When I Solicit Donors for a Bequest It Doesn’t Mean I Want Them to Pass On
I am often asked how do non-profit organizations set up endowment funds and solicit donors for bequests. Although the two are not necessarily related frequently donors connect setting up an endowment with their passing on. Often endowment funds are set up when organizations or donors want to arrange to use the earned interest and not the principal of a contribution. Committed donors bequeath funds to organizations and sometimes stipulate the funds should be invested and the interest should be used either for the annual budget or for a specific program in the agency. When the donors make a request for the funds to be invested and for the interest to be used by the non-profit then the agency has to set up a vehicle to handle the funds; this is the endowment fund.
The decision to approach potential donors for these funds should be part of the agency’s overall strategic plan, and it would be appropriate for the section on financial resource development (FRD) to have a section focused on wills and bequests as well as endowment funds. The FRD committee of the board of directors would take the lead by donating funds themselves and discussing the possibility of approaching board members to make a commitment for a bequest to the agency. This is a positive step in “breaking the ice” when the agency approaches people in the broader community.
Of course, there are times when a donor will establish an endowment for the organization privately through a lawyer or an accountant. Another possibility is utilizing the services of a community foundation either within the general community or one sponsored by the Jewish community. These “umbrella” foundations operate according to the laws governing such funds as well as the priorities that guide their decision making.
Prior to speaking with a donor, the non-profit’s executive or financial resource development professional should familiarize themselves with the details of the vehicles that could be utilized for the bequest. It would then be possible to discuss whether the funds will go directly to the organization or whether they will be used to establish an endowment for the organization with the donor. It is advisable to consult with a lawyer and/or an accountant to understand the regulations and laws that apply in specific localities. This is an important part of preparing to solicit a donor for a significant contribution.
Once the appropriate background work has been completed then professional and/or an active lay leader can begin to identify those donors and potential donors who could be engaged in a discussion about the possibility of planning a bequest to the organization. There are several possible approaches that can be helpful to those soliciting the donation. Each is dependent on knowing as much information about the potential contributor and being fully informed about their philanthropic interests.
When donors have a strong identification with a non-profit organization and have a history of giving annual contributions or support for specific projects they can be approached to discuss the importance of their involvement. They can be engaged in a process of exploring their long term commitment to the organization. The focus is that their connection to the agency translates into a special bequest when they pass on or perpetual gift that will maintain their commitment when they are no longer able to make an annual contribution.
The former National United Jewish Appeal (prior to the Jewish Federations of North America) initiated a special PACE (Perpetual Annual Campaign Endowment) whereby an endowment provided support for the annual campaign once they had passed on. The endowment was restricted to the funds going to the annual fundraising campaign. The solicitation process did not suggest the person should pass on and the emphasis was placed on insuring the donor’s continuing support of the yearly campaign. For the donor who wanted to support the provision of services this was a perfect solution.
When the donor has a concern for a specific population within the community, then a restricted endowment can be arranged that focuses solely on this group of clients. Examples of these kinds of bequests and endowments are those for children at risk; day centers for the elderly; or interest free loan programs, among others. In these cases, the executor of the contributor’s estate or a lawyer might oversee the use of the funds and request a report.
When the agency staff and lay leaders engage with the contributor it is important to provide a contingency plan in the event that the need the donor is responding to ceases to exist in the future. In providing for this eventuality there would be a contingency that would state how the funds would be used if the identified need no longer warrants the use of financial resources. The donor would provide information on how the funds would be used by the organization to respond to other needs with the provision of services.
The most important aspect of soliciting a bequest or an endowment is responding to the contributors’ interest and their commitment to the continuity of providing services to those in need. It is a way to honor the givers and to let them know their continued support means so much to those they have assisted in the past and continue to assist in the future. It is wonderful opportunity for the donor, for the agency, and for the community. It is a way of insuring continuity and providing for the sustainability of valued services.
Stephen G. Donshik, D.S.W., is a lecturer at Hebrew University’s International Leadership and Philanthropy Program and has a consulting firm focused on strengthening non-profit organizations and their leadership for tomorrow. Stephen is a regular contributor to eJewish Philanthropy.