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Future of Planned Giving: 5 Challenges that Nonprofits Face

In the midst of this challenging economic climate and evolving donor landscape, nonprofit organizations must diversify their fundraising strategies. As noted in previous blog posts, planned giving is a core component of a nonprofit development plan, contributing to the organization’s financial viability and sustainability. While planned giving programs are essential to the overall health of the organization, these programs face various challenges and obstacles.

Here are five challenges that nonprofit organizations face when implementing or maintaining a planned giving program:

1. Charitable Giving Trends – While charitable bequest giving in 2010 resulted in almost a 19% increase, the cumulative change in bequest giving has decreased by 27.1% from 2008 to 2010. Overall, estimated total change in charitable giving from 2008 to 2010 has declined by 3%. While nonprofit organizations achieved positive bequest giving results in 2010 (19% increase), these institutions must take shifting economic challenges into consideration when preparing their planned giving programs. (Source: Giving USA 2011 Executive Summary Report)

2. Competition – According to The Urban Institute, the number of nonprofits has increased 25% between 2001 and 2011, from 1,259,764 million to 1,574,674 million organizations today. Moreover, growth in the nonprofit sector has exceeded the growth performance of the government and business sectors. This translates into a strong competition for dollars and donors. In addition, for-profit financial firms that provide donor advised funds create additional competition for its nonprofit equivalents. (Source: The Urban Institute)

3. Internal Obstacles – While larger nonprofit organizations have the luxury to employ fundraising staff members that are experts in the planned giving space, many small nonprofits do not have that luxury. Smaller nonprofits undergo various internal obstacles, including: lack of support from the board and/or upper management, budget cuts, absence of necessary tools, small fundraising staff and short term thinking. These obstacles mostly lead to the delay and/or the cancellation of planned giving program.

4. Short Term Thinking – Without a doubt, many nonprofits are struggling financially because of budget cuts, losses and negative fundraising outcomes. As a result, some of these organizations implement short-term strategies in order to survive, neglecting the long-term consequences of their actions. Nonprofit institutions need to implement both short-term and long-term fundraising strategies (including planned giving) to reach a level of security and sustainability.

5. Tax Policy – Tax policy plays a central in the success of planned giving campaigns. According to the 2010 High Net Worth Philanthropy study, affluent families/households reported a shift in the amount they would contribute to charity in their estate plan if the estate tax were to repealed. The report declared that “43% of wealthy households would somewhat or dramatically increase the amount they leave to charity in an estate plan if the estate tax were repealed; compared to 36.1% in 2008.” (Source: 2010 Study of High Net Worth Philanthropy, Indiana University)

As nonprofits ponder the above planned giving challenges, they must also ask the following questions: How does my planned giving program fit into our development plan? Who is an ideal planned giving donor/candidate? Am I targeting the right donors? How can we implement a planning giving program with a limited budget? How will I market my planned giving program?