Posted March 1st, 2005

The Vital Importance of Discovering Bequest Expectancies

Most development executives today are aware of the importance of encouraging their constituencies to include their organization or institution in their wills or other long-range estate and financial plans. Not so obvious, but perhaps of equal importance, is the need to discover those who have already made or are considering making plans that include charitable bequests, charitable beneficiary designations, or other gifts that will be completed at death. Why is it so vital to discover these gifts in advance? Let’s explore some of the more important reasons.

1. Bequest donors can change their minds. Many development executives forget that bequests and a variety of other testamentary gifts are not only among the easiest of planned gifts to arrange, but they are also easy to change. Studies show that most wills that include charitable bequests are completed or revised within three to five years before death. Therefore, it is important to discover bequest intentions so that donors can be properly thanked and recognized. In fact, deferred gift recognition societies can sometimes be more important as tools to remain in existing estates than as inducements to encourage initial bequest provisions. (Few donors will face mortality and incur a legal fee simply to become a member in a deferred gift recognition society!)

2. “Irrevocable” gifts can also be changed. Don’t forget that studies show that most donors who create charitable remainder trusts on their own with the assistance of advisors retain the right to change the remainder beneficiary. The trust itself is irrevocable but the charitable beneficiary designation typically is not. In fact, changing the charitable interests that will ultimately benefit from such trusts can be as easy as stopping by a financial advisor’s office and completing a simple form. When following up on a “bequest” notification, you may find that you have actually been left part of the remainder of a charitable trust.

3. Problem property bequests may be discovered. Has your organization ever been left a bequest of real estate or personal property that you were unable to accept? In some cases such bequests can be uncovered in advance through a dialogue with the donor. More suitable property may be substituted in revisions of the estate plan.

4. Unacceptable restrictions may surface. It is not uncommon for donors to restrict bequests—often in welcome ways. But occasionally a donor may restrict a bequest in ways that violate your organization’s policies or are not in keeping with long-term plans.

An example might be a bequest restricted to funding a program that is no longer in existence. Experience shows that most donors are willing to make adjustments in such restrictions if there is an opportunity to discuss them. Efforts expended in this regard can pay dividends many times over in time and other resources that need not be used to correct a problem later.

5. The size of bequests can be increased. Annual studies conducted by a group of leading nonprofits indicate that bequests that are discovered in advance tend to be two to three times the size of “transom” bequests. This is another byproduct of taking the time to meet with donors and discuss their intentions.

This increase in bequest size apparently results from organizations and institutions engaging in careful nurturing of donors who have made known their bequest intentions. Because of effective stewardship of relationships, donors will sometimes reduce the number of charities named in a future revision of their plans. Conversely, failure to respond to donors on a regular basis and lack of service to them can lead to exclusion from the revised estate plan.

This is one of the main ways that growth can continue in “mature” planned giving programs. It is also a key to justifying staff positions primarily responsible for maintaining relationships with bequest donors.

6. Prospects for other gifts can be discovered. Think for a moment about the tangible benefits for a donor who is planning a charitable bequest. For most the answer is none: no income stream, no capital gains avoidance, no income tax deduction, no asset management, and even no estate tax savings for the vast majority.

So, why do donors make these provisions? Those who have made plans to include you in their wills are perhaps your most dedicated donors. These persons have decided that your cause should be elevated to the status of a “family member.” Who could make better prospects for gift annuities, trusts, and other plans that do provide tangible benefits, but require significant donative intent? This is another of the primary reasons why many programs engage in active bequest marketing among the relatively younger age ranges of 55 to 70 in addition to the traditional bequest segment of donors age 70 and beyond.

The people who have not yet made bequest provisions but indicate that they are considering doing so become especially important. Younger persons who have already included or are considering including a charity in their estate plans may be among the best prospects for outright major gifts during their high-income middle years.

These are only a few of the more important reasons to have an active program aimed at the encouragement and discovery of bequest intentions. New persons are making and revising their plans each year resulting in additional bequest expectancies, so continuity is vitally important for ongoing success in this area of fund development.

Editor’s Note: This article is based on material presented in the popular Sharpe Group seminar, “An Introduction to Planned Giving.” See page 3 for details about upcoming dates and locations.

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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