A personal financial plan is the cornerstone of charitable giving. When donors know they have enough for their own personal and family needs, they will have the confidence to engage in long-term charitable planning, especially when it comes to estate and legacy type gifts.

Fundraisers might ask themselves: What factors are influencing donors’ planning today?

What's Influencing Your Donors' Behavior

Investment Returns
The stock market has been on a tremendous run over the last several years, and these results are starting to filter through into donors’ plans, providing them with more confidence in their financial futures.

Charitable planning impact: The question is, how long will this market environment continue? Stock valuations and sentiment may be stretched, which is historically associated with lower future returns. Bond yields are more attractive today than at the depths of COVID but are still below long-term historical averages. And of course, big picture questions remain related to the health of China’s economy, geopolitical tensions, and policies of the incoming Trump Administration. Going forward, donors will be conscious about the impact of potential future returns and market volatility and adjust their plans accordingly.

Inflation
Inflation has fallen drastically from its highs in 2022, driven by aggressive rate increases from the Federal Reserve. But although the pace of price increases has slowed, high prices remain, which has been a difficult adjustment for many. From a planning perspective, future long-term inflation may be higher than the Federal Reserve's 2% target given trends such as less globalization, an aging and perhaps shrinking workforce, and the potential for higher federal deficits and/or tariffs.

Charitable planning impact: Inflation is an important assumption in charitable planning as donors often think of their giving capacity as the ‘remainder’ of funds after they've already taken care of their baseline living expenses. Many donors will be evaluating a range of scenarios for future expenses, including the possibility that higher inflation eats away at the purchasing power of their assets.

Taxes
Tax policy is now in flux. The Tax Cuts and Jobs Act (TCJA) brought about significant changes to the tax landscape when it was passed at the end of 2017. This act is set to expire at the end of 2025 if Congress does not act to renew its provisions.

Charitable planning impact: President-elect Donald Trump’s election win has increased the probability that at least some of the provisions of the TCJA will be extended. While uncertainty remains, the current provisions can impact giving in different ways.

Provision	TCJA Change	Impact on Giving	Why?
Income Tax Rate	Across the board, nearly all tax rates decreased, and the tax brackets compressed		Less incentive to donate for tax deductions, but more disposable income
Standard Deduction	Doubled		Less itemizing of deductions
Estate Exemption	Doubled		Less urgency to decrease estate
Itemized Deductions	Cash limit raised from 50% to 60%, Pease limitation removed		Less restrictions on large gifting
Section 199A	Established a 20% qualified business income deduction		Deductions can lower income below phase-out limits
Alternative Minimum Tax (AMT)	Significantly increased AMT exemption threshold		Much higher phaseouts lead to lower need to reduce ATM income

What these factors boil down to today is an interesting situation to say the least. Some donors, commonly those who are older or who have benefitted from the run up in asset prices over the last several years, may feel very confident in their financial outlook, and therefore more readily engage in charitable giving. However, another group, those who tend to be younger, rely more on their income, and have higher expenses caused by the inflationary environment, are likely feeling much less confident. Both groups will be keeping a close eye on future investment returns, inflation, and tax policy, but are starting out with very different mindsets for their financial health.

Four Takeaways for Fundraisers

What can fundraisers do about this? No one can control or predict the future, but we can let today's conditions be a guide for your organization's strategy. Consider the following:

1. Emphasize planned gifts. The trend toward fewer, larger gifts will continue and more gifts will be sourced from assets rather income. Non-profits should continue to invest time and effort into their planned giving efforts.
2. Increase donor trust by being conversant and empathetic in the issues identified above (markets, inflation, and taxes) and how they impact donors’ financial plans.
3. For donors where there is a high level of ‘Planning Paralysis’ (whether due to uncertain markets, inflation, taxes, or just the fact that this is a complex problem to solve), we suggest a number of motivating actions: (1) conversation to gently uncover their anxieties and fears, (2) simplifying the issues through the use of stories and planning graphics, and (3) motivating them to take action by quantifying the costs of procrastination.
4. Understand the gifting techniques that will play an important role going forward. Grouping donations, Donor-Advised Funds (DAFs), charitable trusts, charitable bequests, appreciated securities, and Qualified Charitable Distributions (QCDs) are all important tools that can play different roles for donors. Fundraisers don’t have to be financial planning experts, but should know which situations call for which techniques.

Keeping a pulse on donor morale and giving capacity will be essential when setting your fundraising goals for the year ahead. Stay in touch with your donors by engaging them in planned giving events, where you can better understand the appetite for giving and create new opportunities for ongoing financial support – keep reading Unlocking the Power of Planned Giving Events to learn the benefits of adding this type of event to your 2025 calendar.

Your roadmap to growing your endowment

If you’re looking for ways to effectively grow your organization’s endowment, our toolkit can help you get there! Featuring multiple donor outreach templates, an endowed giving prospect scorecard, infographics, and more, this toolkit is filled with actionable resources to help enhance your fundraising.

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The information in this paper is not intended as legal or tax advice. Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.