Monday, December 16, 2013

Are Planned Giving Representatives Incubating Dodo Birds?

Editor's Note: Dan Rice is a member of PPP's Leadership Institute, and he originally submitted the post below to the Institute's blog. We are sharing it with Dan's permission, and we invite you to comment and share your own experience and opinions. 

One recurring theme touched on at the 2013 PPP Leadership Institute was that a rapidly declining number of charities have or are hiring full-time planned giving representatives. Instead, the new normal seems to be that a growing number of charities want the planned giving representative to also be responsible for raising major gifts.

Almost 2 years ago, I was hired by an 18-year-old charity to start a planned giving department and serve as their full-time planned giving representative. However, throughout my 33 years in planned giving, I have raised some of the largest current gifts for the organizations I worked for. I think leaders of nonprofit organizations have a right to expect their planned giving experts to bring in current major gifts!

That said, I think it is wrongheaded to ask planned giving representatives to carry a portfolio of specific donors that they are responsible to develop moves management relationships with and raise annual gifts from. Instead, I think planned giving representatives should be supporting the major gifts representatives and other annual gift fundraisers. More about how and why coming up.

From their unique expertise perspective, planned giving representatives should redefine major gifts as asset gifts in the minds of their organizational leaders. A number of studies show that the largest gifts given to charity annually in terms of dollar value, are gifts of closely held stock, followed by real estate, followed by everything else from the attic to the basement and from sea to shining sea. Furthermore, the only fundraising training boot camps I know of that provide solid information on how to handle asset gifts are planned giving training programs. How ironic.

Here are a couple of personal stories to serve as examples. Exactly 14 months after I started working for my first charitable organization, I helped a family donate a $1.6 million outright gift of timberland. No one on the major gifts staff knew how to help the donor make an asset gift. Then, at the next charitable organization I worked for, I was able to bring in the largest current gift in their 25-year history and it came out of an existing charitable remainder unitrust. A few years prior to this event, a previous planned giving representative had helped the donor to put all of his land into the unitrust and sell it to a developer. At that time however, the donor only really needed to put half of his land into the unitrust to meet his annual income needs.

Perhaps the planned giving representative simply lacked the courage to ask for a current gift, or perhaps he wouldn't have received the credit, so he encouraged the donor to make a deferred gift of the entire land. The lesson to me is that there is a big difference between running a deferred gift program and a gifts deferred program! Let's call the former program a current gifts prevention program. Let it go the way of the Dodo bird.

Another concern relates to how many planned giving representatives there are who do not know the difference between a life income agreement and an income for living agreement. One year I was able to raise over $1 million for a charitable organization by asking donors who had previously created $10,000 gift annuities to terminate them and allow the charity to have the money now. I explained the compelling truth that the administrative costs had already eclipsed any future gift value to the charity. The only reason these donors had set up the gift annuity in the first place was because they were asked to by the planned giving representative. The same person who wouldn't or couldn't ask the donor to make the $10,000 gift as an outright gift. You might be able to call a $10,000 gift annuity a life income agreement, but can you seriously call it an income for living arrangement?

Economically speaking, I think many, if not most, life income agreements should be at least be in the 6 figure range. Otherwise, the professional advisors and managers, plus the compensated planned giving representatives will likely get more than the charity will.

All to say, I welcome any trend in the planned giving area that nudges planned giving representatives to be responsible for raising current asset gifts as well as deferred gifts of all kinds. And, I think that in most situations it is wrongheaded to ask a planned giving representative to carry a portfolio of donors that they call on regularly. I've heard that there are about 8,000 planned giving council members in the country and about half of us have been in the field for 5 years or less. Of course, not all of us work for nonprofit charitable organizations, but for those who do, I think that they need to be allowed to do this full time, to help donors to give to the over 1 million charitable organizations who would benefit from receiving current asset gifts and deferred gifts.

About Dan Rice

Dan Rice is the Philanthropy Architect for Convoy of Hope, a leading faith-based organization that provides help and hope to people in need in the United States and throughout the world. Dan coaches philanthropists, solicits principal gifts and conducts charitable gift and estate planning.

Formerly, Dan was the Philanthropy Architect for Educational Media Foundation, the world’s largest Christian music broadcaster and parent organization of K-LOVE and Air1 radio networks, and Vice President of the KLOVE & Air1 Foundation.

