Why is it Hard to Give My Money Away? A Donor’s Perspective

Article Highlights:

• Five things that nonprofits should consider doing to facilitate donations.
• What happened?
• First, a Little Personal Context
• A Few Additional Comments
• Looking Through Your Donors’ Eyes

Are there donor challenges in giving money? This article suggests you can improve your overall donations by evaluating everything in the process from the donor’s point of view, and optimize the process from beginning to end.

Five things that nonprofits should consider doing to facilitate donations.

Imagine you’re the head of a small charity: Without a full-scale development team behind you, you’re probably very pleased to have developed any plan to solicit donations.

With some help from your friends, you’ve created an attractive website that makes a powerful statement about the good things that you’ll accomplish with any gifts.

Heck, you’ve even made giving easy by signing an agreement with an online payment processing center to accept most credit cards. By hook or by crook, you’ve also received access to lists of potential new donors (maybe from other nonprofits you’ve collaborated with).

Imagine also that I’m on your list. As a potential new donor, your solicitation letter appeals to me. After all, I support your mission of fostering intellectual freedom. But then I click on the donation link, stop, and move on without making a monetary gift.

What happened?

As a donor, I thought it might be helpful to explain why I have found it often too difficult to make contributions after having been eagerly asked, sometimes multiple times, to do so.

My goal is to encourage organizations to look at giving from the donor’s perspective. To this end, I’ll recount obstacles that I’ve faced in trying to make donations — including when I wish to give money to charities in my estate planning.

To be clear, the following stories really happened. And, to repeat my key point, my goal is to encourage charities to look at the process from the donor’s point of view by identifying how to create a slippery slope from the initial interest to the actual gift.

First, a Little Personal Context

I did not come from a moneyed background, although I did end up earning a doctorate from Yale with support from multiple sources and had a financially stable career as a librarian and professor. My wife and I are childless, live within our means, and invested in the tech boom.

We’ve decided to donate our accumulated wealth to various charities — with the secondary goal of reducing our tax burden, of course. I’m proud to pay back to future generations for the help I received. I made my first major donation in the early 2000s, and my giving has recently increased (due to the IRS’ Required Minimum Distribution).

I have made plans to leave a major legacy upon my death. I’ve designated a series of endowments in my will for substantive amounts and have had sufficient resources to establish them via RMDs. In 2023, I made five significant gifts, as well as 25 smaller donations to a multiplicity of charities. I’ve created a complex spreadsheet to monitor the process that frankly still takes more time than I would like.

And I know I’m not alone in this frustration: Many of my generation feel as though being philanthropic requires more effort than it is ultimately worth. I even know people who have hired accountants specifically to manage which nonprofits receive donations — and when.

All of this takes up a lot of time and money that could be better spent benefitting charities (like yours).

As a result, the ultimate takeaway from my perspective is fairly clear: Make the next steps for potential donors as clear, unambiguous, and simple as possible to make sure the reward is worth the effort.

So what can you do, as nonprofits, to facilitate donations?

There are five things that nonprofits should consider:

Consideration 1: The Mechanics of Giving

First, charities must consider the actual mechanics of giving in their solicitation efforts. This means you need to look at the frequency and scale of the donations.

That is, if you’re trying to attract smaller-scale and/or younger donors, you might look into those aforementioned online services like Venmo, Zelle, and Google Pay.

However, if you are looking for large-scale donor gifts (and, I mean, who isn’t), make sure you take the RMD rules into account.

Consideration 1A: Pay Attention to Any Legal Requirements

As a slight caveat, nonprofits must understand that large-scale donors in particular face different requirements based upon the rules of the companies that hold their investments.

If nonprofits want to attract RMDs, they need to understand that there are legal restrictions as to what qualifies as a tax-deductible donation, as well as special procedures that the donor must follow to get the donation to the charity from the company that holds the IRA.

The current limit for qualified charitable deductions (QCD) is $105,000, but this amount will be annually indexed for inflation. While very few donors make such a large donation to a single charity, this cap may decrease the amount given by a donor who wishes to support multiple charities.

In fact, many donors have much less to give because their annual required distribution is below this maximum.

Consideration 1B: Note Complicated External Processing Rules

The following are a few special requirements that I’ve run into thus far from the two firms that hold my IRAs; however, the charity should always take care to ask donors what they will need to do to make the gift.

To clarify, these external complications might be imposed by the organization(s) that manage an individual’s IRA. For example, the two companies that I deal with do not allow me to make online contributions from a credit card or other online service — the donation has to come directly from the IRA, not from my taxable funds.

However, even within these organizations, the rules differ, and so I use my accounts for different charitable purposes.

I keep some funds in a Fidelity IRA to write a series of smaller physical checks that I mail directly to 25 different charities.

