Planned Giving: Too Much Information?

No area of fundraising intertwines development staff and donors in more personal relationships than planned giving.

In many cases, all a prospective donor asks is that a development executive supply generic information about how a particular gift plan might function, what the payment rates or tax deduction might be, or whether an organization can serve as a trustee.

But in other cases, the process of planning a gift — the who, what, when, why and how of it — results in the development officer becoming privy to very private information.

For example, suppose a donor informs an organization of her intention to include a charitable gift as part of her estate plans. She says she would like the organization to serve as trustee of two trusts to be created under the terms of her will. She has a brother and a sister, both in their late 60s.

She would like to leave half of her estate in a charitable remainder annuity trust that will provide her sister with a fixed income for life, with the remainder going to the charity at her death. So far, so good.

Next, the donor shares that her brother has had a history of drug and alcohol abuse dating to the 1960s. Her mother left her brother’s inheritance to her and asked her to “take care of him.” What she would like to do is create a trust under which the nonprofit organization as trustee would provide for her brother as his needs require, but never give him access to the corpus.

There could be as much as $1 million in the trust. She says her brother is “functioning,” and that this family issue has never become public. One reason she wants the organization to serve as trustee is that she feels this will be more private. She doesn’t, for example, want the information to be known in the trust department of her local bank.

Suppose, as would be the case for many institutions, that the decision is made not to serve as trustee of the brother’s trust. Should this decision and the information surrounding it be permanently recorded in the donor’s file? Should it be entered into a contact report in the organization’s donor-tracking system?

One approach might be to indicate that there were personal family issues that led the charity to decide his trust would best be handled by someone else. This makes it clear that there was a specific reason for not serving as trustee, but it doesn’t spread around any details. Sometimes it’s not just what you do or do not say, but how you do or don’t say it.

Obviously there are conflicting interests at play in a situation such as the one described above. It might be important for your successor or others on staff to know this information, but what about the donor’s interest in maintaining her privacy and that of her family?

Pitfalls abound
This is just one example of the types of delicate situations that can develop when donors share personal motivations underlying their desire to make a particular gift.

Three different groups consistently appear as beneficiaries in wills and other estate plans: family members, close friends and charitable interests.

When a person includes a nonprofit organization in her will, she does not benefit from an income tax deduction or receive any income. Relatively few donors will tell you in advance about their plans, so there often is no desire for recognition. On top of that, the vast majority will not benefit from estate tax savings.

A donor who decides to include a nonprofit in her will is, in effect, elevating the charity to the status of a family member. If she decides to inform the organization of her intentions, the donor often treats the organization from that point on as a family member. Representatives of the organization might then become privy to information, such as what’s in estate documents, that otherwise would be shared only in a very trusting relationship. In such situations, it’s critical to hold such information in confidence.

It’s perfectly proper to note that a donor enjoys hiking, music, bridge or gardening. These things help you (and your successor) find shared interests and values, without intruding on someone’s privacy.

What to do?
There are situations in which a development officer’s duty is to not record donors’ personal information.

In some cases this includes not even revealing that a donor is a donor. One Ivy League university president was approached by a donor regarding a multi-million dollar bequest. The donor wanted the top management of the institution to know that the bequest was in the foreseeable future and to plan for it accordingly.

The donor’s wish was that the amount of his bequest and his desires regarding the eventual use of the funds be known only to the president, who would have to agree he would not record the information or share it with anyone — including the board of the institution.

The president informed the board of the donor’s conditions and was told to respect his wishes. Only then would the donor inform the president of the size and scope of the bequest.

This example also illustrates why planned-gift development efforts usually are very staff-driven, with less involvement by volunteers than some other methods of fund development. Donors might be friendly with volunteers, but they might not want to share very personal information with them.

Staff members who interact with donors who might share personal information should be trained to be aware that this could occur and to feel comfortable in not recording certain information.

In some cases, a staff member might wish to verbally convey information to her superior to assure institutional memory without making permanent notations.

When working with a donor who shares particularly sensitive personal information about the circumstances surrounding a gift, it might be appropriate in some instances to ask the donor if she would mind if certain information was recorded for future reference, to make sure her intentions are carried out. If the donor prefers that information not be kept, it would be wise to follow her wishes.

Untangling the Web
What about information gathered during a donor’s visit to a planned-giving Web site? For example, if you maintain a tax-deduction calculator on your site, should you be recording information a donor might enter regarding the amount of a proposed gift, pay-out rate, age, etc.?

Without permission, probably not. How do you ask for permission? One way might be to ask Web site visitors at the outset if they want the information saved. How would you answer that question if you were about to embark on an exploration of your organization’s Web site?

Another possibility might be to indicate before a donor leaves the site that only by checking a box will personal information be shared with the charity.

In any event, it might be wise to seek a legal opinion and/or board-level approval of policies regarding the retention and use of information donors might leave behind after a visit to your site.

What about information that is publicly available? Would most donors be offended if you obtained age information from public sources to reduce the cost of your fundraising efforts by, for example, not sending information about gift annuities to people in their 30s? How would you answer that question if the information obtained was your age?

Clearly the gathering and use of certain information is appropriate and would be expected to lead to few, if any, objections from donors. In other cases, the answer might not be so clear.

As in many other areas of human endeavor, there are no clear-cut answers to questions regarding the gathering and use of information as part of planned-gift development efforts.

Five tests
When faced with donor-privacy decisions that might have moral and ethical implications, it’s wise to put the decision to these five tests.

1. Is the activity legal? If you don’t know or aren’t sure, find out. If it isn’t, you can disregard the rest of the tests. An example of information that may not legally be used in planned-gift development is personal health history that a hospital has because a donor was treated at the facility. That is not an ethical issue; it’s federal law.

2. If it is legal, does it pass the “stomach test”? We can all think of examples of behaviors that are legal but just don’t “feel right” for one reason or another.

3. If the behavior passes the legal and stomach tests, does it pass the “relative test”? Would this be something that would be OK to you if it was your mother or other close relative? Or you? How much information about your personal affairs would you want to be a part of an institution’s permanent records?

4. If it passes the legal, stomach and relative tests, take the “60 Minutes” test. Would you like what you are about to do to be the subject of a Page 1 article in your local newspaper tomorrow morning?

5. Finally, take the “witness stand” test. Keep in mind that donor records can be discovered in a will contest or other legal action.

When recording information in a donor’s file, imagine that you or someone else could be asked to read the report from a witness stand. Or simply imagine the donor herself reading your notations.

Create policies
The best course of action is to anticipate certain situations that could arise and to formulate policies in advance so that you or your staff members don’t have to make important determinations on the fly. Once policies are in place, make sure they’re disseminated among staff and volunteers and periodically updated to reflect changes in the law, technology and other factors that could underlie them.

Robert Sharpe Jr. is president of The Sharpe Group.