Ken Goldstein, MPPA

Ken Goldstein has been working in nonprofits and local government agencies from Santa Cruz, to Sacramento, and back to Silicon Valley, since 1989. He's been staff, volunteer, board member, executive director, and, since 2003, a consultant to local nonprofit organizations. For more on Ken's background, click here. If you are interested in retaining Ken's services, you may contact him at ken at goldstein.net.

Monday, May 04, 2020

Budgeting for Bequests

One thing about shelter-in-place; I’ve been going through notes and files and finding half-written ideas for blog posts that never made it here.

One such germ of a post began with a question from another website (I’ve lost the link, not sure where the conversation started), “Do Bequest gifts to your organization at least total seven to nine percent of all charitable gift dollars each year? That’s the national average.”

My response (now edited for posting):

Bequests may be 7-9% of overall charitable giving, but it’s wrong to assume that it’s an “average” that organizations should shoot for. That’s an overall figure for the sector, including organizations large and small. And including religious orders and nonprofit universities, which are “typical” (as dangerous a word as “average”) bequest recipients.

This made me wonder if there’s a better way to come up with a nonprofits' target bequest expectations. Rather than bequests’ overall ranking, maybe it would be more appropriate to look at it in relation to individual giving? After all, bequests are simply the final gift of the individual donors who we've properly stewarded for many years.

So, if individuals are about 74% of overall national giving, compared to bequests being about 8% (changes slightly year-to-year, but roughly the about that), then we’d say bequests, overall, are about 11% of individual giving.

Then, an organization could see if they’re doing well on bequests using that 11% of individuals figure.

IE: If individuals are 50% of your income, bequests “should be” 5.5%. If individuals are 25% of your income, bequests “should be” 2.75%. If individuals are 85% of your income, bequests “should be” 9%. IF that were a good benchmark.

Reality, however, includes many other factors. Do your donors skew older or younger? It seems likely that if you have older donors, you may be expecting more bequests. What is your average donor turn-over? Do you retain a high percentage of donors each year? Organizations that retain more donors, rather than churn them over, may be more likely to have higher bequests.

In the end, even when donors notify us that they’ve included us in their wills, bequests are never a “pledge” that you can count on. They will nearly always be unexpected, and are not something you can put in your budget. And, as they are frequently larger amounts, it may be that your board will designate them for an endowment.

Bottom line: Encourage planned giving. Be grateful for the bequests that do come in (and make it through probate). But don’t plan for them, and don’t fall into a trap of trying to benchmark where you “should be” in bequests.