Planned Giving and Major Gifts

The Relationship Between Major Gifts and Planned Giving

It’s quite common to see an organization house planned giving under the same umbrella as major giving.

Why, though?

They are different types of gifts, and they occupy separate tiers on the donor pyramid. And yet, they are often grouped together to the extent that some organizations even hire a joint planned giving and major gifts officer.

This article will answer the “why” behind the connection between planned and major giving and explore the ways in which these two giving types differ. 

First though, we should walk through the definitions of each type of giving.

Definition of Major Giving

Major gifts are the crème de la crème of donations an organization receives. Outside of the absolute largest gifts a nonprofit secures, major gifts are consistently the biggest donations an organization will collect. These gifts are relatively rare, but they can account for most of a nonprofit’s fundraising totals for any given year.

The specifics of what defines major giving from organization to organization are always different. For example, you can’t universally state that anything over $25,000 constitutes a major gift. If you do, you’re underestimating that amount for a number of nonprofits and excluding other smaller organizations that are years away from consistently securing gifts over $25,000.

Even though the definition of a major gift is fluid depending on the nonprofit in question, major gifts are always important, powerful, and deserving of careful cultivation, solicitation, and stewardship.

Definition of Planned Giving

Planned giving encompasses all the ways in which a donor chooses to make a future gift in the present. There are generally two paths planned gifts take from decision to allocation:

  1. A supporter decides to leave a planned gift to a nonprofit in his/her will. After the supporter has passed away, that predetermined amount is gifted to the organization.
  2. A supporter establishes a planned giving arrangement with a nonprofit. Through the arrangement, the supporter gifts a large sum of funds to an organization. The organization then pays the donor a set amount of money from those funds until the donor passes away. When the terms of the payment are complete (usually upon the death of the donor), the nonprofit keeps the remaining funds.

The gifts are often termed legacy gifts because they leave a lasting impact on the recipient organization in honor of the donor.

Although planned giving is relatively easy to explain at face value, it can get complicated very quickly once the details surrounding wills, trusts, and tax exemptions enter the equation.

What’s the relationship between planned giving and major giving?

When you look at the definitions one after another, the similarities between the two giving types become obscured. Let’s shine a light on those similarities!

Major giving and planned giving are often part of the same sub-department of development at organizations because both:

  • Are some of the largest gifts an organization will receive. Major gifts, as was heavily emphasized in the definition section of this article, are big gifts. Planned gifts are often even larger, although that is not exclusively true. When someone donates a planned gift, it’s a legacy donation allocated after the donor no longer needs the money. So, by that standard alone, you can see why they’d tend to be on the grander side of the gift size spectrum. Plus, if someone has the funds to set up the type of planned gift that pays back out to them over multiple years, you’re talking about high-net-worth individuals with corresponding high-net-worth funds to donate.
  • Require additional cultivation, solicitation, and stewardship strategies compared to annual fund donors. Gifts with high dollar signs are often donations that take additional effort to secure. Receiving planned and major gifts is hard work, but certainly worth the effort. When your nonprofit can suddenly fund new programs and start brand new initiatives to further serve your mission, the time and energy it took to acquire these gifts will have been time well spent.
  • Sets of prospects share similar qualities. Although major gifts donors and planned gifts donors don’t share all of the same traits, they do have many in common. This is especially true for those planned giving donors who leave major gift size (or bigger) donations. Typically, these donors will have a mix of traditional wealth markers. But the most important trait to look for in these prospects is past giving to your organization. If someone has a proven history of donating to your nonprofit, there is a much higher likelihood that that person will give another gift and be open to upgrading their gift size.

Because of the combination of those three similarities, organizations will sometimes conserve resources and assign the same team (or team member) to both planned and major giving. This marriage can work well, because it keeps the messaging and practices uniform across all avenues of large gift solicitation.

However, nonprofits need to be careful, because planned and major giving do have unique, individual aspects that should not be addressed in the same way.

What are the distinguishing characteristics of planned giving and major giving?

An alternative title to this section could be, “Reasons why you should keep planned and major giving separate.”

The three distinguishing characteristics to keep in mind as you decide how to allocate your time and resources to the two types of giving are:

  1. Planned gift donors don’t have to be traditionally wealthy. As grim as it is to type in such a straightforward manner, the fact is, planned gifts are left when the donor has passed away and no longer has any use for them. Because of that, someone who has a limited income and is a strong supporter of your nonprofit and your cause can leave a planned gift after death when he or she isn’t restricted by budget constraints. Often, those gifts are far larger than any donation the supporter made prior.
  2. The required technical know-how varies. The legal and fiscal complications that can arise during the planned gift process require a certain level of expertise. Organizations will even bring in outside legal consultants to handle the most perplexing aspects of allocating a planned gift. While major gifts are not without their own similar complexities, they are not on the planned giving level of legal difficulty.
  3. People don’t tend to leave planned gifts for the same reasons that they would donate a major gift. A planned gift is a legacy gift, and that drastically affects the reasoning behind leaving one. There’s a separate logic that goes into leaving a planned gift for the future, instead of allocating a major gift in the present day. Both decisions have serious heft, but the mindset that drives those decisions is far from similar. That difference has to be reflected in the way your nonprofit cultivates and solicits those donations. Personalization is key, and personalization is far harder to accomplish if you are trying to make a major gift ask using planned giving compatible language. You back yourself into a “square peg, round hole” corner.

As you can see, there are solid arguments for saving resources and combining your planned giving and major giving programs, and there are equally convincing reasons to keep the two separate. The solution in your particular case will boil down to your nonprofit’s current situation. More likely than not, you’ll find a happy medium somewhere between the pendulum swing from planned giving and major gifts.

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