Q: How do you calculate the "present value" of a future gift, such as a bequest?

A: (Two of our Presidents Emeriti graciously provided the answer to this month's question--thanks to David Clough and Wally Munro!) 

The present value of an amount that will not be received until some future date can be determined if you know, or are willing to make assumptions about, 3 factors:

1. What it will be worth when you actually receive it.
2. How many years will pass before you get it.
3. The interest rate at which the asset would grow during this interval if you had it now and could invest it.

For example: Mrs. Smith has a $100,000 bequest for your institution in her will, and has a life expectancy (according to the mortality tables preferred by your organization) of 12 years. Your finance department tells you they think it reasonable that they'll average a 5% return on invested assets for the next 12 years.

The formula for determining present value is PV=FV/ (1 + R)n   where:

PV = present value

FV= future value

R= assumed interest rate

n= number of years you have to wait to get the asset

In our example:

PV = $100,000 / (1 + .05)12

     = $100,000/1.7959

   = $55,682.39

Another way to ask this question is: "How much money would we need to invest at x% per year from today until the donor dies to have the amount the person is bequeathing to us?"

In our example, if you had $55,682.39 now and could invest it at 5% for the next 12 years, you'd end up in 2024 with $100,000 (or something very close to it). 

If you have a question for The President, please e-mail us.

Join PPGGNY's Linked-In Group!

Are you on LinkedIn? If so, please consider joining the PPGGNY group on LinkedIn. It's one more way to stay connected and in the know with your valued peers and friends who are also PPGGNY members.

It's as easy as 1,2,3:

1. How? From the Group's tab on the LinkedIn homepage, click on Groups You May Like or Groups Directory. In the search box on the upper left type in PPGGNY (or ppggny) and the group will appear.
2. Why? Because we like you-and because this can be an effective way to share news, ideas/discussions, job postings, and other information with a group of peers who share many of the same challenges (and in many cases, the same donors and clients, though we are always careful to maintain confidentiality, of course).
3. Who? Thirty-one of us at present and more each day, including one since I started typing this.

Please join us and help make this group a valued part of your professional networking activities and a useful supplement to the Planner and our website!

Upcoming Events-January 

Planned gifts are very often the largest contribution a donor ever makes. Yet sometimes it takes some convincing to get resources allocated to this type of campaign and if belt tightening becomes an issue for a nonprofit, this is an area that generally gets cut back first.

But interestingly, while this form of fundraising produces major gifts, it does not take a lot of monetary support to be successful. And, you don't have to be an "expert" in charitable trusts or other more complex forms of gift planning.

What really counts is letting the people who loyally support your organization know that by including you in their estate planning, they can continue to have an impact on your work well into the future.

Here are just a few suggestions for waging a "budgetless" campaign:

• Let your supporters know you are interested in these gifts with every email you send by putting a tagline such as "please include xyz in your will" under your signature. Just about every nonprofit has a Facebook icon on their emails for people to click and "like" them. "Friendship" is not more important than being in someone's estate plans.
• Make sure there is some reference to planned giving in every donor mailing. This can be as simple as printing your tagline on the outside envelope flaps (when you print new envelopes), or at the very bottom of your stationery, or just under your signature and title. Include a planned gift buck-slip in renewal mailings that people can fill out and return in your return envelope (hopefully with their check).
• Include a testimonial from a proud planned gift donor, or an informative/helpful article in your organization's general newsletters.
• Send e-blasts with new tax information and gift planning ideas. Make sure your contact information is clear so you can receive questions or messages of interest.
• Have a planned giving page on your website and include testimonials, (it's where you can also recognize these special donors if they give you permission).
• Put your tagline on your business cards when they're reprinted.
• Include planned giving in some way at events with a booth and handouts, or in the speakers' remarks.
• Talk about the value of planned gifts to your organization when you meet with donors.    

There is no shortagse of ways to heighten your campaign's visibility and importance. Be innovative in your marketing. If there's no money whatsoever, piggyback or e-blast or attach tagline Post-Its to items or do something else creative. The important thing is to get your best prospects - the people who love your nonprofit - thinking about this kind of gift.

More than 75% of planned gifts are bequests. You don't have to be a "technician" or concerned that your prospects might know more than you. Your planned giving campaign can be highly successful with high visibility, a very simple "ask", and little or no budget.

Note: Lorri M. Greif, CFRE is President of Breakthrough Philanthropy, Inc.,  and the creator of the easyPG® Program .

Alan Berkowitz 

Alan has a Master's degree in the Management of Human Services from the Heller School at Brandeis University and an undergraduate degree from Clark University.

Alan is a member of the PPGGNY Board of Directors and currently serves as co-chair of the Sponsorship Committee.