Let’s talk about wealth

We want the donor to talk about assets. Why? Because

1. It creates a setting of wealth sharing.

2. It uncovers capacity for a major gift.

3. It reveals opportunities for creative solutions. For example, a donor

• Is planning to sell an appreciated asset[1]
• Is not planning to sell appreciated stocks[2]
• Is getting ready to retire[3]
• Is taking retirement account distributions[4]
• Has a big income spike[5]
• Can’t use tax deductions[6]
• Has kids who don’t want to take over the farm or a vacation home[7]
• Has estate tax issues[8]
• Has wealth tied up in illiquid assets[9]

4. It leads to the next meeting that shares these creative options.

Major gifts are gifts of wealth, not disposable income. To encourage these gifts, we need to have wealth conversations.[10] How do we do this? How do we talk about wealth? More importantly, how do we get the donor to talk about their wealth?

Strategies from research

For some, their wealth is a sensitive topic. How do we get people to open up about a sensitive topic? Research suggests two useful approaches.

1. Start social then follow up. (This says, “I’m interested in your story.”)
2. Make questions part of another task. (This says, “I can help you” or “I need your help.”)

Start social then follow up

Starting with simple, social language often works best. Social, emotional language encourages sharing. Formal, transactional language does not.[11]

Social phrasing also tends to elicit more information.[12] Researchers tested different methods of asking sensitive questions. They found that “People are more forthcoming when you ask questions in a casual way, rather than in a buttoned-up, official tone.”[13]

A social conversation about the donor’s wealth might start simple:

• “How’s business?”
• “How’s the market been treating you?”[14]

The magic comes from the follow-up questions. These show we care. We care about the things the other person cares about. Most wealthy people care about their wealth. They care about their business or investments. Showing a shared interest through follow-up questions helps build relationships.[15] It can also reveal opportunities where the fundraiser’s expertise provides value.

Tell me a story: Past, present, and future

Assets have stories. Questions can lead the donor through their asset story. The asset story progresses through

• Past (origins of the asset)
• Present (what’s happening now)
• Future (future plans for the asset).

This progression helps the donor to talk about their assets. But it also leads to fundraising conversations. Suppose the future plan is to sell. Giving before the sale can create tax and even income benefits.[16] Suppose the future plan is never to sell. Charitable estate planning then becomes key.

A sequence of questions might include

• Past

“What’s the story of your business? How did you get started?”[17]

• Present

“What are you proudest of?” “What are you most excited about at the current time?”

• Future

“What are your future plans for your business?”

• Future sale/transition

“What will that mean to you?” “Have you thought about using the sale or transition of your business as an opportunity to achieve some of your charitable goals in addition to financial goals?”

• Future estate transfer

“Will your heirs continue running the business?” “I know there are some smart ways to avoid taxes for people like you who want to include a gift to charity in their plans. Have you ever considered that?”

The asset need not be a business. For example, the conversation might begin,

• “Are you a collector (art, stamps, coins, etc.)?” “What is the story? How did you get started?”
• “Do you invest in Real Estate?” “How did you get started?”
• “Where do you vacation?” “Do you own a home there?”
• “How has the market been treating you?” “What is your investment philosophy?” “What’s the best investment you ever made? Tell me that story.”

The questions advance the story from past to present to future. The punchline is the future. The future conversation can lead to questions about giving. This might include,

• “Have you considered making gifts with assets instead of cash?”
• “Most donors giving at your level use appreciated assets instead of cash because they get a double tax benefit. Have you ever considered giving in that way?”

“How?” questions

In Socratic fundraising, we often want to know the “Why?” We want to uncover connections to the donor’s people, values, and history. But in the wealth conversation, we instead want to know the “How?” We might ask, “You’ve done so much for [this charity]. What allows you to be so generous?”

Dan Rice explains, “Usually, we stop at asking the donor what motivated them to make the gift. We want to ask a very different question: ‘How were you able to make this wonderful gift?’”[18]

Such conversations can transition to a discussion of wealth and assets. For example, Jay Steenhuysen suggests,

1. “What makes it possible for you to make this generous cash gift?
2. Have you ever given something other than cash to a charitable organization?
3. Are you planning to sell something this year that is worth more than you paid for it?”[19]

Reverse questions

Another Socratic opening doesn’t start with a question. It starts with a statement that triggers a question. For example, a common social question is “What do you do?” Suppose we answer,

• “I help people give weird assets to [charity].”[20]
• “I help donors give smarter.”

