The Complete Guide to Nonprofit Planned Giving

Planned giving programs are proving to be beneficial to donors and nonprofits alike worldwide. But what exactly are they? And what do they entail? Find all this out and more in our ultimate planned giving guide.

What Is Planned Giving?

For nonprofits, finding and maintaining sources of funding can be so difficult and time-consuming. The constant search for donations and money exhausts so many resources that could be better spent elsewhere.

Yet, despite this, there is a key source of funding that many organizations ignore, which compounds their money struggle in the process; planned giving.

Planned giving, simply refers to a sizable donation to a nonprofit that is given over-time, or as a part of a donor’s estate. It can also be referred to as ‘‘gift planning’’ or ‘’legacy giving’’. It gives individuals the opportunity to make larger gifts to charitable organizations in order to help them earn more, rather than just ordinary income.

In some cases, planned giving provides life-long income to the donor. In others, planned gifts use estate and tax planning to provide for a nonprofit and does so in ways that are able to maximize the gift or minimize its impact on the donor’s estate.

What does this mean? Well, it concludes that a planned gift is any large gift that’s either made throughout someone’s existence, or at death as a part of a donor’s overall financial and/or estate planning.

Planned gifts can be anything of equity, life insurance, cash, personal property, or real estate. Whether a donor chooses to donate through appreciated securities or stock, artwork, partnership interests, a retirement plan, or any of the many options of donation; the advantages of funding a planned gift can provide a world of benefits for both the donor and the nonprofit itself.

Support From Nonprofits

A nonprofit’s main goal throughout the whole process is to cultivate strong relationships with planned gift donors, and support them throughout the complicated process that is enacting a planned gift.

Planned giving programs are so unique in the world of nonprofit fundraising, and there’s good reason for it.

Due to the length of time involved in the process of receiving the gift, and the fact that multiple contacts beyond the donor themselves are often involved in the planned giving program (like estate planners, lawyers, and other beneficiaries), legacy giving can be complicated.

It requires long-term efforts to build relationships with donors and manage the legal and financial details of the gift.

There are three types of planned gifts that can prove highly beneficial to a nonprofit, these are:

  1. Outright gifts that use appreciated assets as a substitute for cash
  2. Gifts that return income or other financial benefits to the donor in return for the contribution
  3. Gifts payable upon the donor’s death.

The Benefits of a Strong Planned Giving Program

  • First and foremost, you’ll be helping so many people in need with your generous donation
  • Second, you’ll be helping yourself! Donating real estate to charity can allow the owner to receive charitable tax deductions based on the fair market value of their property. Bear in mind, however, the value will be determined by an independent appraisal.
  • Additionally, the donor will avoid paying the capital gains taxes on the property when donating to charity.
  • The tax benefits are long-lasting, meaning it will cover you for up to five years!
  • You’ll receive complete freedom from the tax you were previously paying on the property
  • You’re no longer obliged to pay maintenance along with any other fees the property incurred
  • Freedom from liability and insurance
  • You will receive peace of mind knowing that your property is no longer a drain or burden

How Planned Gift Programs Benefit the Donor

  • Being part of the planned gift program allows the donor to gain the satisfaction and pride that comes standard as part of legacy giving. When they choose to donate to a nonprofit close to their heart, they’re able to ensure the ongoing and future health of their chosen nonprofit.
  • One of the benefits of planned gifts is that donors have more control over where their money goes than with most annual gifts. Planned gifts are generally a part of a legal contract like a donor’s will. This means the donor can include language that allocates how or where they want their charitable contribution to be spent (within certain limitations depending on the organization).
  • Often, most donors will find that it’s just not possible to give a nonprofit a large gift, no matter how much they would like to. Planned gift programs offer the donor the opportunity to give to charity in a meaningful way, without having to break the bank.
  • Like with any large charitable donation, the tax savings are always the second biggest reward (the first will always be the people that you help). This is especially beneficial when it comes to appreciated properties and securities. A planned gift can help donors reduce income tax and also benefit from a reduction of capital gains tax.
  • When donors participate in donations of planned gifts, they’re able to avoid the entire probate process. Let’s face it, probate is an expensive and arduous task. Those who can avoid it should most likely do so.
  • Through planned gifts, donors can leave a legacy behind after they pass. That’s why planned giving programs are often called legacy programs or legacy societies. Whether leaving a bequest as a tribute to a family member or to create a legacy for themselves, donors benefit from planned gifts because they can make a lasting impact on a cause that’s important to them.
  • Depending on the type of planned gift a donor proceeds with, there can be so many other additional benefits. These benefits can include things like: planning for the financial need of a spouse or someone they love, providing an inheritance for your heir at a tax deducted cost, a diverse investment portfolio, receiving income from residence, and much much more!

