BDQ #6: Why Would Someone Make a Planned Gift?

Isn’t it obvious? There are as many reasons why someone would make a planned gift as there are donors. What is more – spoiler alert – if you want to know why someone makes a planned gift, just ask them!

The myriad reasons a donor might make a planned gift can be arranged into categories:

Support a Cause: Some make planned gifts because they want to support a worthwhile cause. They want to have an impact on an organization, preserve something of value, or improve the human condition.

Leave a Legacy: Some want to leave a legacy after they are gone. This can be as simple as a named memorial or might involve a complex arrangement creating an endowed program to ensure the donor's values and passions are carried on after they are gone.

Reduce Taxes: Planned gifts can provide tax benefits to the donor. The opportunity to reduce, avoid, or defer taxes has become a central feature of planned gift marketing.

Provide for Others: Planned gifts can be used to provide financial security for loved ones, such as a spouse, children, or grandchildren.

Achieve Financial Objectives: Well-planned gifts can help accomplish non-charitable purposes including financial goals, such as retirement planning or funding a child’s education.

While most planned gifts are made for a combination of reasons, the recipe is unique for each individual donor. We could assign a priority order, but the ranking would probably be different for the charity and the donor and priorities may change over time. Also, let’s be honest, some reasons are more acceptable – dare we say honorable – than others and sometimes donors embrace certain reasons as justifications for the gift they’ve made.

There is a ground truth: philanthropic intent – providing for a charitable purpose – must be primary among the reasons a gift transaction is completed. First of all, the charitable deduction and other tax advantages require donative intent. In addition, basic math comes into play: it’s just not possible to give away something and end up with more than you had. Taxes can be reduced, avoided, or deferred but, no matter how many tax and financial advantages are layered on a gift transaction, the donor is making an economic sacrifice. Three minus one does not equal four … or even three.

To successfully raise money for our organizations, we need to decide how best to approach a prospective donor. Do you lead with financial advantages or the opportunity to support the mission? Should you focus on a persuasive pitch explaining how your organization serves the needs of the community, or should you focus on the opportunity to provide income to others?

The answer depends upon the prospective donor’s interests, which are likely to change over time depending upon the donor’s receptivity. This is the reason that well-crafted marketing programs convey an array of messages – some about mission, some about possible tax savings, some about specific gift vehicles – calibrated to appeal to the audience.

Understanding prospective donors’ priorities is key. Open ended questions like, “What would you like to do with your money that would be meaningful to you?” advance the planned giving conversation more effectively than declarative statements like, “Here are the advantages of a gift annuity.” Of course, it takes time to build a trusting relationship and earn the opportunity to ask such questions. And, because the prospective donor’s priorities may change, we’ll need to revisit the question from time to time.

There is no right or wrong reason to make a planned gift. Ultimately, the decision to make a planned gift is a personal one, and the best reason is the one that is most meaningful to the donor. Our opportunity as gift planners is to help prospective donors understand their options and to guide them as they explore their own reasons for making their planned gift.