! Have our donors been misleading us?”

Taking a closer look

Upon reviewing the organization’s prospect files, which had been enhanced with information on age, gender, wealth levels, etc., a trend began emerging. It seemed that donors to this organization were more likely to be men than women– an unusual situation in the world of planned giving where many of the “rules” under which we operate assume that the bulk of prospective donors for bequests and annuities, at least, will be female.

In this case, the problem was not dishonest donors! We believe that most had indeed put the organization in their estate plans. The only problem was that, being older men, they were much more likely than older women to have a living spouse. Because they were married, the donors’ attorneys undoubtedly in many cases urged them to take advantage of the unlimited marital deduction. The estate plans for these men and their wives would thus tend to leave everything to the surviving spouse and only in the event that the spouse predeceased the donor would charitable and perhaps other bequests come into play. In effect, our client was being listed as a contingent beneficiary in the estate plan, subject to the contingency of the death or survival of the donor’s spouse.

Clearly, organizations in the much more common situation of having an overwhelmingly female donor base will have a different experience. For example, when a female donor dies, she is much more likely to be the last surviving member of a household. Therefore, she is distributing the joint assets remaining after both her and her late husband’s lifetime. In these cases, the unlimited marital deduction was used when the husband passed away, leaving the female survivor to make the final designations.

Are there solutions?

If you find that you are working with a predominantly male constituency, there are options that can help assure maximum results from your gift planning efforts. First, be sure that all of your correspondence with donors in newsletters, brochures, cover letters, ads, and articles suggests that couples coordinate their plans so that both spouses’ wishes are taken into consideration. The goal is for a couple’s estate plans to reflect their shared charitable interests as well as those each supports separately.
Second, consider using hypothetical examples in your printed publications depicting a man who decides to make a limited number of charitable gifts that are fulfilled at his death while still reserving the bulk of his estate for the use of his spouse.

Another option may be for one spouse, typically the husband, to establish a qualified terminable interest trust or “QTIP” trust. This trust would provide support and asset management for the surviving spouse, but would provide that the ultimate charitable distribution desires of the first spouse take effect at the death of the second spouse, at least insofar as a portion of the assets are concerned. While some would recommend this, it may be wise for charities to exercise caution when advocating such a planning approach because of the very basic inequities that many believe are inherent in the QTIP trust. If not careful, the gift planner may find himself or herself involved in a donor’s marital disagreement over the ultimate disposition of marital property.

The moral of the story

One lesson we can learn from this case is that it is critical to know who your donors are. Knowing the age and gender of your donors is especially important when planning bequest marketing programs. This case also shows that it is important to dig deeper when something occurs that at first does not make sense to you. Now that we know the reasons underlying what at first glance might seem to be less than honest behavior, we can address the reality of the situation through thoughtful copy preparation, list selection, and other means.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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