Planned giving is an impactful, accessible way for donors to leave a sizeable future gift to your nonprofit without dipping into their current funds. However, bequests and other types of planned gifts aren’t ideal for everyone. What if a donor wants to leave a legacy that they can see begin during their lifetime?
That’s where this guide comes in. We’ll introduce you to three ways donors can leave lasting charitable legacies without making planned gifts. While these aren’t traditionally considered legacy giving methods, each is a highly impactful way for donors to leave a major, long-term impact on your organization. Let’s explore how.
1. Donor-advised funds
Donor-advised funds (DAFs) have been making major waves among high-capacity donors in recent years. As of 2022, there were almost 2 million DAF accounts open, holding $228 billion in total. But what are DAFs, and why are they increasing in popularity so rapidly?
According to Infinite Giving, a donor-advised fund is “a charitable giving account established by an individual at a public charity.” These accounts enable donors to set aside money for charitable giving at any time, allow the funds to grow, and then donate to various nonprofits down the line. While donors don’t manage the fund themselves, they serve as advisors, contributing money and suggesting which organizations grants should be distributed to.
DAFs continue growing in popularity for several key reasons:
- Donors can create a charitable legacy during their lifetimes. With a DAF account, donors can devote significant amounts to charitable causes and make large donations throughout their lives. This way, they can see the impact their funds make firsthand.
- DAF holders can impact a wide variety of nonprofits and causes. While planned gifts typically go to a single organization, donors can distribute DAF grants to as many nonprofits and causes as they choose.
- DAFs give funds the potential to grow. Setting aside money for charitable donations in a specialized account allows that funding to grow through investments. This enables donors to grow their funds before they give, ultimately giving more to your nonprofit when they do request a grant.
- Donors receive tax benefits faster. Wealthy donors are always looking for the most tax-efficient ways to give, and DAFs fit the bill easily. Donors can claim charitable tax deductions the year they add money to the fund, even if they don’t end up granting that money to a nonprofit until later.
Clearly, many donors love DAF accounts and use them to leave legacies on multiple nonprofits throughout their lives. However, due to the long-term nature of DAFs, donors often need reminders to request grants. That’s why using specialized fundraising software can help. By adding a DAF widget to your donation page, you can remind donors to give through their DAFs and quickly provide instructions on requesting a grant for your nonprofit.
2. Endowments
Another giving option that helps donors create a legacy is contributing to endowments. An endowment is a similar type of long-term fund that’s made up of charitable donations and designed to grow over time. Unlike DAFs, however, nonprofits directly manage endowments and take out only a set percentage (typically 4-5%) each year to put toward organizational expenses.
Donors can participate in endowment giving in one of two ways. They can either:
- Donate to your existing endowment. Once your nonprofit establishes an endowment, donors can contribute to it via cash or stock donations at any time. Their donated funds will then grow over the years and be used well into the future, helping them leave behind a generous legacy.
- Gift a micro-endowment to your nonprofit. While this is a less common option that isn’t as accessible for most donors, donating a micro-endowment is a clear way to cement a donor’s charitable legacy. Donors can create and donate their own micro-endowment in their or their family’s name that will keep growing beyond their lifetimes, establishing an impactful long-term relationship with your nonprofit.
Either way, endowment donors can rest assured that their funding will support your organization for years to come.
If you want to create an endowment for your nonprofit and start securing these donations but aren’t sure where to start, partner with a nonprofit investing advisor. These experts can help you create the endowment and manage it wisely. Make sure any advisors that you consider offer low fees, transparent reporting, and policy creation services. They should also have experience working with nonprofits and a fiduciary responsibility to act in your organization’s best interest.
3. Matching gift challenges
Your nonprofit has likely already heard of corporate matching gifts and their potential to multiply eligible donations. But did you know that individual donors can match gifts as well?
With a matching gift challenge, a donor can create a significant impact on your nonprofit by becoming a sponsor and matching all gifts to the campaign at a specific ratio. For instance, you might host a matching gift challenge on GivingTuesday where the sponsor doubles every gift made to your nonprofit that day. These challenges are easy to host yet highly influential ways for donors to create a legacy and see their impact right away.
Double the Donation’s guide breaks down the steps of hosting a matching gift challenge like this:
- Identify your match sponsor. This is the major donor (or business or foundation) who will sponsor the challenge and match every gift at a set ratio.
- Define the terms. Work with your sponsor to determine the challenge’s match ratio (often 1:1 or 2:1), fundraising goal, and timeframe.
- Promote the challenge. Announce the matching gift challenge and explain to your full donor base that they multiply the size of their gifts for a limited time.
- Track progress. During the campaign, monitor important fundraising metrics like the number of donations matched and total matching gift revenue.
- Report on the results. When the campaign ends, you’ll collect the final donation from your sponsor and regularly update them about the impact their sponsorship makes.
The best part of a matching gift challenge is that it doesn’t just improve your relationship with the challenge sponsor—it also engages plenty of your small-dollar donors by empowering them to double their gifts’ impact.
To tap into these unique legacy giving opportunities, you’ll need to promote them on your website and across other marketing channels in the same way you promote planned giving. Provide interested donors with more information about how they can participate in these opportunities and the impactful legacy they can make by doing so.
