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October 2010

When English isn't Literature

A view from a marginally employed academic. English has something to do with producing and consuming written documents. Interest in literature per se is declining.

My own sense, though, is that interest in one's own bio is soaring. The wealthy don't want the trouble of writing their own moral biography but they are willing to pay some schmuck English major to pen it. So there is a future for us. I won't link to sites providing this service because the last time I did, someone muttered something about suing me for libel. All I meant was that there is a market for English majors. I meant no harm and no disprespect. Whatever you have done in Wealth Bondage to service clients, I have done worse and for less money. We are all just doing what the market demands. Every market clears at a price and we hack writers are in an oversupply situation. Given I once took a course in moral philosophy, and got a B -, I have tried to differentiate myself by critiquing the ethics of those whose moral bio I write, but that has proven counter-productive, and so far has been a career limiting move. Writing naked from a Dumpster was good as a gag, but with winter coming on, I could use a real job.

Albert Ruesga on Theories of Change

What a service Albert has provided to those of us who have always wondered what a "theory of change" might be, and how a "logic model" could ever connect input A but result X in a complex and interactive human system. He demonstrates with the cold ferocity of an MIT trained analytic philosopher that in fact Paul Brest and others who demand such theories are ignornant of what such a theory could possibly entail. They are not theorist, to be blunt, and would not know a rigorous theory if it landed on their desk. My sense is that funders with big dollars do not need much logic or rigor, or  much intellectual humilitly or even much self awareness, they can work within a Newtonian vision of society as "billard balls" bouncing on a table, without anyone having the courage to wise the funder up. It is far easier to flatter the delusions and blindspots of the funder than to provide the debunking as Albert so courageously has. A good story in the funder's preferred framework, perhaps Albert Ruesga and Paul Best could agree on that definition, though they migh differ on the preferred narrative frame, and how scientific the bs should sound.

Bloglines to Close as Twitter and Facebook Boom

If you are reading Gifthub in Bloglines (2,000 plus are allegedly Gifthhub subscribers there), be aware that bloglines is closing by November 15. You can transfer your data to other rss feed readers, such as Googlereader. I continue to blog rather than get too deep into Facebook and Twitter because I like not having to worry about what Mark Zuckerberg or some other entrepreneur sticks in the sidebar by way of advertising. Monetize your own eyeballs, or lend or sell them to whomever. At Gifthub, our constant product placement for Wealth Bondage, our generous sponsor, is our only concession to the marketization of all things. There was a time, long ago, when blog to blog links were a potentially subversive alternative to commercial media. Bloglines was part of that era. Now, of course, blogs are just feeds into closed spaces, on which ads can be posted by the owner of that utility. To facilitate this, the new convention is that posts should be banal, brief, artless, and authentic as are conversations under surveillance at work. (I tried, believe it or not to create an ad on Facebook for Wealth Bondage; I wanted to target highly educated people at $.89 a click through, since those readers could be great Morals Tutorial clients for me. The system kicked Wealth Bondage out for containing a forbidden word. That my friends is Wealth Bondage at work, guarding our morals to protect its business model. We don't want ads coming into our living rooms in a subversive context!) Wealth Bondage is the Quiet Omnipresent Frame. Subverting Wealth Bondage, or even mentioning it in polite company, would be a Fool's Errand. Please keep your subscription current so that we can help Wealth Bondage grow to scale. Then, when everything is owned and processed effectively and efficiently including all conversations, and personal data, and our attention, we will be at last be Free.

Gift Planning for Very Small Organizations courting Very Big Potential Donors

Planned Giving Defined

I defy you to find a clear definition. Having recently canvassed the best known guides, some over 700 pages long, I can tell you that planned giving is a department. What? Planned Giving is the department in a large charity that has Annual Giving on the first floor, Major Gifts on the Second Floor, and Planned Giving a room on the third floor. The Planned Giving people handle deferred gifts, split interest gifts, gifts of tricky assets like real estate, have tax calculation software, know all that tax stuff, and work with attornies. That is planned giving, as traditionally defined in practice.