For my five larger contributions, I use my JP Morgan account, where the major portion of my investments are. But frankly, I don’t like this system because JP Morgan has more complicated procedures, including filling out a detailed form every time to get the bank to cut a check — either to the charity itself or to me so that I can redistribute the contribution.

Despite the extra step, I usually take the more complicated latter route, mostly so that I can control the process and make sure the charity knows the donation came from me. This way, I can also (usually) direct how the money is allocated. Especially if the receiving organization manages endowments for multiple charities, it can be very important to identify who they are from and what to do with them.

Of course, these are not the only two possible complications: I am merely giving my own examples, and I know other firms offer different choices. In fact, receiving donations from RMD gifts may be the most complicated step for both the donor and the charity, so nonprofits might want to keep this in mind when identifying what kind of donations they want to target.

Consideration 2: The Mechanics of Solicitation

It probably goes without saying that solicitation materials in all media — including mail, email, websites, phone calls, social media, or broadcasts — should provide all the information needed to give the gift in whatever way the donor wants to donate.

If this isn’t possible, such information should be easy to find, and any instructions should be simple to follow. At the very least, the charity should provide contact information for asking questions (phone number, email address, links to a form, etc.) and then do its best to respond quickly.

Ideally, a solicitation should include the following:

• The official name of the organization
• Information about the tax status of donations
• The tax number (or where to find it)
• Where to send the donation (via whichever medium the donor prefers)
• A point of contact for questions as well as encouragement to seek help in donating large or complicated gifts (such as transferring assets or setting up an endowment)
• Confirmation about providing IRS-ready receipts (for RMDs especially)
• Any limitations on what can be accepted (if you can’t handle real estate, for example)

I understand that it might be difficult for you as an over-stressed nonprofit employee to predict everything a donor might find helpful.

Here, it might be useful to enlist the eyes of friends and family to market-test all possible options with a focus on discovering any potential snags.

Remember, clarity on the material aspects of solicitation ensures that, once a donor decides to give, they can know exactly what to do.

Consideration 3: Donor Motivations

Donors often pop up in the least likely places. For example: Every year, I give to new organizations I learn about from my town’s annual counterculture fair or from museum visits. I usually don’t even know these organizations exist until then.

However, my spontaneous decisions to donate usually arise from three factors:

• I support the mission of the organization. Here, I’m usually more inclined to give if I realize that the cause may not have broad appeal, as I know my smaller gift will likely have great importance.
• The staff is willing to talk to me.
• They have written information on hand that streamlines the process for the actual giving (see the previous consideration).

It is important to note that these donor motivations — like all donor interactions — are environmental, meaning that they change based upon context.

That means a fair booth might have different results than a museum visit, but the bottom line is really the same: As a nonprofit, you should always be prepared to encourage potential donors wherever you might encounter them.

Consideration 4: Time

It is important to note that, much like with any relationship, cultivating donors is a fluid process. That means there might be a lot of back and forth before you get a gift — especially if it is an endowment or part of the donor’s estate planning.

You can’t rush this process. In fact, if you try to hurry it along, you might end up turning a potential donor into an opponent instead of a proponent.

That is, they might only remember you trying to pump them for funds and choose to relate this incident to their potential donor friends and family.

The message becomes not your mission or your work, but the bad taste this interaction left in their mouth. You will have then missed out on several possible donation streams, all because you tried to presure a donor into giving for your (admittedly probably very worthwhile) cause.

It isn’t worth it. The best relationships take time, and you want donors to be advocates of your organization as well as financial backers.

Here, I’m going to go on a quick detour to relate my story about estate planning. At the beginning of this process, one of the five organizations I was bequeathing my assets to asked me to start by contacting their lawyer, who was unfortunately one of the most unpleasant people I’ve ever met. He wanted me to specify a timeline for and level of detail about an event that I hope won’t happen for many years — namely, my death.

Of course, the director was horrified when I relayed this situation and apologized profusely. Part of what the lawyer failed to understand, I think, was this fluidity in terms of relationship-building that is, by necessity, part of the donor process.

Not only does this process take time on the nonprofit’s part to cultivate this relationship, but the process of donating (especially endowments) can take much longer than you anticipate.

As part of my estate planning, I decided to establish endowments for my major legacies because the organizations were mature enough not to need the money for immediate purposes.

I worked with the nonprofits to create contracts, designating broad objectives for the largest endowments, as well as providing a second beneficiary in case the first ceased to exist. But what took the most time was the language stating the maximum percentage of assets to be annually withdrawn.

In this, the nonprofits and I had to discuss what would work best: Them explaining the material realities of funding and me identifying specific boundaries I wanted maintained. It took a lot of work, but I think my relationship with these nonprofits is all the stronger for the time we spent in open communication with one another.