The statement triggers a question.

• “What’s the weirdest asset someone has given?”
• “How do you help donors give smarter?”

This gives permission for us to share a story. In the story, our advice helps someone like the donor. They benefit by giving an asset instead of cash.[21] The story establishes our credibility as a guiding sage. The story ends with a question about the donor’s wealth. For example,

• “Have you ever made any unusual investments?”
• “Have you ever been hit with capital gains taxes?”

These questions open the wealth conversation. It continues through follow-up questions.

Follow-up questions

There are many ways to start a wealth conversation. But the real power comes from the follow-up questions. As the conversation continues, planning opportunities emerge. For example,

“Have you ever made any unusual investments?”

• Yes? Ask about it. “Has it gone up in value?” The capital gains taxes for collectibles are high. This makes charitable options more attractive.
• No? Ask about it. “So, do you like stocks or bonds or something else?”

“Have you ever been hit with capital gains taxes?”

• Yes? Ask about it. “That must mean you were good at investing! Tell me what happened!”
• No? Ask about it. “That’s smart. It’s good to avoid those as long as you can. Do you think that might be a problem in the future?”

Notice, a person can also signal they don’t own any appreciated assets. This is useful information. Wealth is held in appreciated assets. It’s not held in cash. It’s not held in checking accounts.[22] Usually, those without appreciated assets aren’t wealth holders. They aren’t likely to be major gifts prospects. Learning this is helpful.

Many paths, one destination

The conversation can take many directions. But the goal is to spot opportunities. Appreciated assets are ideal. Income goals can be important. Estate planning concerns create opportunities. Tax issues are perfect openings.

All of these can emerge from the follow-up questions. They can all lead to the same destination: Asking for the meeting to share options. For example, “This reminds me of another donor’s situation. I remember he used some creative planning that [avoided taxes/created income/provided for family] and made a big impact at the charity. Would you mind if I talk to some of our experts and put together a few ideas for you to look at?”

Make questions part of another task

Sometimes, we can be blunt. As an estate planning attorney, I ask blunt questions to clients. What real estate do you own? Who’s on the title? What’s it worth? Stocks? Bonds? Bank accounts? Any children? Any by a prior marriage?

The questions aren’t clever. They aren’t social or “story-fied.” Yet, people answer them. If even a close friend asked the same questions, it probably wouldn’t have a good outcome. But here, it works. Why? Because we are there to get a job done. The questions are secondary to the task.

Making questions secondary to a task works. It works especially well for sensitive information. In one experiment,[23] some people were asked directly,

“Have you done this behavior?”

Others were instead given two sets of options:

“If you have EVER done this behavior, how unethical do you think it was?”

“If you have NEVER done this behavior, how unethical do you think it was?”

The “task” was collecting opinions about ethics. Admitting the behavior was secondary. In this “secondary” approach, people were almost twice as likely to admit

• Making a false insurance claim
• Cheating on a tax return, or
• Lying about income.

Fundraising tasks

In fundraising, we aren’t trying to get people to admit improper acts. But we may want them to tell us about their assets. And for some, that’s also sensitive information. But we can also make these issues secondary to another task.

The task may relate to a philanthropic barrier. These conversations can start with a question like,

“What’s holding you back from reaching your charitable goals?”[24]

Financial solutions might vary. They might include a multi-year pledge, an estate gift, or a complex trust. But first, we want to get agreement on the task. This might come from a question like,

“What if it was possible for you to make a gift and still accomplish your financial goals? Would you mind if I shared some of those options with you?”

Other tasks can also start such conversations. The first goal is still to get agreement on a task. For example,

• “You mentioned that you are going to be [passing the business on to your kids / selling your practice]. Would you be interested in charitable options that may save you money on your transaction?”[25]
• “You have been so generous to this cause in the past. Would you be interested in learning how to give more at a lower cost by using the best assets for the gift?”

After agreeing to a task, things change. Now, questions can be blunt.[26] For example,

• “How do you give? Through a company? A private foundation?”
• “Do you normally give appreciated assets?”
• “How is your business structured?”
• “Is it difficult to get profits out due to tax concerns?”
• “Do you have any life insurance policies you no longer need?”