Planned Giving as it Stands Today

Planned giving is an intimidating topic to many in the nonprofit world. Successful programs require significant staff and budget, and red ink for 3-7 years as "expectancies" mature. Planned gifts generally, or often, go into an endowment - and little nonprofits don't have one. Planned gifts require gift acceptance polices, a gift acceptance committee, and ongoing stewardship. Planned gifts require tax calculation software. Planned gifts often involve quirky assets, like closely held stock, mortgaged real estate, gun collections, intellectual property, oil leases, antiques, and much else. Accepting these and writing receipts for these and managing them is an exercise fraught with complexity and liability.

And furthermore! Planned gifts can be very large. And how can a donor justify giving a huge gift to a tiny organization that may be overwhelmed by it?

And furthermore! Planned gifts are often deferred, or death time, and the donor may outlive the charity.

For all these reason and more, big donors make big planned gifts to big organizations with big staff and big programs, like universities, prep schools, medical centers, and established arts organizations like museums, opera, and ballet. They do not make planned gifts to grassroots organizations, nor can these organizations generally accept gifts other than cash and publicly traded securities. These organizations need cash and need it now, or they may not survive.

Net result? The big get bigger, and the grassroots organizations struggle. 

Planned Giving on the Old Model is in Decline

For many years planned giving grew rapidly as large organizations did their feasibility studies, and decided to invest in getting their share of the wealth transfer wave estimated to be in the tens of trillions. Planned giving councils grew up all over the country. Recently, though, the trend has reversed. Every year at Partnership for Philanthropic Planning attendance is lower. An internal study by PPP found, in effect, that the game has changed. Advisors now are up to speed on the charitable tools. The planned giving officers who once seemed like experts now seem like amateurs in comparison to the professional advisors who can integrate the charitable tools into an overall financial or estate plan, while the planned giving officer, who generally has no access to the donor's financial statements, and who generally views advisors as pesky deal killers, is now marginalized, pitching tools in a vacuum with predictably poor results.

Organizations doing a feasibility study today on starting a planned giving department will conclude that it is a poor investment. Organizations with existing planned giving programs are cutting back. Some are consolidating planned giving (the technical, tricky, tax driven, advisor dominated giving) with major gift planning (asking for cash and securities in big amounts). Fundraisers say they must increasingly "wear many hats."

Grim? Actually, pain like this is a wake up call. Only enough pain will enable those in the nonprofit sector to finally reconceptualize their place at the planning table, and their way of seeing the world of big donors and big gifts. What is killing the nonprofit planned giving programs could also cure them. Big orgs with big donors and many fundraisers will be the last to get the news. They are insulated from the pain by their donor base and its commitment to the organization, and they have the advantage of established solid gift administration services. Their results will justify continuing in the old way, as if, in effect, they were financial services companies, with a department to accept, process, invest and manage complex gifts, and the money that goes into endowments, often with restrictions laid out by the donor, requiring ongoing stewardship. The good news for the grassroots is that they can start new programs in the new way, and get results without the red ink, big staffs, and high liability.

New Model

What is called planned giving is called estate planning, financial planning, business transfer planning, and investment planning by advisors. The so-called planned gifts are nothing more than tools or techniques of wealth transfer planning as taught to advisors working in advanced markets. Furthermore, what charities call endowment is nothing more than assets under management. Forprofits train advisors to do wealth transfer planning. Forprofits over the last decade have excelled at creating surrogates for endowment. Guess what? the forprofits and advisors want to do the planning and they want to manage the money, and they are very good at that, and offer many options. Charities resent this. They feel that have been co-opted, displaced, or euchred. Vanguard, Fidelity, Schwab, Merrill, Bank of America, Wachovia, Wells Fargo, Foundation Source, Northern Trust, Renaissance, National Philanthropic Trust, Charitable Solutions, American Endowment Fund, Community Foundations, and many other organizations, whether technically forprofit or nonprofit, have emerged as providers of charitable tools, and charitable endowments. Whatever Harvard can do in planned giving can be done by an advisor using the readily available infrastructure inside his or her firm, or through the "vendors."

