Balance-Sheet Philanthropy: The Real Wealth Behind Planned Giving

Do you talk with your donors about their checking accounts or balance sheets? While the answer is probably not directly, in another way, every nonprofit fundraiser does so when they don't go past asking donors for a straightforward one-time gift. I consider these contributions to be "checkbook gifts," and you may be missing one of the biggest opportunities in philanthropy today in the form of non-liquid assets.

There’s an enormous amount of untapped philanthropic potential sitting quietly in the form of homes, businesses, appreciated stock and other non-liquid assets. Though the median household wealth was $176,500 in 2022, the 90th percentile reached $1.6 million, according to data from the U.S. Census Bureau. That means one in 10 households' wealth exceeds $1.6 million. 

Still, charitable donation retention and giving in the U.S. seem to be on the decline, but the American people's generosity remains strong. What’s happening is that the average number of donors per nonprofit is decreasing, and chances are that we'll soon see a pullback in giving. When there’s economic and job uncertainty, donors may reduce or even stop their giving, but there’s a way around it with balance-sheet giving and non-liquid assets.  

The Shift in Giving: Why Fewer Donors Are Giving More

Before we dig into balance-sheet philanthropy around planned gifts, let’s explore a few of the reasons why many nonprofits are likely experiencing a decline in donor giving. 

• The economic stress on the middle class causes families to conserve as much as possible, making one-time and recurring donations to nonprofits less likely.
• A generational shift with younger generations choosing, more often, to be activists or to crowdfund than to give in traditional manners.
• A lack of trust in nonprofits, as failing trust in all institutions — from universities to nonprofits to government — accelerates.

And yet, wealth hasn’t evaporated. Savvy fundraising can tap into assets mostly off many nonprofits’ radars. Take a baby boomer or Gen Xer, for example. If and when they seek to sell homes, businesses or other assets, the consequences can be taxing. That leaves many with appreciated assets and potentially significant tax liabilities. To avoid this, they can transfer the assets to the family, sell and pay the taxes, or donate them to a nonprofit. 

Related story: The Future of Planned Giving Is Now

Follow the Wealth, Not Just the Wallet

The truth about fundraising is that most of the wealth we seek isn't sitting around in liquid forms, like checking accounts. It's in less accessible but far more plentiful forms, like illiquid assets, private investments and controlled companies. Fundraising revenue is in the balance sheets of your donors, such as peoples’ homes. Yet, many nonprofits still approach wealth-holders as though they write checks from their monthly incomes.

Philanthropy, as opposed to simple fundraising, is about having authentic, legacy-focused conversations with donors in which they aren’t just told to give their income but are also inspired to create impact. This is where charitable remainder trusts, donor-advised funds, and gifts of appreciated assets come into play because they support a nonprofit cause and still provide for the donors’ families. These planned donations enable benefactors to:

• Lower or do away with taxes on capital gains.
• Boost their cash-flow during retirement
• Bequeath a lasting influence on matters they care about. 
• Often creates a current gift to charity that is much larger than would have been available from the checkbook. 

How to Start the Conversation

Balance-sheet philanthropy is really about inviting people to have a conversation with nonprofits about what legacies they want to leave. This process isn't only for wealthy donors. It's something many donors can do. It is a very personal and meaningful experience because it concerns their legacy. It can touch on nearly every aspect of someone's life, from what they do and how they do it to why they do it. 

Every fundraiser can start with these steps to open the conversation:

1. Discuss what matters. Inquire what is of the greatest significance to your donors. Before discussing money, nearly all of the most generous donors want to engage in conversations about family and core values.
2. Emphasize timing. Occasions such as divesting a business, selling a rental property, getting ready for retirement or refreshing an estate plan provide ideal opportunities to discuss planned giving, so stay alert to these discussions.
3. Employ their terminology. When a donor wants to discuss their legacy and your cause, discuss it on their terms, including financial management, wealth that lasts for generations and strategies for avoiding taxes — not merely contributing to charity.
4. Collaborate with financial consultants. When a potential donor's financial consultant — a financial adviser, estate planner or certified public accountant — is part of the conversation, the donor is much more likely to be moved to give.

Fundraising Survival: Diversify or Close the Doors

Focusing your development strategy solely on annual giving campaigns and event-based fundraising is like walking in financial quicksand. Donors are pulling back funding, the middle class is disappearing, and there's immense uncertainty regarding inflation, the future of jobs and people's families. Now’s the time to diversify. Illiquid assets aren’t just a way to get through the next few years — they're a way to establish long-term impact and sustainability.

A balance-sheet approach to philanthropy isn’t a tactic. It’s a mindset shift. It’s about meeting donors where their real wealth lives and understanding their desire to care for both their family and their favorite causes. It’s about guiding them through a process that benefits everyone. We have to have that conversation as fundraisers. We owe it mainly to them — to the people whose futures hang in the balance of our work — and to the work we do in the social good sector.

The preceding content was provided by a contributor unaffiliated with NonProfit PRO. The views expressed within may not directly reflect the thoughts or opinions of the staff of NonProfit PRO.