The fundraiser becomes a helpful advisor for an important task. Information sharing then comes naturally.

Use a menu

Another approach asks for reactions to a menu of asset giving options. In conversation, this might sound like the following.

• “I help donors like you to give smarter. Usually this involves gifts of stocks, real estate, businesses, life insurance, or retirement accounts. The tax benefits can be much larger. Have you ever considered giving something other than cash?”
• “What’s your favorite form of giving?” “Have you ever considered other types of gifts like … [menu]?”[27] “What options would you be interested in knowing more about?”

A survey, response card, or website might do the same. Donors could check (or click) to receive information. For example,

__ How to save taxes with gifts of stocks or bonds
__ Top tax tips for gifts of real estate
__ Tax smart giving from a retirement account
__ Giving smarter with closely held businesses
__ How to avoid estate taxes with charitable planning

Requesting the information reveals the assets. It also creates opportunity for further conversations.

We can ask donor opinions in person or in a survey. First, we justify the questions. Maybe we need help with a problem. For example,

• “We’ve noticed that other charities receive more of their gifts from stocks, bonds, and real estate.[28] We’re trying to figure out why.”
• “We’ve recently seen a drop in people saying that they’ve included us in their will documents. We’re trying to figure out why.”

Next, we ask for permission.

“Would you mind if I ask a few questions about your thoughts on this?”

Then, we ask for opinions.

• “What’s the likelihood you would ever consider making
  • A gift of stocks or bonds?
  • A gift of real estate?
  • A gift in a will?
  • A gift of cryptocurrency, artwork, or oil rights?”
• “What have you heard about the extra tax benefits from donating assets instead of cash? What about leaving estate gifts from an IRA or 401K?”

Change the setting after the decision

The right setting for major gifts is the land of wealth sharing. Sometimes we can establish that setting shortly before a gift. Sometimes we establish it years before. But what if we’re too late? Even then, there are options.

Cherian Koshy shared this story.[29]

“I had a donor on the phone. He said, ‘I’m going to send you a check for $2,000.’

I said ‘Jim, is there any chance that you have stock that is worth $2,000?’

He said, ‘Yes, absolutely. But I don’t want to sell that stock.’

I said, ‘Take the cash. Go buy that exact same stock. Then send us the old shares worth $2,000. Now you have stepped up basis. That highly appreciated stock now starts at zero for capital gains tax purposes. And you get a charitable deduction as well.’

He asked, ‘I can do that?’

I said, ‘Yeah.’

The next day we received a stock gift … of $10,000 from the donor.”

Maybe the donor mentions he has included a gift in a will. Johni Hays suggests this question:

“If you plan to leave something to charity in your estate plan, could I share with you a way to make sure the best assets are used for the gift to minimize the loss in taxes?” [30]

Maybe a donor has already made a pledge. Appreciated assets are an ideal way to fulfill it.[31] This conversation can even be scheduled right after the commitment. For example,

“I can’t thank you enough for this tremendous commitment to our charity. When I come back to finalize the details of how you want to allocate the gift, I’ll bring a colleague who specializes in putting together gifts to maximize the tax benefits for you.”[32]

Knowing v. doing

It is easy to understand the idea. We want donors to make gifts of wealth, not disposable income. This changes the setting. It changes the reference points. It transforms giving. But actually doing it? That can be daunting. Cherian Koshy explains, “You intervene in the process and actually stop and say, ‘No, I don’t want your cash.’ I know that’s scary folks. I get it. But this is what you need to do…. What this really means is being the donor’s helper in this conversation.”[33]

The gift or pledge was already secured. And we interrupt that process. That’s not what salespeople do!

And that’s the point. We reject the cash – to help the donor. We take on more administrative hassle – to help the donor. We provide guidance, wisdom, and counsel. We serve as the donor’s guiding sage. We advance the donor’s hero story. We guide them in a journey. But it’s a journey set in the land of wealth sharing.

