Posted June 1st, 2010

‘Virtual’ Endowment May Help Help Donors Give Now and Later

Art Borden is Director of Planned Giving at Eastern Mennonite University. Now 81 years of age, Art enjoyed a long and varied career before entering the field of planned giving at age 60. Here he shares with Give & Take how his innovative approach to fund raising has given his donors new and exciting opportunities to achieve their philanthropic goals.

Give & Take: How did you become involved with gift planning?

Art Borden: Planned giving is my sixth career. I spent much of my working life in Latin America, from my time as a pastor in Venezuela in 1957 to my position as a representative of the Puerto Rican government in the 1970s. I also worked for a number of years with the American Bible Society, both in Latin America and in New York. In 1981, I became president of the Evangelical Council for Financial Accountability, a position I held for nine years.

When I turned 60, I reached a point where I still wanted to do something useful, but I no longer wanted to deal with the responsibilities and pressures of being in charge. That’s when I got the call to work with the American Bible Society for a third time, this time in planned giving.

I was hired as a field representative, and eventually I supervised up to 10 other representatives across the country. At age 73, I took a part-time position with the Virginia Mennonite Retirement Community, where I was asked to start and develop a planned giving program. When I was 77, I assumed my current role of Director of Planned Giving at Eastern Mennonite University.

G&T: Can you tell me about your virtual endowment program?

Borden: The concept of a virtual endowment can be useful in encouraging both current and future gifts. A virtual endowment may enable donors to fulfill their desire to make a significant gift that might otherwise have to be postponed for economic reasons.

Here’s how it can work: Suppose a donor informs you that he would like to establish an endowment benefiting your institution through his will. Normally, no one would be able to benefit from this endowment until after it is funded, which in this case would be after the donor’s death. The donor would like to see the impact his gift will have, but he does not feel he can fund the endowment in his lifetime. By funding a “virtual” endowment, the donor may commit to donating a certain amount, say $1,000 per year, equal to the income that his fully funded endowment would have supplied. In this way, the charitable recipient can begin to benefit from the donor’s intention to fund the endowment.

At Eastern Mennonite University, we allow donors to use this concept to fund a named endowment with less than the normally required amount. For instance, a donor may establish a named endowment with EMU for a minimum of $50,000. The virtual endowment allows a donor to create a named endowment with only $10,000 plus a yearly gift. This permits the university to provide scholarships even before the entire endowment is funded. The donor then funds the endowment over a period of time or through an estate commitment.

We are in discussion with some donors to use the income generated by a gift annuity or a charitable remainder trust to create a virtual endowment. I just met with a couple who have established a named endowment through their will. They are considering making annual gifts to support the purpose of the endowment, which is a named scholarship, while funding the endowment over time using the income from a charitable remainder trust. As soon as their endowment reaches $10,000, we’ll be able to use the income generated to support the purpose as well.

Here’s another little twist: If a donor regularly gives you $1,000 per year, you could provide him or her with an idea of a way to make that gift perpetually. An endowment of $20,000 given now or through estate plans should generate at least $1,000 per year for the foreseeable future.

With the virtual endowment, if a donor is planning a gift through his will, you can help him find a way to give now. If a donor regularly makes annual gifts, you can encourage him to set up an endowment so that his annual contributions will continue far into the future.

One of our donors has established a named endowed scholarship to be funded through her estate. We suggested that she not wait for the endowment to be funded, but instead start enjoying benefiting students now. The donor is giving EMU $1,000 per year to aid students as if it were a grant from the endowment. The donor is also planning to fund the endowment with at least $10,000 so that additional grants can be made before the endowment is fully funded through the estate. The first grant will be awarded this next school year.

G&T: How do you communicate with your donors?

Borden: Sharpe helps us produce our planned giving newsletter, which we send out twice per year. In addition, we mail birthday letters to all donors 65 and older for whom we have birthdates on file. But we don’t send the letters on their birthdays. Instead, we mail them six months ahead and include specific illustrations on the benefits and payment rates they could expect from a gift annuity made at their current age. We’ve enjoyed significant response from these efforts.

We also have a legacy society to honor those who have included EMU in their estate plans. Every year in August, we send members a letter signed by the university president thanking them for their future gift. This effort goes a long way toward sustaining and strengthening the special relationship we have with these donors.

G&T: What do you like best about working in planned giving?

Borden: I always say that my job is not to ask people for money. My role is to give people an opportunity to serve others with the resources that have been provided to them. The key to being an effective gift planner is to listen, ask questions, and then listen some more. I try to keep my ears open and my mind alert to what might be of interest to my donors.

Planned gifts, and especially split-interest gifts, allow donors to give more than otherwise could have been possible so they can make a lasting impression on the future.

‘Virtual’ Endowments Contribute to Rise in Giving

In 2009, a year in which private donations to higher education dropped by almost 12%, giving to Cornell University grew a remarkable 9%. Cornell raised almost $447 million last year, more than any other university except Harvard and Stanford, and was the only university among the top 10 university fundraisers to report an increase in giving.

Part of that success can be attributed to a strategy that allows for ‘virtual’ endowments, a way for donors to fulfill endowed gift commitments that had become less practical in many cases to fund during the economic downturn. According to Charlie Phlegar, vice president for alumni affairs and development at Cornell, “We worked with many of our donors to see if they would fund current-use money as if the endowment were in place until they felt comfortable that the markets had stabilized and would be able to fund their commitments.”

Now that the economy is rebounding, Phlegar and his staff are continuing this approach with donors by asking for new endowed commitments supplemented by current-use annual fund gifts. According to Phlegar, “This is really nothing new. It’s something that made economic sense in the down economy, and I think it’s made us better professionals.”

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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