News/Blog

Views expressed by News/Blog authors are solely that of the authors and do not necessarily reflect the views of the Association of Fundraising Professionals New York City Chapter. Links Disclaimer

 

The Power of Planned Giving: Building Lasting Support for Nonprofits

The Power of Planned Giving: Building Lasting Support for Nonprofits

Chapter Leadership Brief 5.17.24

by Mary Whitrow
Content Marketing Manager, Kindsight

Why Focus on Planned Giving?
Fundraisers – you understand the ongoing struggle to ensure you are meeting your fundraising goals and keeping the lights on, so to speak. Engaging current donors and prospects for your annual fund, capital campaign, or year-end appeal is often the focus of fundraisers on the ground. These gifts can be fundamental to sustaining a nonprofit, but we can’t forget about another type of gift that can make a huge difference in the longevity of your nonprofit: planned gifts.

The elusive planned gift is sometimes shied away from or overlooked because it can feel like an uncomfortable subject for fundraisers to broach. The reality is that many people in a position to give a planned gift have considered their legacy and are not afraid of the conversation. That said, there are numerous ways to conduct outreach and a variety of options for planned gifts, many more than the standard charitable bequest we might all be familiar with.

Types of Planned Gifts
Planned giving has seen significant growth, notably with charitable giving by bequest increasing by 2.3% from 2021 to 2022, according to the GivingUSA 2023 annual report. This increase has brought the total to $45.6 billion, now representing 9% of total contributions.

For obvious reasons, planned giving is important to nonprofits, but it's also a very attractive option for donors. A planned gift can ensure a donor leaves a lasting legacy and protects the future of an organization that supports a cause near to their heart. Some planned gift options offer income streams or tax benefits and allow donors to make an impact during their lifetime. Planned gifts offer diverse income streams for nonprofits and often strengthen relationships with the donor.

We’ve split the types of planned gifts into two categories: deferred and immediate.

Deferred:

  • Charitable Bequests: This is the most popular planned gift type. The nonprofit receives cash when a donor passes.
  • Retirement Plans And Life Insurance: Donors can gift their retirement assets or life insurance policies when they pass, and they have the potential to be quite large. This option is ideal for givers who may not be able to give major gifts during their lifetime but want to leave a lasting legacy.

Immediate:

  • Charitable Gift Annuities: These are irrevocable cash gifts that provide a fixed income and immediate tax benefits for donors. They allow donors to make an impact during their lifetime while securing their own financial future.
  • Charitable Remainder Annuity Trusts: Donors contribute a gift (cash or assets) during their lifetime and receive an income (a fixed percentage based on the value of initial assets). This option allows donors to avoid related capital gains and estate taxes, and the remaining balance of the gift goes to the nonprofit when donors pass.
  • Charitable Remainder Unitrusts: Similarly to Charitable Remainder Annuity Trusts, donors can give an asset (real estate, stock, etc.) and receive an income. This time, the income is a fixed percentage of the asset's fair market value, so donors avoid the pitfalls of inflation. They can also avoid capital gains and estate taxes.
  • Pooled Income Funds: Nonprofits can pool together many donor gifts (cash) and invest them. Donors can receive income, but it depends on their share of the fund and the investment performance. They also receive an immediate income tax deduction and the option to avoid paying capital gains tax. Upon the donor’s passing, the nonprofit receives the money from these funds.
  • Charitable Lead Trusts: These are irrevocable trusts designed to provide financial support to a charity for a period of time, with the remaining assets eventually going back to the donor or their beneficiaries. Wealthier donors often choose this option due to the reduced taxes it allows for. The donor receives a fixed stream of income and reduced estate taxes.
  • Retained Life Estates: Donors can transfer a property deed or title to a nonprofit but continue using the property. They can receive a tax deduction for the property’s value, and at the donor’s passing, the nonprofit retains the asset.

Create Relationships with Planned Givers
A planned gift is enormously generous, and stewardship and recognition are of the utmost importance with planned giving. The care and attention that must be shown to planned givers cannot be underestimated; they deserve to be thanked and appreciated in a way that resonates with them. Make sure you are engaging with them in a tailored way – this is about understanding them on a deep level and having a high degree of personalization in your outreach and ongoing relationship.

A note: it’s important to educate your planned gift prospects on their options. You can also recommend that they talk to their financial advisors about the gift type that is right for them to make sure it is in line with their financial needs and values.

When to Engage with Planned Givers
The best time to engage with a planned giver is early and often. The average American writes their first will between 45 and 75, so if you’re only focusing on people over 60 who are known to have more discretionary income, you may be missing a large group of prospective planned givers.

That said, it makes sense to reach out to planned givers during life milestones or key events, such as retirement or when they are estate planning. These are the key times when they will be considering their legacy and making plans to ensure it lives on. Events or workshops are also great ways to engage prospective planned givers and educate them on the impact they could have on your cause.

And if a planned gift is confirmed, there still needs to be a high degree of engagement to ensure the donor knows that their gift will be used properly and that your organization and cause are worth their support now and in the future. You must keep planned givers abreast on all the impacts you are making and any relevant changes to policy you are implementing. You want them to feel engaged and involved so they can understand how their gift has impacted or will impact your nonprofit.

Securing Legacies
Planned giving is a vital component of a fundraising strategy because it brings value to both donors and nonprofits. It diversifies income streams to strengthen the nonprofit's financial position and ensures donors will have a lasting legacy. Proper engagement with planned givers will encourage connection and foster relationships that can stand the test of time.

Mary Whitrow is a Content Marketing Manager at Kindsight. She has a business degree and brings a multitude of experience in marketing, education, writing, and editing to her role. Mary is committed to producing content that serves and uplifts nonprofit organizations, and she has a genuine passion for making a positive impact in the nonprofit industry.

Theme picker