Dan was also the Senior Philanthropic Advisor in the Principal Gifts department for World Vision, Inc., the largest Christian relief and development agency in the world. He also served as their National Director of Gift Planning. During his 26 years with World Vision, Dan developed philanthropic financial plans, designed charitable estate plans, provided gift planning consulting, conducted philanthropy coaching and co-authored the Family Philanthropy Guidebook.

Dan is a co-founder and Chairman of the Charitable Trust Administration Company, a third party charitable trust and foundation administration services corporation. He is a member of the Partnership for Philanthropic Planning Leadership Institute and formerly served for 13 years on the Board of the Morgan Stanley Global Impact Funding Trust and also on the advisory committee for the Chair of Philanthropy at The American College.

Since 1980, Dan has actively consulted with highly successful individuals and families and their professional advisors. He is nationally recognized as a humorous and informative communicator on philanthropic planning.

Tuesday, December 3, 2013

Leadership Institute on CRTs and the Future of Gift Planning

PPP Leadership Institute discussions get my mental juices flowing so much that my head hurts! This year, attendees have identified more than twenty topics of interest, including non-cash assets, non-direct gifts and advised funds, communicating the true value of gift planning to data-driven decision makers, disintermediation, donor restrictions, charity secret shopping, tax triggers for planning, 90 percent of recent campaign came from two percent of donors and other similarly provocative ideas.

Leadership Institute members always meet for roundtable discussions at the National Conference on Philanthropic Planning. In Minneapolis, those discussions focused on two primary topics: Charitable Remainder Trust Trends and Opportunities, Concerns and Predictions for the Gift Planning Field. 

During the charitable trust roundtable, most attendees said that CRTs were finally coming back. From 2002-2012, charitable remainder unitrusts rose from 89,000 to 91,000 but assets dropped from $100B to $91B. During the same period, annuity trusts dropped from 23,000 to 14,000 with assets falling from $10B to $6.5B. With annuity trusts in particular, many discussed the fact that gift annuities were becoming more prevalent for large gifts and may be cannibalizing CRATs. Click here for a deeper dive into the topic by Leadership Institute member Reynolds Cafferata.

Attendees noted the key CRT drivers are the return of asset appreciation, higher income tax regime providing greater benefits of a tax-free sale and baby boomers wanting to cash out of businesses, stock or real estate in exchange for less management and life-time income. As financial markets are hitting new highs, donors want to take some assets off the table, but there are some distinct changes from the late 90s. First, donors are choosing a much lower payout rate usually between 5-6 percent. Second, many more are including non-spouse income beneficiaries. Third, more current CRTs are being funded with non-cash/illiquid assets. And finally, donors are including more testamentary CRTs for retirement plan and other IRD (income in respect of a decedent) assets.  

One attendee remarked on the evaluation, "It [the roundtable discussion] was so affirming! I had just reported to our board last Friday that we've only established one new trust since 1999 and I wasn't entirely sure why. Great discussion. Thanks for opening it up for non-Leadership Institute members to listen in."

You can share your own experience with CRTs by responding to these polls:

The next Leadership Institute Roundtable will be held March 22 and 23 at the Anaheim Marriott in Anaheim, California. Watch the PPP Perspectives blog and e-newsletter for more information. If you’d like to join the Leadership Institute so that you can participate in the discussion, click here to download an application. (PPP members who do not belong to the Leadership Institute may audit the roundtables, although they cannot participate in discussion.)

About Bryan Clontz

Bryan Clontz is a 2013 co-chair of the PPP Leadership Institute. He is president and co-founder of Charitable Solutions, LLC, specializing in non-cash asset receipt and liquidation, gift annuity reinsurance brokerage, gift annuity risk management consulting, life insurance appraisals and CRT/CGA investment management. He also serves as a Senior Consultant for Ekstrom & Associates – a Connecticut-based community foundation consulting firm. From 1993-2003, he served as the vice president of advancement at The Community Foundation for Greater Atlanta and the national director of planned giving for Boys & Girls Clubs of America. He received a bachelor’s of science in business administration from the College of Charleston in Charleston, SC; a master’s degree in risk management and insurance from Georgia State University in Atlanta, GA; and a master’s degree in financial services from the American College in Bryn Mawr, PA.