Even if current donations are your nonprofit’s bread and butter, you can’t afford to ignore planned, legacy, or deferred gifts. In Giving USA’s The Annual Report on Philanthropy donations from bequests represented 9% of all contributions during 2022. These donations, which are typically granted through wills and living trusts, can be substantially greater. When donors make gifts through their estate plans, your employees are not required to be personally involved. However, your development team should understand how the process works and how to encourage such contributions.
How Gifts Work
In addition to will and trust gifts, planned donations can be made through beneficiary designations on retirement accounts such as 401(k) plans and IRAs, as well as life insurance policies. Charitable annuities and other more complex estate planning tools, such as charitable remainder trusts, may also come into play.
Donors must provide your nonprofit’s entire name and address in a legally binding document (for example, a will). Although your organization’s tax identification number is useful, it is not necessary. The legal documentation must also specify the donation and indicate any limitations on its use by your nonprofit.
Making Your Case
You can’t simply be reactive and hope that windfalls come your way. You must proactively pursue planned gifts. For example, include information about planned giving in prominent spots on your website, newsletters, brochures, and other marketing materials. Don’t presume that only senior, long-time donors will be interested. Many people may not even consider making a planned gift unless you educate them on the possibility.
Realize that even affluent people may fail to develop effective estate planning. They may pledge to leave something to your organization, but unless they put it in writing, state intestacy laws can direct the funds elsewhere. Use subtle and sensitive messages to get the point across.
You might also highlight the tax advantages of acting quickly. Unless Congress acts, the current generous estate tax exemption – $13.61 million in 2024 – is set to revert to an inflation-adjusted $5 million in 2026. Supporters whose estates are not currently subject to estate taxes but may be after 2025 should consider including a planned gift into their estate plans soon.
It’s also useful to demonstrate to donors how you might put planned gifts to use. Many donors want planned gifts to be used for specific initiatives or programs rather than day-to-day expenses. You can help by suggesting potential special uses, but you could also encourage them to contribute to your basic operating fund to help you meet ongoing needs.
Gaining an Advantage
Donors are less inclined to make donations to young or financially vulnerable organizations. So, if your nonprofit already has a long track record and a good reputation, you probably have an advantage. However, it is never too early to establish ties with financial and legal advisers in your community who can assist people in preparing estate planning. Also, aim to secure planned gifts from dedicated stakeholders such as board members. Please contact us with any questions.
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