Listen please! Insource or outsource? That is the question. Harvard, the Medical Center, the Opera are big enough to have 100 fundraisers and 10 who know planned giving. They can insource the expertise to accept gifts of real estate, or oil leases, or patents. They can do gift acceptance policies and have a gift acceptance committee, and have legal talent on call, and have sample documents. They can manage assets in perpetuity to fulfill the donor's legacy intentions. The planned giving staff from big organizations are proud of all that and swagger disdainfully before the grassroots orgs who are pitifully unable to get the planned giving job done. Yet, all the big orgs have done is to take on the overhead and offset it with reliable deal flow and economies of scale. Why not outsource the overhead and not have to worry about scale or liablity?

Outsourced Planned Giving

Hildy Gottlieb in her Friendriasing has an exercise that would be familiar to anyone in the life insurance business. William Sturtevant in his The Artful Journey has others. Kevin Johnson in his The Power of Legacy and Planned Gifts, has another exercise, or action project, also familiar to anyone in the life insurance sales training bidnis. These procedures just work, and are dead simple. Adding these exercises and action projects to the outsourced infrastructure discussed above, yields what seems to me to be a new model of planned giving for grassroots orgs, as well as the major (potential) donors who love them.

  1. Name List: Charity and advisors create and share a list of names of potential friends of the organizations who may have liquid or ill-liquid wealth. Whom do you know who? Has a farm or ranch? Who has a business?  Is an inheritor? Is a wealthy widow? Is wealthy, liquid, and older with no heirs? Is active with us? Is or was on our board? Volunteers?
  2. Rating System: Rate more than one way. Rate as prospects from the traditional charity focused perspective as Five Star prospects if the donor is committed, rich, old and nearly dead, with no heirs. Rate as Five Stars from an advisor perspective (life insurance sales person with an advanced planning background in wealth transfer planning with credentials like CLU, ChFC, MSFS, CAP, CFP, or a CPA, or an attorney specializing the estate planning, wealth transfer field). For advisors illiquid assets, working business interests, and a client who is healthy, has a family, and is insurable, and who is approaching retirement is ideal.
  3. Market Survey: Instead of creating a pitch kit on why you need the money (a Case Statement, as it is traditionally called) why not do a Market Survey? Go out and ask rich people who love your organization what you do well, what you do poorly, and how you could do better? Let them reach the obvious conclusion that doing better will take money. Ask them what would need to happen for them and those like them to consider your organization as a suitable candidate for a significant chunk of the donor's annual giving? Major giving? Legacy giving? 
  4. Case Statement: Build the case statement based on the survey of what donors want and how you can provide it if given the money to do so.
  5. Moves Management: Decide who will approach whom how. Who will introduce whom to whom? Who will have lunch with whom? Who will do what event for whom? Who will manage the moves? Who will be the lead player? Who will take what handoff?
  6. Gift Acceptance: Cash only or cash and public securities. Or add beneficiary designations for life insurance, annuities, IRAs, and qualified plan interests.
  7. Cash Creation: Advisor will use the tools and techniques of estate planning plus using outsourced vendors. Advisor will be delighted to do this because it allows the advisor to get paid for managing the freaking money. How cash is created from farms, ranches, gun collections, S Corporations, trailer parks, patents, etc is not the charity's problem. That is what advisors are for, and that is what the intermediaries named above are good at. They are staffed to do it. They are at scale. They accept the risks. What they want is deal flow. And it all starts with a name, as per the Name List.


