Adapt to Changing Circumstances for Success in 1998 | Sharpe Group
Posted November 1st, 1997

Adapt to Changing Circumstances for Success in 1998

When looking toward 1998, we see a period of rapid change and transition such as we have not seen since the early 1970s and mid-1980s. Many of the basic rules and assumptions that have driven charitable gift planning for decades are beginning to change. Powerful economic and demographic forces continue to alter the landscape of philanthropy. Congress has also made changes this year that will have a tremendous impact on the way many donors make their gifts and will further affect how organizations and institutions will approach major and planned gift development on the eve of a new millennium.

Aging of the donor population

The backbone of the support base of many organizations and institutions will continue to age. The first of the large wave of college graduates who obtained higher education following World War II is now retiring. This group will comprise the wealthiest contingent of retirees in history. Fund development programs will continue to rely on this group for major gifts as they wait for the baby boomers to move into their prime years for charitable giving in the early years of the next century.

Gift planning skills essential

Due to the increasingly complex manner in which wealth is held, coupled with the aging of donors referred to above, a basic knowledge of charitable gift planning techniques will increasingly become a prerequisite for advancement in fund development roles beyond entry level positions. In 1986 there were approximately 14 planned giving councils across the country with just over 400 members. Today that number has swelled to over 10,000 members in more than 100 councils. As a result of this growth, gift planning capability has been disseminated very broadly and many donors now expect any development officer approaching them concerning a significant gift to be conversant in basic planning techniques.

Impact of accounting rules

New accounting rules (FASB 116 and 117) that have recently come into play will result in a greater role for financial officers in formulating gift acceptance and crediting policies for pledges and deferred gifts. As we begin to work with baby boomers and other relatively younger donors, it will be essential to give greater consideration to the present value of gifts when deciding how to expend limited time and other resources.

Women will give more

Women will continue to make up a larger percentage of major donors as they comprise increasing percentages of the ranks of high level executives and professionals, and are more involved in entrepreneurial activities. We will also see an increased role for older women as an ongoing result of the unlimited marital deduction introduced in 1982. Now more than 15 years after this change in the law, many surviving spouses (typically women) have inherited and will in many cases dispose of the couple’s lifetime accumulation of assets. IRS and other studies already indicate that women are almost twice as likely as men to make charitable estate gifts.

Donors needs will be different

Charitable remainder trusts and other gifts designed to increase income in retirement years may create less interest among a generation of retirees who are forced by law to begin withdrawing significant sums from tax-favored retirement plans. This is a subtle implication of the tremendous growth in retirement plan assets and one that will have an impact on gift planning strategies. Plans such as term of years trusts that are instead designed to fund significant gifts while boosting income in pre-retirement years should increasingly appeal to those who anticipate more than adequate income in early retirement years.

Other plans such as deferred gift annuities may also find greater favor among recent retirees who, concerned that they may need additional income, may be looking to create “secondary” retirement plans for their later years. Many baby boomers will be providing financial assistance to their parents in their later years at the same time they are providing for educational expenses for their children and funding their own retirements. Gift annuities, charitable remainder trusts, and other plans will provide answers that feature welcome gifts for organizations that are prepared to assist their donors in structuring gifts that meet multiple needs.

Tax law changes will be felt

The impact of the Taxpayer Relief Act of 1997 was discussed in last month’s issue of Give & Take. To summarize, a number of direct and indirect changes have been made in the tax laws that will affect charitable giving in many ways. According to one well-known commentator in the field, this law will have the greatest impact on the planning of gifts, both current and deferred, since the Tax Reform Act of 1969. Around tax time in 1998, it will become apparent to many donors after they sign their returns that the rules have changed. The organizations that are proactive in dispelling confusion and emphasizing the positive aspects of the law will make an impression on their donors that will pay dividends for years to come.

These are just a few of the factors that we believe will motivate many development executives to change the way they approach their roles. The future is bright for those who recognize the implications of these trends on their programs and take steps now to adapt their efforts in ways that will assure continued success.

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The publisher of Sharpe Insights 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 Sharpe Insights 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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