Footnotes:

[1] Selling appreciated assets means paying taxes. Any part that is donated before the sale avoids those taxes. Complex plans allow a sale with no taxes where the donor keeps the right to payments from the asset. For details of all of the options listed here see James, R. N., III. (2020). Visual planned giving: An introduction to the law and taxation of charitable gift planning. http://www.encouragegenerosity.com/VPG.pdf

[2] The donor can get tax benefits without changing the portfolio. They donate the old (appreciated) shares. They instantly purchase identical replacement shares. The portfolio doesn’t change. But the taxable gain disappears.

[3] A charitable remainder trust or charitable gift annuity can provide lifetime income and tax benefits.

[4] A “qualified charitable distribution” can address this issue.

[5] Special instruments can “pull forward” deductions for gifts that will not be paid out to the charity until future years such as the donor advised fund, retained life estate deed for homes or farmland, grantor charitable lead trust, or charitable remainder trust.

[6] Some tax advantages don’t require using deductions. Avoiding capital gains taxes and reducing “required minimum distributions” from retirement accounts fit into this category. On the other hand, if the donor is itemizing but is over the income limitations due to past giving and can’t use additional deductions, he can place an income producing asset into a non-grantor charitable lead trust which is it’s own tax paying entity that can use the deductions up to 100% of income.

[7] A retained life estate deed can create an immediate income tax deduction when irrevocably donating the inheritance rights to a personal residence or farmland to charity.

[8] Estate gifts to charity are tax deductible. Transfers to non-grantor charitable lead trusts can expand these benefits by allowing tax free transfers to heirs of any growth above the section 7520 interest rate.

[9] Illiquid assets may be excellent candidates for a “flip” or “net income makeup” charitable remainder unitrust as no sale is required for many years.

[10] A great example of the importance of this comes from Bidwell, D. & Magnuson, C. (2012, October). How to pursue and accept the right real estate gifts. [Paper presentation]. National Conference on Philanthropic Planning, New Orleans, LA, p. 7. (“I’m skeptical about the whole real estate gift thing. We‘ve received only three calls in the last two years.” To which we often respond: “Have you given your alums/members/donors any reason to think that you are interested in receiving real estate gifts? Do you mention it on your website? Do you include it in your mailings? Do you highlight it at reunions?” Most often the answer to these questions is: “Well, no, not really.” To which we respond: “They are not going to give you a call unless you give them some reason to call.”)

[11] James, R. N., III. (2018). Describing complex charitable giving instruments: Experimental tests of technical finance terms and tax benefits. Nonprofit Management & Leadership. 28(4), 437-452. For other explorations see Roberts, J. A., & Roberts, C. R. (2012). Money matters: Does the symbolic presence of money affect charitable giving and attitudes among adolescents? Young Consumers, 13(4), 329-336; Vohs, K. D., Mead, N. L., & Goode, M. R. (2008). Merely activating the concept of money changes personal and interpersonal behavior. Current Directions in Psychological Science, 17(3), 208-212.

[12] John, L. K., Acquisti, A., & Loewenstein, G. (2011). Strangers on a plane: Context-dependent willingness to divulge sensitive information. Journal of Consumer Research, 37(5), 858-873. In this experiment, identical sets of sensitive questions were given different website headers. The informal header (“How BAD Are U???” in red font and included a cartoon devil logo”) worked better than a neutral header (“Survey of Student Behaviors”) which worked better than a formal header (“Carnegie Mellon University Executive Council Survey on Ethical Behaviors”).

[13] Brooks, A. W., & John, L. K. (2018). The surprising power of questions. Harvard Business Review, 96(3), 60-67.

[14] See also Sagrestano, B. M. & Wahlers, R. E. (2016). Getting started in charitable gift planning: The resource book. CharityChannel Press. p. 90. (“What do you think the market is going to do in the next year?”)

[15] Huang, K., Yeomans, M., Brooks, A. W., Minson, J., & Gino, F. (2017). It doesn’t hurt to ask: Question-asking increases liking. Journal of Personality and Social Psychology, 113(3), 430-452, 430. See also, Yeomans, M., Brooks, A., Huang, K., Minson, J., & Gino, F. (2019). It helps to ask: The cumulative benefits of asking follow-up questions. Journal of Personality and Social Psychology, 117(6), 1139-1144.

[16] Giving an appreciated asset prior to sale avoids capital gains taxes. Giving through a charitable remainder trust allows a sale without initial capital gains taxes while retaining the right to payments from the proceeds resulting in higher annual income. Purchasing a charitable gift annuity with appreciated assets delays the payment of capital gains taxes.