  • S Corp Stock sold through a Donor Advised Fund: See this video by Bryan Clontz of Charitable Solutions. Complex as can be. Technical as can be. Ignore that. Watch for S Corp into a blackbox and cash out. What Bryan shows is that what goes into the box can be almost anything, and what comes out can be cash. You want cash? Cash now? Is taking cash now, planned giving? No, no. Harvard says, No! Planned giving is deferred giving! So let Harvard be Harvard. You work with the advisors and take cash -cash now, in large amounts. Let the planning in question be the advisor's problem. Let the tools be the problem/opportunity for the advisor and the intermediary organizations he or she uses to get the deal done. You worry about names in and cash out. You talk that way to advisors and they will buy you lunch. Believe me. For advisors names and referrals are the lifeblood of their business. You have qualified names? You can make good introductions? You will get (at least some of) the cash as the deals flow through the steps. Will you get all the cash? That is up to the donor. He or she may want to test you first with the biggest gift you have ever gotten, but small by Harvard standards, then another gift, then another.
  • Family Farm Purchased from Estate with Life Insurance in Trust for Children with Cash to Charity: Family has a farm (or a business); heirs use life insurance to buy farm from the estate. Cash in the estate goes outright to charity or into foundation or charitable lead trust. Charity gets cash in grants or outright. (Not a planned gift by the traditional definition since the charity gets cash.)
  • Gun Collection, Intellectual Property, Real Estate, Trailer Park or other odd asset:  Gift to Intermediary such as a community foundation,  Renaissance, Dechomai, American Endowment Fund, gift fund at a financial firm, or other intermediary who has gift acceptance, receipt writing, legal assistance, and other capacity. Gift becomes cash in a fund managed by the intermediary. From that fund gifts of cash are made to nonpprofits. (Not a planned gift by the traditional definition since all that happens at the charity level is a gift of cash.) 
  • Donor wants control of Endowment: Donor is told by Harvard that his gift of $10 million will be held in a restricted account to fund a Chair. Donor would prefer to fund a ministry at a local church that has no experience with planned gifts, has no endowment, and is not financially sophisticated. Donor tells advisor that he fears a big gift to the church will discourage others donors from giving, and will likely stress the church's financial control. Solution is to put the money or securities into a donor controlled grant making entity, such as charitable lead trust, donor advised fund, or foundation. Donor and successors dole the money out to support the ministry. (Not a planned gift except if it goes to Harvard, on the traditional terminology. When the charity gets annual gifts from the donor controlled grantmaking entity that is annual giving, not planned giving.)
  • Donor wants a split interest gift providing income to Donor: Charity has no experience in providing this. Donor turns to advisor who gets capacity for CRT and CLT from intermediary like Renaissance, or a local attorney, bank, and CPA. Advisor discovers that a local community foundation will set up a gift annuity with the residuum to the small nonprofit. Donor puts $10 mil into the split interest gift. (Not a planned gift to the small charity, within the usual definition, since the charity does not have to accept the property, set up the vehicle, or plan and manage anything. Charity just gets cash.)
  • Life insurance death benefit: Donor expresses concern that giving a big policy to a small charity is inappropriate. "I may live longer than they do; they might just cash it in, since they need the money." The solution could be fo the donor to hold the policy and make the charity the beneficiary for some or all the money. Can change beneficiary if the charity folds, or fails to meet donor's expectations. Gift is not deductible, but the donor has control and can access cash values for opportunities and emergencies.
  • IRA, Annuities, and Qualified Plan interests: Charity gets cash through the beneficiary designations. Nothing to manage.
  • Bequests: Charity simply encourages them. Cash goes at death from the estate. Tricky assets go elsewhere. Use life insurance to get heirs what they want from the estate by using death benefit to purchase to assets from the estate. Cash from estate goes to the small charity.
  • Accelerating a bequest: Donor plans to leave signicant wealth to charity at death. Financial advisor does the calculations to show that the gift could be staged during lifetime without impacting donor's other financial goals. Charitable tools provide both income and estate tax benefits during life. Cash flows can be adjusted as needed with split interest gifts like CRTs and gift annuities. Inheritance amounts can be adjusted through life insurance. The end result is that the donor is able to make current gifts, and live to see the good they do. (Huge amounts of planning, of course, but not a planned gift by the usual definition, since all the charity likely gets is cash, and cash now.)