How Planned Gift Programs Benefit the Nonprofit

  • A major benefit of planned giving for nonprofits is that they provide a promise of future funding. There are plenty of ways to give a planned gift, but in general, a charity will probably be left a will. Occasionally, they can be given large sums of cash that they’re able to either invest or gain an income from over a long period of time.
  • Planned giving programs offer nonprofit charitable organizations the highest return on investment in comparison to other fundraising types. This is due to the incredibly low cost of bringing them in. What’s more? Well, not only do planned gifts have a high return on investment, but they’re often larger than annual or capital gifts.
  • Planned giving increases annual giving. Nonprofits no longer have to worry about planned gifts cannibalizing annual giving to their organizations. Thanks to recent studies, it’s been confirmed that planned giving programs have actually been found to trigger a 75% increase in gifts received annually. This means that if you own a nonprofit and you’re not nurturing your planned giving programs, then you’re massively missing out on the positive impact it can have.
  • So many people don’t have the means to make annual or major contributions to nonprofits, and that can last throughout their whole life. However, that doesn’t mean they wouldn’t do so in a heartbeat if presented with the opportunity. Planned giving opens up doors to so many more giving opportunities from a variety of supporters.
  • Planned giving programs can also prove to be a useful tool when it comes down to building donor loyalty. Those who participate in planned gifts will usually commit and would like to be involved in the nonprofit’s activities long-term. This means that they will often make many more donations along the way.

Blackbaud, a software and service provider that serves nonprofits released a report that tells us planned gifts given to nonprofits have grown over the past 40 years by 4.5% to 5% annually on average. This is applicable even throughout economic downturns. When it comes to diversifying revenue sources, these gifts can make a world of difference.

In addition, Blackbaud states that once a planned giving program has been established and incorporated, it can typically boast an enviable cost-to-donation ratio that sits in the range of 3 to 15 cents of cost per $1 raised. This means that if an average planned gift amounts to $50,000, nonprofits are able to secure $1 million by just simply landing around 20 planned gifts that they’re then able to use for new or existing programs to establish endowments.


Challenges Nonprofits Face in Planned Giving

It goes without saying, nonprofit organizations will always recognize and appreciate the benefits that come with planned giving. However, the reality of heavy workloads, concerns about getting credit for long-range fundraising, and a reluctance to talk about the death of a loved one can often relegate this strategy to the fundraising margins.

Planned giving may feel like a challenge for most, but when nonprofits and donors come together and start conversations about significant long-term donations, they have the power to change the world. In fact, Orr Group states that over the next several decades, the largest and wealthiest generation in the history of the United States will transfer a whopping $67 trillion to their Generation X and millennial children. This crazy amount of wealth transfer means that it’s the perfect time to start those meaningful planned giving to charity conversations.

What Tax Benefits Come with Planned Giving for Donors?

As we mentioned in the benefits of legacy giving for donors section earlier, tax deductions hold the throne for the second biggest benefit of giving to charity. To find out why exactly that is, check out the benefits of the tax deduction received for donors below:

  • Donors are able to give to charity through appreciated property like real estate or securities, and receive a charitable tax deduction for the full market value of the asset. In addition, they’ll pay absolutely no capital gains tax on the transfer.
  • If donors establish a life-income gift, they’ll receive a tax deduction for the full, fair market value of the assets donated. However, this doesn’t include the present value of the income retained. This means that if they fund their gift with appreciated property, once again, they pay no upfront capital gains tax on the transfer.
  • In the unfortunate event that a donor was to pass away, the bequest or beneficiary designation in their life insurance policy or retirement account does not generate a lifetime income tax deduction for the donor nut they are exempt from estate tax.

Do Nonprofits Have to Be Equipped and Prepared to Accept Planned Gifts?

The Internal Revenue Code states that any nonprofit can accept a planned gift. This includes nonprofits that are very small. If an organization was to have a problem in accepting your gift, then this solely relies on the organization itself. The nonprofit must be prepared in the sense of obtaining proactive VS reactive mindsets, the motivation has to be powerful, they must understand what it takes, and it’s vital to remove any internal politics from within. A nonprofit’s main responsibility is to make sure that they employ responsible and proactive people that function as a unit. If this happens, then they will thrive in everything they do.

4 Things You May Not Know About Planned Giving

  1. On average, it’s predicted that only around 37% of Americans are familiar with the term ‘’planned giving.’’ So, instead of targeting donors to talk about planned giving, talk about what they would like to accomplish, then show them how they’re able to do it through planned giving methods.
  2. As many aren’t aware of the concept, If you have a button on your website that says ‘‘planned giving’’, you should remove it and replace it with a button that says ‘’Other Ways to Give’’.  By doing this, you’ll find that you will begin to receive more click-throughs.
  3. It’s vital that you include monthly donors in your planned giving marketing communications and appeals. This is due to the fact that monthly donors are six times more likely to leave a charitable gift in their will than those who donate once per year.
  4. A common misconception is that the donations of planned gifts are only carried out by the ultra-rich. This is wrong, and it’s your job to educate them on how everybody is able to participate, regardless of their wealth bracket.
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