5 Gifts That Will Have the Greatest Appeal in 2021 & Why

Wondering where asset-based philanthropy is headed in 2021?

We’d all surely love a clear, concrete path. While that probably won’t happen (sorry, everyone), we can look ahead to what types of gifts will be most appealing to donors this year, so we can better prepare our messaging and communicate more effectively.

Here they are, the 5 gifts that will have the greatest appeal to donors in 2021—plus a thought to ponder. We’ve based this list in part on the effects of the pandemic and the current state of the economy, the stock market and donors’ mindsets, as well as what’s coming out of Washington, D.C., if President Biden and Congress come together to pass tax reform.

A CAUTION: First and foremost, our duty as fundraisers is to connect donors with their missions. As you’re communicating with donors and prospects this year, you may notice themes throughout your conversations that lend well to certain gift types. While gift vehicles can help donors achieve their philanthropic goals, don’t get caught up in specific gift goals. Remember: It’s all about the donors.

1. QUALIFIED CHARITABLE DISTRIBUTIONS

It may be their big year

First, a note about the name. Some like to refer to it as an “IRA charitable rollover” while others prefer to call it a qualified charitable distribution or QCD. Remember: A qualified charitable distribution=an IRA charitable rollover.

Why the Appeal in 2021?

Last year, the CARES Act waived required minimum distributions (RMDs) for retirement plan accounts. (RMDs are amounts you’re required to withdraw from certain tax-advantaged accounts when you reach age 72.) The RMD waiver in 2020 under the CARES Act meant that more people, specifically seniors 72 and older, could keep more money in their IRAs. This year, not only is the RMD back but the stock market is at or near all-time highs. Additionally, this is a time-sensitive gift; the RMD transfer has to be completed by Dec. 31 of every year.

Tip: Many experts agree that you should promote the benefits of qualified charitable distributions three times a year—early in the year, at tax time and at the end of the year. It’s not too soon to begin promoting QCDs, as it takes time to create awareness among donors and prompt them to take action. Another apt approach is to include a QCD/IRA charitable rollover widget on your site. Check out our recently developed widget at work on a client’s site here.

Promote: Drip a QCD message throughout your direct mail (e.g., newsletters and a special-focus print postcard) and digital efforts (e.g., social and email). Try creating a calendar of QCD promotions for the next six months. Encouraging year-end giving to your nonprofit could be especially advantageous from a tax perspective if the donor hasn’t taken their RMD for the year.

2. DONOR ADVISED FUNDS

The fastest-growing philanthropy tool

Also known as DAFs, donor advised funds account for more than $121 billion in total charitable assets. They’re growing in popularity—fast. Schwab Charitable, for example, reported more than $3.3 billion in outgoing grants during fiscal year 2020, or a 24% increase in grant volume.

Why the Appeal in 2021?

DAFs are growing in popularity because:

• They’re easy to establish
• Donors can use a wide variety of assets to fund the DAF
• All gifts to a DAF qualify for an income tax deduction
• DAFS allow donors to receive the immediate advantages with flexibility to recommend grants at any time

Know These Donors: Explore the six common characteristics of DAF donors and other insights in “Donor Advised Funds: Time to Promote Those Rainy-Day Funds.”

Marketing Tip: Many nonprofits have a “Give Now” or “Donate Now” button on their websites. Given the explosion of donor advised funds, consider a DAF Direct widget on your website. In fact, according to Fidelity, 94% of donors recommend grants from their DAF accounts online. (Here’s an example of Stelter’s new DAF widget in action on a client’s site.) A non-digital option is to add language to your printed reply cards such as “I would like to make a grant from my donor advised fund.”

3. WILLS & BENEFICIARY DESIGNATIONS

Still the most popular gifts

A gift in a donor’s will or beneficiary designation accounts for more than 85% of all planned gifts. Why? They’re the easiest for us, as planned giving officers, to understand and talk about with donors. For donors, they’re also the easiest to understand and complete. See the win-win? Think of bequests and beneficiary designations as “entry-level” giving, only because of their simplicity, with the same worthy impact as more complex gift structures.