Donor Perspective

How do you change the world? How did conservatives change the landscape of US politics in one generation? They funded seeds, not orchards. When they were marginalized in the LBJ era, a few Funding Fathers, not really all that rich, withdrew as what they called a "saving remnant." They funded campus conservative clubs, scholarships, professorships, publishing houses, churches, campus ministries, think tanks, clubs for lawyers, legal institutes, and on and on. Over time, by providing talent with a whole network of career options they grew the talent that now decides in their favor on the bench, including the Supreme Court, Congress, and the media. This is not a conspiracy, it was excellent grassroots, social change philanthropy for the long haul.

Whether the donor is conservative or progressive, whether the donor is secular or religious, whether the donor is an entrepreneur who wants a high risk, high gain portfolio of small orgs, or whether the donor is a civic repayer who wants to support the grassroots organizations in his or her small town, the benefit of investing in a flotilla, network, or balanced portfolio of small orgs is very clear. The small ones are nimble, committed, passionate. They treat donors as colleagues, friends, co-conspirators for the good. They are grateful for a $10,000 gift whereas Harvard yawns at $1 million. A small nonprofit will change course and add programs and take advice for a promised gift of $25,000 a year for 10 years. Harvard won't.

The donor may be concerned that he or she will outlive the charity and so will not be inclined to name a small organization as the beneficiary of a death time transfer (CRT, CLT, bequest, life insurance proceeds, IRA beneficiary). But this objection can be answered through the use of revocable beneficiary designations, and by flowing funds into deferred giving accounts managed by a person who can sprinkle the money out in line with the donor's philosophy. ("Give to XYZ nonprofit, but if they are gone, to one like it.")

Catalytic Community Building

Work back from the end state desired. That is what Hildy Gottlieb says to grassroots nonprofits. That is also, so it happens, what Mark Kramer says to the most sophisticated and richest funders. Say the goal is a more vibrant Dallas. Start there. What role does your organization play? What is needed for you to succeed? What does your success make possible for other people and other orgs? Are we in this to compete or collaborate? Can we get the banks, brokerage houses, insurance companies, the community foundations, the top law firms and orgs big and small into the act to create a better Dallas? Would funders kindle to that vision? Instead of funding one org, a funder might work through financial intermediaries to fund a network of nonprofits that would advance that donor's conception of a better Dallas in a better world.

Checklist of Who Gets what He, She or It Wants

  • Nonprofit: gets cash and cash only. Gets lots of cash. Has no planned giving infrastructure to build and maintain. Has no endowment to manage.
  • Advisors: do the planning for appropriate clients. Get a flow of appropriate referrals. Get paid for planning, asset management, and life insurance sales.
  • Financial intermediaries: Get and hold assets; place insurance.
  • Donor: gets planning to suit his or her personal, family, business and charitable goals. Gets as much control as he or she wishes. Can fund local, community organizations to which the donor is passionately committed. Does not have to worry about overwhelming these small orgs with complex gifts.
  • Community: As these parties converge in collaboration, fesh funding, fresh ideas and new philanthropic programs arise from the grassroots up as citizens take responsibility for their community. 

Reality Testing

The ideas here will go into a course I am writing, or rewriting, for the Chartered Advisor in Philanthropy program. We are testing CAP in Dallas with the avowed goal of making it an even better place to live. TX Communities Foundation is our hub. We expect over 20 leading advisors and a cross section of nonprofits to take the program together with an eye to collaboration over the ninth month it takes to do the three courses. "Students" are graded in part on their action projects. Collaboration (joint projects between advisors and nonprofits) are encouraged. With success we could replicate through other Community Foundations, or other hub organizations, around the country.