[17] All questions in this “Tell me a story: past, present, future” section (except for estate phrasing) are from Greg Sharkey. Sharkey, G. (2021, March 25). Personal communication. Greg Sharkey, Senior Philanthropy Advisor, The Nature Conservancy.

[18] Rice, D. (2009, October). Asking for principal gifts – 5 approaches. [Paper presentation]. National Conference on Philanthropic Planning, National Harbor, MD. p. 2.

[19] Steenhuysen, J. (2015, October 23). A future for gift planning. [Paper presentation]. National Conference on Philanthropic Planning.

[20] Clontz, B. (2018, June 3). Planned giving comedy hour. [Presentation]. Life and Legacy Conference, Springfield, MA.

[21] For an extended story example, see Book II from this series, The Epic Fundraiser: Myth, Psychology, and the Universal Hero Story, Chapter 9 “Introducing the epic fundraiser to the public: What’s your job?”

[22] Less than 3% of household financial wealth (excluding real estate) is held in cash or checking accounts. For example, in 2018, $113,094.2 Billion in Total Assets were held by households and $1,375.9 Billion were held in checkable deposits and currency held by households. Thus, 1.2% of total financial wealth is held in “cash” by that definition. Adding money market fund shares adds another $1,701.4 Billion. Combined, this adds to 2.7% of household wealth. Board of Governors of the Federal Reserve System. (2019, June 6). Financial Accounts of the United States – Z.1, https://www.federalreserve.gov/releases/z1/20190606/html/b101h.htm

[23] John, L. K., Acquisti, A., & Loewenstein, G. (2011). Strangers on a plane: Context-dependent willingness to divulge sensitive information. Journal of Consumer Research, 37(5), 858-873, 860, Table 1.

[24] Lydenberg, J. (2007, October 13). Identifying planned gift donors. [Paper presentation]. National Conference on Planned Giving, Grapevine, Texas.

[25] Shuba, J. J. (2020, October). Navigating planned gift conversations with your donors. [Paper presentation]. National Charitable Gift Planners Conference. p. 2.

[26] See examples in Sagrestano, Brian M. & Wahlers, Robert E. (2016). Getting started in charitable gift planning: The resource book. CharityChannel Press. p. 91.

[27] Modified from Stroman, M. K. (2014). Asking about asking: Mastering the art of conversational fundraising (2nd ed.). CharityChannel Press. p. 164.

[28] In the U.S., such information is publicly available online for all charities on IRS Form 990, Schedule M.

[29] Koshy, C. (2020, August 12). Data dive ‘Why cash is not king in fundraising’. [Webinar recording]. Endowment Partners. Las Vegas, NV https://share.vidyard.com/watch/tvdptudNMESa1DhDayV2HZ?

This “charitable swap” approach might be particularly powerful in certain markets. One study found that when investors believe the stock market will be rising, they become less likely to donate stock. [Amin, K., & Harris, E. (2020). The effect of investor sentiment on nonprofit donations. Journal of Business Ethics, 1-24.] The charitable swap can sidestep this by emphasizing that the donor’s portfolio doesn’t change.

[30] Hayes, J. (2017, October). IRA wins Oscar: Best tax performance in a deferred gift. [Paper presentation]. National Conference on Philanthropic Planning, Baltimore, MD. p. 43.

[31] Clark, M. (2020, October 7). Personal communication. Matthew Clark, Director of Planned Giving, West Virginia University.

[32] Sagrestano, B. M. & Wahlers, R. E. (2016). Getting started in charitable gift planning: The resource book. CharityChannel Press. p. 91.

[33] Koshy, C. (2020, August 12). Data dive ‘Why cash is not king in fundraising’. [Webinar recording]. Endowment partners. Las Vegas, NV https://share.vidyard.com/watch/tvdptudNMESa1DhDayV2HZ?

 

Related Resources:

• Donor Story: Epic Fundraising eCourse
• The Fundraising Myth & Science Series, by Dr. Russell James
• How to establish “the land of wealth sharing” for major gifts donors
• 5 Reasons Why Nonprofits Should Pursue Gifts of Assets over Cash

 

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