Identify family values when cultivating planned giving donors

Larry C. Johnson

Planned giving has been called the “untapped resource” in fundraising and much has been said of the coming “once-in-history” transfer of assets from baby boomers to their children. Understandably, fundraisers are eager to “get in on the action.” Hardly a day goes by without yet another nonprofit organization deciding to launch their own planned giving outreach to their donors—to anyone’s donors.

Yet, with all of the attention and information that is being showered upon prospective donors and philanthropic investors by those who would secure those investments, only 5 percent of Americans over 50 have made a charitable bequest whereas 33 percent are willing to consider making one.

More than two-thirds of adults over the age of 30 aren’t even familiar with the term “planned giving.” Even nonprofit organizations use the term “planned giving” without having a clear idea of what they mean when they use it.

Before we judge the philanthropic and would-be philanthropic too severely for their lack of awareness and understanding, however, we need to acknowledge that planned giving and financial services professionals seem to be in the dark as well, as traditional financial and estate planning has failed both donors and organizations, alike.

Planned giving and estate professionals have failed their donors and clients as traditional planning has failed to preserve families and fortunes for even three generations. All of the sophistication of the financial and legal sectors has failed to change what has been the pattern the world-round for two millennia: wealth created in any given generation is 90 percent dissipated by the end of the third generation.

Why? First, those with wealth—even modest assets they wish to use productively for future generations—very often have a mistaken idea as to where the real dangers lie. Most individuals focus on the dual boogey men of government intervention, most often through taxes, and investment strategy risks. The culprits, however, are not these villains at all but rather those found in family dynamics—a lack of communication between family members and heirs who are unprepared for new-found wealth. In actual practice, 80 percent of individuals cite a lack of communication and trust between family members and unprepared heirs as the reasons for the dissipation of their wealth. Only 3 percent report that their wealth precipitously atrophied through failures in financial planning, investment failures or taxes.

Second, planned giving professionals, and their associated partners—attorneys, accountants and wealth advisors—tend to work in silos and concentrate on the secondary issues of tax avoidance and asset transfer with the least cost. In so doing, they focus on the material transfer rather than the wealth transfer.

A survey of baby boomers revealed that for both boomers and their parents, the most important (77 percent) “asset transfer” was their values and family story, not their material assets. Donors make gifts to express their deepest held beliefs and values. The material assets, properly stewarded, become simply manifestations of these. The vast majority of individuals (70 percent) who are inclined to make planned or estate philanthropic transfers want to transfer their passion, their values, their wisdom—only 7 percent are primarily concerned with a monetary transfer.

And yet we, as fundraisers and financial professionals, continue to be enamored with the assets rather than the wealth. We often become enraptured by a clever vehicle or process that saves even that little bit more from the tax man or gives the incrementally higher return.

If 90 percent of wealth is lost by the end of the third generation, how does the remaining 10 percent make it through unscathed? These individuals let the wealth drive the assets. They clearly communicate to younger generations their emotional inheritance and how it relates to any financial inheritance. They foster trust and a shared vision while actively mentoring each generation.

When planned giving and financial professionals help their donors to first clarify their values while assisting them in working toward a healthy balanced view of material wealth with their family members, they achieve what I call the “triple-win”: 

First, the donors and clients win because family members are prepared for wealth thereby beating the 90 percent monster. Second, financial professionals and planned giving officers win by achieving a considerably larger gift or management portfolio—as much as five times what is achieved through the “traditional” approach. Finally, the community benefits by the creation of a culture of philanthropy that transforms both giver and receiver—for generations to come.

If you are an individual who wants to see both your emotional wealth and your assets preserved for future generations, let your wealth drive your assets. Insist that the professionals who work with you share those priorities and will take your desire for emotional wealth preservation seriously.

If you’re a planned giving or financial professional and want to both help your clients succeed and grow your own organization or business, first learn who your clients really are before counseling them on what they have. Show them what is truly possible—and you’ll both be the better for it.

Larry C. Johnson is the author of The Eight Principles of Sustainable Fundraising. He speaks, writes and consults on subjects related to relational philanthropy.