Help Donors Help Your Nonprofit with a Planned Gift

By: Helen Weeber

November 9, 2023

Most established not-for-profits are already equipped to solicit and accept planned gifts. But if your nonprofit is new to planned giving and doesn’t yet understand the long-term advantages of deferred gifts, it’s a good time to get up to speed. You’ll likely need to educate donors about the advantages — for them and your organization — of this form of support. This underutilized tool can contribute to an organization’s long-term viability. According to the most recent publication of Giving USA: The Annual Report of on Philanthropy, bequest giving represented 9% of all giving in 2022, which was a 2.3% increase from the prior year.

3 Forms

Planned gifts typically are made using one of three methods:

Direct gifts and bequests. These are made from a donor or a donor’s estate directly to your nonprofit. Generally, the bigger the donation, the bigger the tax benefit. Direct gifts provide donors with a current income tax deduction if they itemize, subject to annual limits. In addition, donated assets are removed from the donor’s taxable estate, which can reduce any estate tax due. Direct bequests don’t generate an income tax deduction, but they usually are 100% deductible for estate tax purposes.
Charitable gift annuities. These allow donors to gift substantial assets during their lifetimes. Annuities can be structured to minimize current income tax and future estate tax while providing donors with a consistent income stream during their lifetimes.
Charitable trusts. With a charitable lead trust, the donor contributes assets to a trust, which pays income to your charity for a set number of years. Then the property reverts to the donor or another beneficiary. With a charitable remainder trust, the donor or another beneficiary receives income from the donated assets for a specified period or for life, and the remainder goes to your nonprofit. Depending on the structure of a trust, donors may enjoy income and estate tax savings.

Other options that might be appropriate for charitable gift- and tax-planning objectives are donor-advised funds, supporting organizations or foundations.

Choose What You’ll Accept

Of course, your nonprofit doesn’t have to accept planned gifts in all forms. If, for example, your organization is going to accept endowments (gifts that permanently restrict the principal) or contributions that temporarily restrict use, you’ll need an infrastructure that handles them.

If you haven’t already, decide what type of gifts you’ll accept. Do you want to accept donations of appreciated securities (which typically provide donors with a greater tax benefit)? If so, establish a policy for them, such as whether you’ll liquidate these assets in a certain period of time. Then, adjust your investment policy on restricted gifts and get board approval. Also make sure your accounting system is set up to receive these types of gifts.

Getting the Word Out

You might start seeking planned gifts among your nonprofit’s board members. Even if they don’t make planned gifts themselves, they can be effective evangelists for your nonprofit’s mission and the benefits of planned giving.

Next, you may want to target outside resources such as financial advisors. Meet with prominent advisors in your community and explain your needs and willingness to enter into planned giving arrangements. Also develop strong relationships with local community foundations. These entities can act as intermediaries between your organization and potential donors, helping you to reduce or eliminate internal investment and infrastructure costs.

Long-Term Thinking

To take advantage of planned gifts, your staff and board members should be prepared to discuss them when opportunities arise. Provide training on how they work and how your organization’s policies affect what you accept. Contact us with questions.