If you would like to learn more, or contribute ideas, comment here or email me via the link in the sidebar.


Shaping State Laws to Suit the Jailer

How our laws, at the state level too are drafted,

So, for example, last December Arizona state Sen. Russell Pearce sat in a hotel conference room with representatives from the Corrections Corporation of America and several dozen others. The group voted on model legislation that was introduced into the Arizona legislature two months later, almost word for word.

The more who go to jail the more profitable it is for CCA. Republican or Democrat, we are supposed to care intensely. About the process of lawmaking itself, we are best left in the dark.

Progressives Marked for Death, Plead that they are Innocuous

Dear Fox News Advertiser. Tides calls on Fox advertisers to defund not only Beck but the network itself, after Tides staff are targeted for death by a loyal Beck viewer. What I keep listening for and do not yet hear is the discussion of corporate power, demagoguery, and the empowerment of losers. That is what Fascism was. The dregs of society were given uniforms, exempted from taboos about violence, told who were the scapegoats, and turned loose to bully all who stood in the way of the demagogue and, say, IG Farben. The dots to be connected go beyond Fox, and include think tanks promoting anti-regulatory populism at the behest of board members from, say, KKR. The dots include Supreme Court justices raised up from the campuses over time by right wing funding of campus groups and the Federalist Society. The outcroppings of corporate power to corrupt and inflame and to attack democracy as "big government" are readily visible, but the analysis of the foundation, the tectonic plates, through which this lava erupts, is nonexistent. Tides and others should fund a far better analysis of our current national turn for the worse. We don't have much time left before corporate money corrupts our government, and the justice system, while the corporate sponsored media range from passively reporting our decline, between advertisements, to actively promoting the misinformation that inflames and empowers the ignorant and the resentful, enlisting them as useful, violent idiots to intimidate and silence reasoned opposition to corporate rule. To my ears, the Tide communications sound weak, timid, wistful, and scared. "Please, Sir, stop beating us! We mean no harm! We are not radicals, Sir, please Sir, we are just wimpy people in an office pushing paper, Sir, we are not activists on the front lines, we mean no harm, Sir! We just want some civility around here, is that ok?" The strong prevail, the weak perish, so goes the free market philosophy. Whether we are crushed by force, or pacified by entertainment, or intimidated into silence, in the end, there is no outside of Wealth Bondage. We may as well celebrate it. To be fair and balanced, if you object to this post, please send me money care of Candidia Cruikshanks. She is the biggest fan Glen Beck has, and has agreed to make up any shortfall in his advertising revenue. As for myself, being beaten half to death is something I pay pay extra for, when I have a few dollars to spend on myself. I lick the blood from the boot that kicks me. I should get it good for this one, at no cost to me. A free beating, for my own good, and that of our community in Wealth Bondage, Where America Goes to Hell.

Boom in Philanthropy Predicted

Good news for philanthropy:

Every 34th wage earner in America in 2008 went all of 2009 without earning a single dollar, new data from the Social Security Administration show. Total wages, median wages, and average wages all declined, but at the very top, salaries grew more than fivefold.

With more wealth in fewer hands philanthropy should boom. If we can eliminate the death tax, we would have these huge dynasties. I would teach them ethics. Then, wow! What a boom in giving we would have.


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P.S. one tenth of a cent of your click through goes to pay my gardener, a poor man of color with starving children who need your help!

Bryan Clontz on Selling S Corp Stock via Charity in Trust Form

Interesting. An approach like this might work for a small organization that does not have a planned giving program and is not willing to accept hard to value or tricky assets, like S corp stock. With so many financial intermediaties available these days, a small nonprofit might team with advisors to help donors with hard to value assets, or closely held stock, even S corp stock, while the charity would receve in the end nothing other than cash - cash now. Many advisors specialize in working with small business owners. Many small nonprofits have passionate supporters, many of whom own businesses. Perhaps this could result in collaborations that benefit all concerned?