Consideration 5: Special Issues with Donating Stock, Bonds, and Mutual Funds

Current tax rules allow donors to get credit for the full value of any appreciated assets without having to pay tax on the unrealized capital gains. However, donors must transfer the assets to the charity.

To facilitate these kinds of donations (and ease the burden on donors), nonprofits should establish accounts to receive such assets, as well as follow certain IRS-mandated procedures.

I bring this up because I have encountered special problems in donating stocks and mutual funds.

When I made my first major gift to establish an endowed scholarship, I faced great pressure to just sell the stock and donate the resulting cash, an action that would have required paying capital gains tax on the profits. Essentially, the federal government would be getting more of the money that was supposed to be donated to charity.

Yet another issue arose on a separate occasion when I wanted to give mutual fund holdings from my JP Morgan account to the American Library Association. The JP Morgan procedures differed from those of the ALA, and there was a lot of back-and-forth about how this would all go down.

Eventually, JP Morgan “won” the argument because they refused to approve the transfer unless the ALA agreed to their procedures.

To be clear, these complications differ from those from gifts that are made as part of an RMD, as such assets can be sold while part of the IRA and the cash then transferred to the charity.

From what I’ve read, giving property is even more complicated, but I have no experience in this area. It might be best for the nonprofit to consult an expert before diving into these more complex donations.

A Few Additional Comments

Now that we’ve gone over the most important steps nonprofits must take when courting new donors, I also wanted to offer a few additional suggestions for improving donor relations.

Admittedly, some of these deal with minor annoyances rather than actual problems. However, I think it’s important to remember that, as an organization asking for money, it is crucial to court the goodwill of your donors.

Other donors may have different concerns, but here are a few potentially frustrating situations I’ve encountered:

1. Promotions

The public radio and television stations in my area often offer special incentives (such as gifts or event tickets) for giving. However, the donor needs to call in and make a gift with a credit card to get an entry.

For me, this means that the donation can’t come from my RMD (as previously stated, the organizations I work with only allow checks). So, if you’re looking for larger donations, credit cards probably aren’t the best way to go.

2. Public Recognition

Some donors prefer to be anonymous, but I like to be recognized for my gifts. The radio and television promotions usually acknowledge aforementioned credit card donors on the air, but give no public recognition to those who send checks.

Of course, there are fairly easy workarounds to this: You can list donor names in reports, on a building wall, or in event handouts.

Ask your donors about any recognition preferences, including name spelling, titles, and pronouns — and make sure you follow them!

3. Thanks to Donors

Most charities are good at recognizing gifts. Many times, it’s a form letter, but I’ve sometimes received warm personal notes — especially after speaking in-person with someone at a smaller organization where any amount makes a great difference.

However, I have recently been a bit bemused by the number of thank-you letters I am getting for a very small gift to a very rich university — and then slightly less-than-bemused when these thank-yous are accompanied by a request for more money.

I suspect said university has figured out I can donate more and is trying to push me in that direction. This approach usually has the opposite effect — especially when the ask comes every month (see next point).

4. Frequent Solicitations

I get tired of unending solicitations by email, mail, and even by telephone. A charity might feel that statistics prove that the net result of these expenditures is positive, but I think an astute charity would provide an “unsubscribe” button (or a box to check) to temporarily remove oneself from the seemingly endless litany of solicitations.

Again, you might consider asking donor preferences: Do they want to be contacted every quarter, every year, or never again?

The savings in postage, office supplies, and time might lead to positive results for the charity — including donors not feeling like they are being harassed or spammed.

5. Small Gifts with the Solicitation

While charities may have research that including a small gift with a solicitation letter improves their chances of getting a donation, they don’t influence my decision.

Calendars go out of date quickly. I have enough notepads and return address labels to last a lifetime.

The only possible exception is stickers — but this usually only works to court a younger crowd who want to wear their hearts on their sleeves (or, at least, their water bottles). And even then, it’s probably better to offer stickers (or calendars, notepads, etc.) for purchase instead of paying to mail them to people who might not want them in the first place.

Looking Through Your Donors’ Eyes

To summarize, nonprofits should look at the giving process through the eyes of the donor. You want to make it as easy as possible for them to slide down the slippery slope from the intention to making the actual gift.

Someone at your organization (on the development team, for example) should also monitor changes in tax laws and general economic conditions to aid donors if they have questions. If you can, you might even experiment with creative ways to reach out to potential donors. Remember, donations sometimes come from unexpected sources. You never know who might yet donate — and what friends you might make in the process!

You might also like:

• Treasurers of All-Volunteer Organizations: Eight Key Responsibilities
• An Easy-to-Use Accounting Procedures Manual Template
• A Guide for Private Foundations: Tax Exemption and 990-PF Filing Requirements
• Nonprofit Grant Proposal Budget Calculations: A Road Map
• Your Nonprofit’s Budget: A Window to Finding Your Priorities

 

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