Why the Appeal in 2021?

Not only do they remain easy and flexible but proposed tax changes could reduce the estate tax exemption to $3.5M per person or reinstate the $5M exemption in effect prior to enactment of the Tax Cuts and Jobs Act. (The current estate tax exemption is $11.7M per person.) A lower estate tax exemption may shift donors’ focus from income tax planning to estate tax planning—meaning more interest in gifts in a will or trust and beneficiary designations.

Tip: Stay away from the word “bequest”; use “gift in your will” instead. This phrasing keeps donors more emotionally invested in the process by drawing a straight line from gift intention to gift completion. “Bequest” is industry speak, but don’t be fooled into thinking your prospects will be impressed with the jargon.

4. GIFTS OF STOCK & OTHER APPRECIATED ASSETS

Wealth for good

Americans created more than $5.1 trillion in wealth in the stock markets in the last 11 months of 2020. With the market ending 2020 at record highs, many of your donors—and prospects—find they have more than they expected in appreciated assets, possibly with hefty tax implications. At the same time, spending on “luxuries,” like travel, entertainment, dining was down.

Why the Appeal in 2021?

Making a gift of stock or other appreciated asset can save donors capital gains taxes. Donors who itemize also can receive a charitable deduction for the fair market value of the stock.

5. REAL ESTATE

A smart gift when expertly managed

Nonprofits turn away an estimated 80% of real estate gifts. But before you shut the door on these gifts, know that real estate can be a real boon—and real satisfaction—for both the donor and charity involved, when properly assessed and managed.

Why the Appeal in 2021?

Real estate generally comprises more of our individual personal wealth (at 43%) than do stocks (23%), bonds (20%) or cash (14%)*—yet it’s only 2% of charitable giving. So there’s opportunity in every property, if vetted appropriately and cautiously by your in-house and expert team.

A low charitable midterm federal rate (CMFR) or IRS discount rate creates opportunities. The IRS discount rate for February is 0.6%, a near historic low. The lower the CMFR, the higher the income tax deduction for some split interest gifts. Add that to a record-breaking year in 2020 for the housing market. Retained life estates may be a sound option for some donors this year.

In addition, a higher capital gains tax and top income tax rate, as proposed by President Biden as part of his tax reform, will likely lead to increased interest in gift vehicles that eliminate or minimize taxes like outright gifts of appreciated property, bargain sales or life-income gifts. The resulting increase in taxes can be minimized or avoided through a charitable gift in the form of real estate.

Key to Managing a Real Estate Gifting Process: Planning & professionals.

No doubt about it, managing real estate gifts can be more complicated. But—and this point is key—if you put an in-house plan in place and assemble a team of advisors ahead of time, you’ll be ready when that donor calls. You also can minimize risk to your organization by using a third party like Realty Gift Fund or Charitable Solutions, LLC to help with the transaction.

A basic team should include a gift acceptance board committee member (if applicable), the donor’s financial advisor and/or estate planning attorney, the realtor handling the transaction and a charitable real estate consultant. Consulting services can be tapped, too, when in-house planned giving teams are tight or feel uncomfortable with the level of expertise required with these types of gifts.

PLUS, A FINAL THOUGHT

Some of your prospects may be as much as 60% completed with their decision-making before reaching out to you. Get out in front of these self-directed donors with proactive communication (like marketing qualified charitable distributions now and throughout the year!) and meet donors where they are digitally and through direct mail.

Share Your Insights

Have you seen any trends emerging in asset-based philanthropy so far this year? What are your donors saying they would like to know more about or would like to give?

*The Secret Power Behind Real Estate Donations, Dennis Haber, Esq. & Chase Magnuson, CCIM, 2014.