In the next 20 years, an estimated $30 trillion will be inherited in the United States as prosperous baby boomers pass their assets on to the next generation. If nonprofits take the right steps, this could be an unprecedented opportunity for philanthropy. Right now, however, many organizations are missing out on legacy gifts.
A Missed Opportunity
Fewer than 30 percent of Americans have an up-to-date estate plan, and only 7 percent of those plans include a charitable gift. Meanwhile, roughly 90 percent of high-net-worth American households make a gift to a nonprofit each year; $36 billion was donated to charities through bequests in 2017. Increasing the number of people with estate plans that include a charitable gift by even a few percentage points will result in tens of billions annually going to many of the world’s most important causes.
Over the past three years — first as graduate students at Stanford University, then as the co-founders of FreeWill.com — we have done thousands of hours of research and experimentation on what keeps people from making planned gifts and how nonprofits can unlock the enormous potential of this great transfer of wealth.
Today, more than 23,000 people have committed more than $295 million in planned gifts to hundreds of nonprofits using our free online estate-planning tool.
Tips for Jump-Starting Planned Giving
We work with more than 85 nonprofit partners who pay a service fee to our company. These nonprofits range from billion-dollar behemoths to tiny, all-volunteer organizations.
Here are nine lessons we learned from this work, some of them quite unexpected, that can help you transform your planned-giving program.
1. Baby boomers need you to remind them about estate planning. The percentage of Americans with an up-to-date will or estate plan is falling every year. In interviews, they routinely describe estate planning as “scary, complicated, and expensive,” and without an estate plan, planned giving is impossible. However, once people take a first step, the process becomes less overwhelming, and they are very likely to finish.
2. It’s up to you to make the ask. Unfortunately, lawyers and online estate-planning tools very rarely suggest charitable giving during the estate-planning process. (And almost certainly never suggest giving to a specific organization.) The good news is that when asked, people are quite generous. Fifty-five percent of people include a bequest ten times the national average — when sent to FreeWill by a nonprofit. Make sure your supporters have the information they need before they start planning.
It’s best to ask people to consider leaving a percentage of their estate as a gift, rather than an absolute amount.... The average percentage gift is nearly seven times higher than an absolute amount.
3. Let your supporters surprise you. Many organizations focus their planned-giving efforts on the same prospects who have been targeted for major gifts. Actually, in aggregate, your middle- and upper-middle-class donors represent a much larger potential. We’ve found that middle-class bequests amount to gifts of $70,000 on average, from the same people who are giving about $20 per month. Our research also revealed that for some organizations, more than 30 percent of bequests come from people who have never given a cent. So, don’t stop focusing on one-on-one conversations with high-net worth donors, but do look for ways to reach beyond that group.
4. Surprisingly, email can be as effective as direct mail. For a long time, direct mail was key to many planned-giving programs. Many organizations we work with are finding stronger results from email campaigns than from direct mail. Repetition is key and should include message in newsletters and other communications as well as emails dedicated solely to planned giving. This digital approach allows you to target more people while saving money. Human Rights Watch did this to great effect, securing additional gifts, some of which were seven figures.
5. You don’t have to treat planned giving as a fundraising push. The Berkeley Humane Society didn’t ask for a financial gift at all. Instead, they challenged people to consider how their pets would be provided for when they were gone and gave people access to free estate-planning tools. The urgency drove people to do their estate plans, and many chose to include bequests to BHS.
6. Percentage gifts are a win for everyone. It’s best to ask people to consider leaving a percentage of their estate as a gift, rather than an absolute amount. This is a win-win as the average percentage gift is nearly seven times higher than the average absolute amount donated. But should the value of an estate drop, it doesn’t lead to awkward conversations or ill will with relatives.
7. “Legacy challenges” can push planned giving to new heights. The core idea with a “legacy challenge” is that a major donor (or donors) match every new bequest with an immediate gift (anywhere from $250 to $10,000) for a period of time. This creates enormous urgency in a field without much, and can triple your planned gifts in a year.
8. Make it as easy as possible for supporters. Pittsburgh Parks Conservancy sent a message that resonated with supporters: It simply shared that people with similar interests have already taken the step of writing a will and encouraged others to work through the user-friendly online process to do the same.
9. Don’t be afraid to enjoy it! Remember that expressing one’s values can be incredibly rewarding for your supporters. A woman who recently used FreeWill to give to the Riverside Church in New York told the church’s fundraisers that thinking about the impact her money would have was “actually fun.”
Patrick Schmitt and Jenny Xia are co-founders of FreeWill, a company that provides free online estate-planning tools. FreeWill is made possible by the support of nonprofits that may receive bequests from users.
Correction: This article has been updated to clarify that 90 percent of high-net-worth American households make a gift to a nonprofit each year, not 90 percent of all Americans, and to indicate that $36 billion was donated to charities through bequests in 2017.