A Special Report for Estate Gift Fundraisers

For those of your colleagues responsible for current operating and program support, we focus on discretionary income. Estate giving is different. It almost always comes from donors who have been engaged in support of operations and programs, but it doesn’t come from current income. It comes from wealth.

Among the useful data that comes from the Census Bureau are measures of wealth by household characteristics. If you go to www.census.gov/people/wealth/ you can find more data than you’ll ever need or want.  Below is a selection of data excerpted with a planned giving fundraiser’s eye to where the veins of gold lie in one’s donor base.

These are general population data. The chances are any given donor base looks much wealthier, as we have repeatedly seen in research studies. But it’s the profile that is important.

We’ve shown over and over again that the principle demographic factors influencing all giving — current or deferred — are, in order of importance, age, education, household characteristic, and residence ownership and tenure.

By household characteristic is meant whether or not there is a committed couple. The Census — at least for 2010 — used the then-conventional definition of “married couple.” And it provides home ownership without length of community residence. Nonetheless, the distinctions in wealth shown between household with married couples and those headed by singles and between those where the householder owns or rents are telling.

I have indexed the selected data to the base, overall net worth numbers, again to underscore that it is the profile, not the dollar data we should have in view when it comes to transposing this information for donor bases across varying markets and types of organizations.

Table for Aug 29 blog

The largest share of the nation’s wealth — 43% — is held by people over 65, and the next highest — 26% — is held by people 55 to 64.  There’s nothing wrong with having a mature donor file!


When is a Donation a Contract?

This from The Star-Ledger’s nj.com, August 5, updated August 6:

Trenton — People who cut checks to charities in New Jersey to help pay for everything from a new university building to an expansion of a local dog shelter are entitled to a refund if the organization does not use the money as intended, a state appeals court ruled today.

In a precedent-setting decision that affects hundreds of organizations across the state, a three-judge panel said nonprofit groups cannot ask for money for a specific purpose and then pull a bait-and-switch, spending it on something completely different.

The news article quotes the plaintiff’s attorney: “In the end, the appellate decision relied on a very, very most basic principle of charitable giving: what was the donor’s intent?”

Ask any seasoned major gift fundraiser when a gift is a contract and the response is likely to be “always!”  In this case the gift was $50,000 and given to a community animal welfare organization. It was a major gift, and its donating couple was certainly treated as if it was.

Does the amount matter? My guess is that the three-judge panel would say it does not, even though they might not have considered hearing the case were the amount much less than $50,000.

I have been expecting this to happen for decades. In fact, I have been expecting a class action suit to emerge and am sure that is now inevitable.  Here’s why:

  • The donor marketplace is getting more and more demanding about accountability for giving, especially giving in response to broad direct response fundraising.
  • Auditors have gotten tougher and tougher about scrutinizing fundraising messages to ensure money goes to the purposes for which it has been solicited.
  • Watchdog competition has intensified and most seem to relish headlines.
  • The press, albeit not much smarter, has become more aggressive.
  • Litigation seems to be replacing baseball as the national pastime.

The New Jersey story is one of those dumb and dumber stories. First, the organization was dumb in its treatment of the donating couple. Then it proved itself dumber by not keeping the matter from going all the way to that three-judge panel.

This is a precedent that is good for the nonprofit sector.

No one ever has to give money

No one ever has to give money. Donations come at donor discretion. So while we have to know a lot about competition within the donor marketplace, we also should know about competition for discretionary money. The former helps us position our fundraising; the latter helps us frame our business model with realistic expectations.

There’s a valuable source of good data for studying trends in discretionary spending. The Bureau of Labor Statistics’ Consumer Expenditure Survey (http://www.bls.gov/cex/) primarily serves to track consumer prices. But it provides an annual trove of data on how much consumers are spending on a wide variety of goods and services.

The editors of The New Strategist Publications draw on all that data and reconfigure its presentation for easy and convenient reference. The Survey is, they have said, “the best source of information about spending behavior of American households.”

The survey also asks about cash contributions and personal tax payments. So it gives us three valuable perspectives on trends affecting charitable giving: changes in cash contributions alone; changes in other areas of discretionary spending; and changes in cash contributions relative to changes in personal tax payments. Here are summary views of each of these three perspectives.

First, we look at trend data for cash contributions in the context of other discretionary spending. For that we’ve selected five items out of the 101 categories and sub-categories New Strategists report in their recently released Who’s Buying – Executive Summary of Household Spending, 8th Edition.

Table 1

We also selected just key fundraising demographics out of the multitude available: age ranges in which discretionary income makes its way into charity, household income and configuration where giving is maximized, and the key threshold of education attainment at which giving also becomes significant.

On the one hand, it’s a bleak picture, albeit one that shouldn’t surprise. On the other hand it offers us a clearer understanding of why recovery in areas of discretionary spending is so sluggish and extended.

Next, we looked at cash contributions and personal tax payments, knowing that there is a general functional relationship between household tax burden and giving, especially at higher levels of charity and philanthropy: the higher the tax burden, the more those who itemize deductions tend to give.

Table 2


Third, just looking at cash contributions alone, we wanted to check on our assumptions of key demographics. We do that by looking at the report’s useful indexing of expenditures. For Table 3, we have selected the two most important demographic indicators of giving, age and education, finding that patterns seen for decades haven’t changed.

Table 3