Planned Giving: Empowering Nonprofits Through Strategic Partnerships

What is Planned Giving? Planned giving refers to a set of philanthropic strategies that enable individuals to make donations to nonprofits while optimizing their financial and estate plans. Planned giving involves future commitments that often come to fruition upon the donor’s passing or during a predetermined time frame. These contributions can take various forms, including bequests, charitable trusts, annuities, and more. As nonprofits strive to expand their impact, planned giving can play an important role in securing sustainable funding. By training development staff to understand planned giving’s complexities, nonprofits can secure their future and achieve their mission with enduring success well into the future. 

Importance for Nonprofits:

1. Long-Term Sustainability: Planned giving provides nonprofits with a reliable source of funding over time, helping them during financial uncertainties and achieve their mission with greater confidence.

2. Enhanced Impact: Donors can contribute more substantial gifts through planned giving, resulting in a significant positive effect on the organization’s programs, services, and overall capacity.

3. Donor Relationships: Establishing planned giving programs fosters deeper relationships between nonprofits and donors, as it often involves thoughtful conversations about legacy and impact. Donors will feel more invested in the vision and mission of the organization when they commit a legacy gift.

Engage Donors: (There are two reasons for a donor to make a planned gift; a tax deduction and income.)

1.      Education: Provide educational resources to donors, explaining the benefits and options available within planned giving, and fostering informed decisions.

2.      Customization: Tailor giving options to match donor’s values and financial goals, demonstrating the nonprofit’s commitment to individual preferences and needs.

3.      Recognition: Develop donor recognition programs that celebrate the generosity of planned giving contributors and inspire others to participate.

Planned giving can involve a wide range of assets. The choice of assets to donate often depends on the donor’s financial situation, goal, and the specific planned giving vehicles being used such as bequest, trust, or annuities.

Bequest: (Though a will)

General bequests are gifts of property and come from sources such as bank accounts. Specific bequests are personal property such as cash or jewelry. Residuary gifts come from the remainder of debts or expenses

Trust:

Charitable Remainder Trust is a tax-exempt trust created to reduce an individual’s taxable income by dispersing their earning to the beneficiaries of the trust over time. The remainder goes to the nonprofit outlined in the trust.

Charitable Lead Trust provides financial support to a nonprofit over a specified period, with the remainder of the trust going to the other beneficiaries.

 Annuities:

An annuity is a fixed sum of money paid to an organization every year. A donor transfers cash, securities, or assets to a nonprofit in exchange for a partial tax deduction.

Here are some of the most common types of assets donated via planned giving:

·         Cash: Cash remains a straightforward way for donors to make planned gifts. This can include specific bequests in wills, charitable gift annuities, and charitable remainder trusts.

·         Securities: Stocks, bonds, and mutual funds. These donations can offer tax advantages, as donors may avoid capital gains tax on appreciated assets and may also receive an income tax deduction based on the value of the securities at the time of the gift.

·         Real Estate: Donating real estate, such as homes, vacation properties, commercial buildings, or undeveloped land, can provide tax benefits. Donors can potentially avoid capital gains tax and receive a charitable deduction based on the appraised value of the property.

·         Retirement Assets: Donors can designate a nonprofit as a beneficiary of retirement accounts, such as IRAs, 401(k)s, and pensions. While these assets can be subject to heavy taxation if passed on to heirs, donating them to a nonprofit can provide tax advantages.

·         Life Insurance: Donors can name a nonprofit as the beneficiary of a life insurance policy, either by transferring ownership of an existing policy or taking out a new policy with the nonprofit as the beneficiary. Premium payments can also be tax-deductible.

·         Artwork and Collectibles: Valuable art pieces, antiques, and collectibles can be donated to nonprofits. Donors may receive a tax deduction based on the appraised value of the items.

·         Business Interest: Donating closely-held business interests or partnership units can have tax benefits. Donors may be able to claim a deduction of the value of the donated interest.  

·         Charitable Remainder Trust: (CRTs): Donors transfer assets into a trust, which then provides them or their beneficiaries with income for a specified period. Afterward, the remaining assets go to the designated nonprofit.

·         Charitable Lead Trust: (CLTs): This involves transferring assets to a trust that pays a fixed amount to the nonprofit for a predetermined period. Afterward, the remaining assets go back to the donor or their designed beneficiaries.

·         Charitable Gift Annuities: (CGAs): Donors contribute assets to a nonprofit in exchange for fixed annuity payments for life. A portion of the initial contribution is considered a charitable donation.

 Three steps to starting your planned giving program:

1.       Have your nonprofit establish an acceptance policy. There are some assets an organization may consider not accepting, such as real estate or works of art. Both such assets may cost the charity in hidden expenses.

2.       Create a committee and have your organization partner with an attorney and a financial planner.

3.       Create a plan to market your nonprofit's planned giving campaign.

The type of asset chosen for planned giving often depends on the donor’s financial goals, the intended impact, and the specific tax and financial benefits they seek. It is important for the nonprofit to be prepared to work with a variety of assets and to have processes in place for evaluating, accepting, and utilizing these gifts effectively.

Planned giving is about building legacies, fostering partnerships, and creating a lasting imprint on what matters most to donors. People want to be remembered after they have gone by leaving something behind that transcends their own lives and contributes to their commitment and vision to make the world a better place.