Here s the issue in a nutshell

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2 Here s the issue in a nutshell 40 th Year Reunion Class Gift: $1.2 million 50 th Year Reunion Class Gift: $5.5 million What do you suppose accounted for the difference?

3 Major Gifts Planned Gifts

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7 Yesterday: Traditional Large Gift Silos Major Gifts Deferred Gifts Gifts received during a donor s lifetime. Usually solicited in a capital campaign. Paid off in 3-5 year pledge period. Most often earmarked for specified purposes. Development staff and volunteers did soliciting. Solicitors generally had minimal knowledge of tax laws involving giving. Handed off prospects to Deferred Gifts staff if outright gift was not forthcoming. Assets usually received after a donor died. Passively generated via low-key mailing and advertising program, and estate planning council. Bequests, CRUTs, Pooled Income Fund, gift annuities. Few restrictions on gift use. Arcane gift vehicles understood by only a few development staff. Often received referrals from Major Gifts staff after solicitations had failed.

8 Today: Continued Silo Approach to Large Gifts Fund Raising Major ( Simple ) Gifts Cash Stock in publicly traded company Select real estate Planned ( Complex ) Gifts Charitable life estate of residence or vacation property Bargain sale of residence Charitable gift annuity Charitable remainder trust Pooled income fund Charitable lead trust Commercial real estate Life insurance policy Energy or timber rights Stock in private company SEC Rule 144 stock 509(a)(3) support organization

9 Then the light bulb went on!

10 A visit to the Mayo s approach: increase $$$ yield of traditional major gifts approaches by always employing time-tested planned giving techniques. All major gifts field staff were required to be skilled in proposing and negotiating planned gifts a radical concept at that time. No distinction was made between major gift prospects and planned gift prospects. The result? $ million per year in total gifts, including one bequest of $120 million. DLM returned to Scripps and implemented Mayo s approach.

11 Configuration of Gifts from Leading Scripps Benefactors (pre-1999) $105 million: a 509(a)(3) Type II supporting organization $54 million: cash / bequest $27 million: mostly cash, some CRUT, some bequest $26 million: mostly LEGA, small CRUT $18 million: all cash $14 million: mostly cash, some CRUT, some bequest $9 million: mostly grantor lead trust, some cash $7 million: all bequest $7 million: cash / CRUT $6 million: CRUT / cash $5 million: nearly all bequest $5 million: all grantor lead trust

12 Tomorrow: Synthesis of Major and Planned Gifts Basic Premise: Planned gifts don t compete with outright gifts they complement outright gifts. Why not maximize your donors overall giving capability, rather than simply focus on what they can give you today? Capitalize on donor s inclination to give, not just respond to your organization s financial needs. Employ full range of estate planning vehicles to unlock less obvious assets. Avoid leaving anything on the table.

13 Tomorrow: Synthesis of Major and Planned Gifts Acknowledge realities of uncertain economy and escalating living expenses in retirement years. Blur distinction between outright and deferred gifts: Planned gifts are no longer 2 nd class citizens!! Alleviates concerns over issue of gift credit : most irrevocable deferred gifts can be booked. Deferred gift planning can trigger major outright gifts not just the other way around. All large gifts staff should be capable of applying various giving vehicles appropriately and effectively.

14 Segregating Major Gifts from Planned Gifts is like. Using separate remotes for your TV, DVD player, VCR, and stereo. Receiving separate bills from your hospital, clinical lab, and doctors. Going to separate experts for advice on trusts, life insurance, and investments. Today s picky consumers prefer a seamless approach to business that eliminates traditional boundaries. Businesses that achieve seamless integration: Kaiser, Walmart, Google, FedEx/Kinko s) are what today s consumers seek. Doesn t an integrated, unified large gifts

15 Typical Assets for a Traditional Major Gift Income from employment or inheritance Money market funds Mutual fund holdings Stocks with rapid liquidity Now compare these assets with.

16 Viable Assets for a Comprehensive Large Gift Approach Income from employment or inheritance Money market funds Mutual fund holdings Stocks with rapid liquidity PLUS: Life insurance policy 403(b) and 401(k) plans, and IRAs Residence Ranch or farm Vacation condo Residential rental property Office building Industrial facility Golf course Marina Hotel / motel Undeveloped parcel Art, automobile, boat, airplane Unrealized stock options Stock in pre-ipo start-up tech company Privately owned business

17 Critical Issues to Address How soon do you need the gift funds? Construction: 3-5 years Equipment acquisition: 1-3 years New programs: 1-5 years Current services / programs: now and in perpetuity Unanticipated needs: in perpetuity Endowment: now and in perpetuity

18 Critical Issues to Address Which development staff have access to which prospects, and who markets traditional life income gifts (e.g., gift annuities, CRUTs, etc.)? Division between Planned Giving staff and Major Gift staff creates counterproductive barriers to cooperation. Donors have little tolerance for competition between development staff and program silos. Challenge is to create an effective incentive and performance evaluation system to reward separate

19 Critical Issues to Address How do you handle a donor who is interested in supporting multiple charities? How does the harmonic convergence influence your own career path and marketability?

20 Critical Issues to Address You need to know when and how to apply these giving vehicles: Outright Gift of Cash, Stock, or Real Property Bequest Gift Annuity (if you have a license) Life Insurance or Retirement Assets Life Estate of Residence Life Estate with Gift Annuity CRUT and CRAT Pooled Income Fund Lead Trust 509(a)(3) Supporting Organization 3 types

21 Summary: Harmonizing Major & Planned Gifts Planned gifts don t compete with outright gifts they complement outright gifts. Maximize donor s overall giving capability and strengthen donor s inclination to give through a team approach. Avoid leaving anything on the table through array of gifting options. Acknowledge the realities of increased living expenses in retirement years and donor reticence for outright gifts. Blur distinction between outright and deferred gifts. All large gifts staff should be capable of nurturing various

22 CASE STUDY