Nonprofits need plan to manage deferred giving

SIGNIFICANT OPPORTUNITY: Elizabeth Manchester, an attorney at Partridge Snow & Hahn in Providence, said the baby-boom generation and impending transfer of wealth through deferred giving will create opportunities for nonprofits.
 / PBN PHOTO/MICHAEL SALERNO
SIGNIFICANT OPPORTUNITY: Elizabeth Manchester, an attorney at Partridge Snow & Hahn in Providence, said the baby-boom generation and impending transfer of wealth through deferred giving will create opportunities for nonprofits.
 / PBN PHOTO/MICHAEL SALERNO

Royal Little did a lot with his life. When he died at age 92 in early 1989, the New York Times referred to him as “the shrewd Rhode Island entrepreneur who is widely regarded as the inventor of the modern conglomerate.”

Today, nearly 30 years later, the late founder of Textron Inc. is still having a big impact in the Ocean State.

That’s because he left behind a huge gift through his estate to the United Way of Rhode Island. He set aside an endowment with the Rhode Island Foundation that pays for all the local United Way’s administrative and fundraising costs, saving the organization millions of dollars each year.

“It’s been a game-changer,” said Cortney Nicolato, president and CEO of the local United Way, about Little’s gift. “It allows us to focus the donations we receive on the communities and programs we serve.”

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But even estate gifts made with the best intentions sometimes can raise unexpected complications, said attorney Elizabeth Manchester of the Providence legal firm of Partridge Snow & Hahn LLP. Her clients include nonprofits seeking advice on how to handle such gifts.

“For some [donors], it may be the establishment of an endowment gift to benefit the organization in perpetuity [such as Little’s gift to the United Way],” Manchester said. “It may be honoring a loved one through a named space. It certainly may be … leaving the donor’s personal legacy for an institution. There may be tax motivations. A common thread is that the organization is one that has engaged and inspired that donor in a meaningful way.”

Amid the variety of reasons that donors give, can come a variety of issues for recipients to consider.

“Organizations more and more are being scrutinized for obligations surrounding donor intent,” Manchester said.

“Oftentimes,” she added, “gifts from estates may be restricted for a particular purpose. Restricted giving in general is becoming more popular. Organizations need to be aware of legal compliance, responsible fundraising practices and IRS regulations regarding gift administration.”

One important regulatory change has come from the federal tax cuts approved in 2017. The legislation increased the standard tax deduction in a significant way, Manchester explained, making many donors less incentivized to make charitable gifts in order to receive an itemized deduction.

“For this reason,” she said, “Deferred giving is more important now than ever for nonprofit organizations. Organizations need to have a formalized planned- and estate-giving program in place.”

Indeed, estate gifts to nonprofits are common. Among a sample of 7,700 donors with a will, one-third included a gift to one or more nonprofits, according to the 2018 Burk Donor Survey, which queried more than 1 million donors nationwide. Among the recipients, it found, more than half didn’t know a gift was coming.

Nicolato said the local United Way is one of just two or three chapters nationwide fortunate enough to have an arrangement such as the one it has with Little’s gift. Some nonprofits, especially colleges and universities, regularly receive donations through estates and wills that account for significant portions of their revenue. The local United Way has received numerous smaller gifts from estates and wills through the years. Sometimes it’s a surprise.

“Oftentimes,” she explained, “we don’t know we’re in somebody’s will until [after the person dies] and we receive a call from an estate attorney.”

Such was the case with Saint Elizabeth Community, a Warwick-based nursing home and assisted-living nonprofit. In 1998, the organization was pleasantly surprised when it received the remainder of Sarah Hallet’s estate, valued at $7.1 million. Prior to her death, Hallet was a member of Saint Elizabeth’s board of managers. Her wish was that her gift not be placed into an endowment but used in other ways.

At the time, the organization had the Saint Elizabeth Home, a nursing home in Providence. But it wanted to move and build a more-modern facility. Then Hallett’s gift arrived, allowing the organization to put a down payment on 21 acres of land in East Greenwich. It used the site to build the new Saint Elizabeth Home, a 168-bed nursing home. Her gift also was used to renovate Saint Elizabeth’s old facility in Providence, now the Saint Elizabeth Court for assisted living.

“A gift through a donor’s estate is a wonderful way to leave a lasting legacy,” said Erica Bryson, Saint Elizabeth’s chief philanthropy officer. “We have been fortunate to receive bequests, the Sarah Hallet gift being our most transformational estate gift.”

According to Manchester, “The baby-boomer generation and impending transfer of wealth is going to be significant for nonprofit organizations to capitalize on.

“Nonprofits can benefit greatly from being well-versed in the suite of options available for a donor to make a deferred gift,” she said.

Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.