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Gift Planning and COVID-19

Heaton Smith Group
Published:  03/25/2020

This post is part of our special series on fundraising during crisis and represents the opinions of an AHP affiliate.

hands giving candles

It is an understatement to write that the world changed over a short period of time.  Just five short weeks ago, the Dow 30, S&P 500, and NASDAQ Composite indices were at or near their historic highs, businesses were hiring, donor meetings were a regular part of a fundraiser’s day, nonprofit organizations were on track to meet their annual fundraising goals, and many were planning to attend upcoming spring conferences.   

Enter COVID-19.  As the virus made its way to and across Europe, South America, and North America, the Dow 30 index has gone from 29,000 to just above 20,000 at the time of this writing. Moreover, Americans are suddenly familiar with the term social distancing, and many are heeding the call by our country’s leaders to disengage from society for a period of weeks, which will hopefully reduce the spread of the virus.   

This current situation begs the question: How does the COVID-19 epidemic affect gift planning programs? After all, many planned giving donors and prospects are older–aged 70 and above–and considered high risk for contracting COVID-19. The following are suggestions for your gift planning program during the period when social distancing is recommended by the CDC and our nation’s leaders. 

Delay In-Person Meetings with Older Donors

Delay in-person meetings with more senior donors since their risk of contracting COVID-19 is higher than for younger individuals. Moreover, older donors are more disposed to the virus’s most adverse effects. The CDC advises that individuals aged 60 and older have higher risks associated with COVID-19. When applicable, offer a virtual meeting with planned giving donors and prospects as a way to safely remain in touch with them. Importantly, do not meet with an older donor if your means of transportation for a meeting include flying or taking a train or bus.   

Your healthcare institution has likely implemented a meetings protocol for non-clinical staff, which should govern your behavior during this epidemic. COVID-19 is highly contagious and can be fatal, so please use caution should you meet with donors.   

Remind CGAs: Income Not Affected by Market Volatility

Remind charitable gift annuitants (CGAs) that their payments will not be affected by market volatility. One should not assume that donors fully understand that nonprofit institutions or re-insurers have taken the investment risks of CGAs. Take this opportunity to assure donors that their annual CGA income will continue regardless of market volatility.   

Educate Donors about SECURE

Use this period of social distancing to educate donors about the SECURE Act’s new rules regarding retirement accounts and qualified charitable distributions (also known as charitable IRA rollovers). Many of your donors have read about the SECURE Act but lack clarity on how the new rules apply to them. They have questions about the new rules for qualified retirement plans, qualified charitable distributions, inherited IRAs, and the demise of the “stretch” IRA. The SECURE Act affects donors who own IRAs, 401(k)s, or any qualified retirement plan. Help donors understand the applicability of the legislation to their situation, which will further engender them to your organization. Moreover, these conversations should provide opportunities to discuss ways that donors could satisfy their desire to support your organization through a legacy gift from their retirement account(s).  (We expect the demise of the “stretch” IRA will motivate donors with large IRAs to gift a larger percentage–or all–to charity. In a few situations, donors will add a testamentary charitable remainder trust or a testamentary charitable gift annuity to their estate plan, which would be funded with IRA assets at death. These testamentary plans extend payments for loved ones with a residual to charity that is no longer possible with the demise of the stretch IRA. However, donor fact patterns for these considerations are unique, and in my experience, comprise very few donor situations.   

For those unfamiliar with the SECURE Act, you can find a summary on AHP Connect or at www.heatonsmithgroup.com via a free download for your use.   

Promote Deferred Gift Alternatives

Promote other deferred gifts from wills, trusts, life insurance, and payment or transfer on death designations. While donors may be nervous to make or pledge outright gifts of cash or stock in these uncertain times, deferred gifts do not require a current transfer. Rather, funds are donated when no longer needed. These deferred gifts are easy to complete – and may be safely done by phone or online with counsel, local bank, investment advisory firm, insurance company, or other advisors. 

Accept Cash, Not Depreciated Capital Assets

Outright gifts of depreciated capital assets such as stock or real estate should not be donated. If these assets are no longer desired by donors, then they may be sold and thus qualify the owner for a tax deduction based on the value of the loss. Subsequently, the cash received from the sale may be donated, which would qualify for a charitable deduction limit of 60 percent of adjusted gross income. 

Offer Older Donors a Helping Hand

Since older donors are more susceptible to the negative effects of COVID-19, many support works, and even family members, implemented social distancing before this protocol became commonplace. Social distancing is sure to increase feelings of loneliness and isolation for older donors in the coming days, weeks, and possibly months.   

Call your planned giving donors and prospects to ask how they are managing during this epidemic, offer to get and take them groceries and medication, and ask their permission to contact them once a week or once every two weeks for a catch-up. But be careful not to accept any gifts from donors for the generosity of your time, which would be unethical. Your objective is to help ensure that your organization’s older donors have life’s basis necessities and to engage with them on a consistent basis to help reduce loneliness and isolation.   

These donor conversations may turn out to be some of the best cultivation and stewardship “meetings” as a planned giving or major gift officer. You will create multiple positive experiences with you and your organization for planned giving donors and prospects. A likely outcome for current planned giving donors is validation of their decision to name your organization as a charitable beneficiary in their estate plan. Such validation may lead to additional or larger planned gifts for your organization from these donors. For planned gift prospects, your thoughtfulness would build a memory map from those donors directly to your organization. When they consider adding charitable beneficiaries to their estate plan, then the genuine attention and care shown to them by you during the COVID-19 epidemic may influence their decision to make a planned gift to your organization.    

Reaffirm Your Organization's Mission

Remind donors of your organization’s mission and that physicians and all clinical staff are on the front lines of COVID-19. Highlight what your healthcare organization is doing to keep citizens in its footprint safe and its commitment to treat those who contract the virus and need clinical care. 

Pause Gift-Planning Discussions

While some will disagree with the following, I would refrain from most gift planning discussions with donors during this time of uncertainty. Many people are fearful of how long the COVID-19 epidemic will last, and the prolonged effects on the US economy are unknown. Moreover, market volatility over the past several weeks has only added to donors’ fears and uncertainty. We often fail to make our best decisions when fearful of the future and uncertainty reins. This was true during the Great Recession, and it is true now.   

Gregory Berns, M.D, Ph.D, a neuroeconomist at Emory University, writes “Fear prompts retreat.  It is the antipode to progress.” (Gregory Berns, 2008) Dr. Berns’ observations paint a less-than-optimal picture of individuals who make decisions when gripped by fear.   

Therefore, give donors space with regard their decision-making and any outstanding proposals. They will make better and more fully informed decisions once the threat of COVID-19 subsides. Planned-giving donors are not only elevating your organization to the status of family, but they are often planning their largest single gift to your organization. Donors want and deserve to make that decision at a time when they are not overwhelmed by a global epidemic.   

An exception would be donors who need to make estate planning decisions that include planned gifts. In those cases, you want to be invited to the donors’ planning table and help guide the discussion with regard to their goals for making a planned gift and the best strategy or strategies for each donor. However, those meetings may be virtual ones in the near term.   

Our country has endured many hardships in its relatively young history. We too will endure the COVID-19 epidemic and ultimately return to our normal routines–although with some likely modifications to our routines. Until then, consider the aforementioned adjustments to your gift planning program. They should serve you and your organization well.   

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NEWS  /03/23/20
Finding time to get out of the "office" is critical when your team is working from home.

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heaton smith group
Heaton Smith Group

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