Asking for Principal Gifts: Four Approaches

What is a principal gift?

Charities commonly define principal gifts as being $1 million or more.  Principal gifts are most often funded with appreciated assets, and donors most often make them with the assistance of savvy giving experts. 

What about principal gifts of cash?

Studies show 98% of all wealthy Americans donate to charity, yet only 7% of their wealth is in cash.  These donors have more assets than cash to give, and asset gifts are nearly always more valuable.  Have you seen $1,000 check donations?  When was the last time you saw a deed to real estate worth only $1,000?

How do I ask for principal gifts?

First, you will rarely ask for a specific cash amount.  Instead, you will ask the donor to consider giving an asset that you previously discovered they own.  Asking a "Have you considered giving this asset?" question is easier than a point-blank solicitation for cash. 

Asking for cash can be more stressful than asking a donor if they have ever considered giving an asset.  Imagine a donor experiencing you.  Fundraisers are contagious and carriers of stress!  You are acutely aware of how stressful it is sometimes for you to visit a donor, but you may not realize how stressful fundraising calls are for the donor!

Using this "Have you considered" approach is an easier way of asking for a principal gift.  Face your mirror and ask, "Would you consider giving $1 million to fund the xyz project?"  Now ask, "Have you considered giving a portion of your real estate, which could be used to fund the xyz project?"  Which question was easier for you to ask?

Four Approaches to Asking For a Principal Gift:

Use the one that's most comfortable for you.

1. How were you able to make this gift?

Situation leading to approach:  You learned the donor just mailed in a large cash gift.  Celebrate!  Then ask for their story.

Purpose of the approach:  Usually, we ask the donor what motivated them to give.  We want to ask a very different question: "How were you able to make this gift?"

Approach overview:  Celebrate the gift event with the donor and ask them to tell you what things worked together to make this gift possible.  Did the get a bonus, sell a business, land a new customer, or sell stock at a profit?  Listen for clues.  Did this gift come from a special one-time event or is there some kind of income-producing asset they own?  You want to know what kind of financial engine allowed them to make this gift. 

Approach objective:  If you discover they own assets, ask if they would consider giving assets rather than cash.  Why?  Cash is often the most expensive and difficult gift to make.  And there are multiple financial benefits to giving assets.

2.  Is there another way you could make this gift?

Situation leading to approach:  Donor plans to make a major gift by check.  Before you accept their gift, ask this question. 

Purpose of the approach:  To serve the donor by counseling them about the opportunity to make a financial and tax-wise gift if they can give assets.

Approach overview:  Like approach #1, listen for clues about whether this gift came from a one-time financial event or from a income producing asset they own.

Approach objective:  If you discover they own assets other than cash, ask if they would consider giving assets rather than cash.

3.  Have you ever considered giving?

  • Have you ever considered giving x?
  • Based on the projected growth rate of this asset, how long would it take for you to 'reforest' the value of this gift? 
  • Do you pay estimated income taxes?  If so, the deduction for your gift can be used to reduce or eliminate any remaining estimated taxes this year. 

Situation leading to approach:  You already know what assets the donor owns.  The "x" is the asset you would refer to.  The follow up 1, 2, and 3 questions are designed to help your donor become comfortable in considering asset gifts. 

Purpose of the approach:  To coach the donor by wisely counseling about the opportunity to make a financial and tax-wise gift.

Approach overview:  Many principal gifts come from using this approach.  And, while these gifts can be complex and time consuming, they are very rewarding. 

Approach objective:  Remember, cash is often the most expensive and difficult gift for people to make if they own other assets that they could consider giving. 

4.  Are you planning to sell anything soon?

Are you selling anything this year that has appreciated in value and have you already decided to share some of the profits with your favorite charities? 

Situation leading to approach:  This is a great question to ask your donors annually.

Purpose of the approach:  To get ahead of a significant liquidity event in the donor's life, to help them achieve their financial and philanthropic goals in a manner that allows them to pay less taxes and have more discretionary income.

Approach overview:  Major liquidity events are some of the greatest sources of Principal gifts.

Approach objective:  To coach Donors regarding their options for giving using best practices. 

 

By:  Dan Rice, Co-founder of CTAC

Back to the June 2011 eNewsletter

*Thank you to Planned Giving.com for allowing us to reprint this article.