Planned Giving – An Essential Fundraising Vehicle Michele Thomas Dole, MS, CFP ® Faculty, The Fund Raising School

Planned Giving Definitions Planned giving connotes thoughtful preparation and planning, usually requires professional advice, and can apply to all forms of gifts. The term is used most commonly for gifts of future interest. A gift legally provided for during the donor’s lifetime but whose principal benefits may not accrue to the organization until a future time, generally at the death of the donor and/or the income beneficiary. 2

Benefits To the Donor Gratifies human need for enjoyment of giving Encourages estate planning Makes a larger gift than if making one outright Creates a permanent memorial Makes a gift with retention of income Provides income for self and/or beneficiaries Assets managed at low or no cost Income, estate, and capital gains tax savings 3

Benefits to the Organization Increases available options of giving May produce “actual-received” gifts on a regular basis that will add to the organization’s income holdings May be irrevocable Increases possibility of a donor changing a bequest to a lifetime gift May lead to future gifts through estate planning and bequests Can be used as a basis for future planning 4

TimingInstrumentDescriptionBenefits to Donor Gifts that help the NPO NOW Charitable Lead Trusts Trust: Pays trust income annually to charitable organization for period of years determined by donor, after which gift reverts to donor or heirs Gift is returned to donor or heirs at reduced tax cost. Gift or estate tax savings for value of payments to charitable organization. Trust pays tax on its income and capital gains. Trust deducts amounts paid to charity. Amounts paid to charity can be % or fixed amount. Brief Description of Planned Gifts 5

TimingInstrumentDescriptionBenefits to Donor Gifts that help the NPO LATER Retained Life Interest Contract: Gift of real property with retained life estate Donors can live in home for remainder of their lives. Partial income tax deduction. No capital gains tax. Reduction of estate tax. Wills/Bequests Donor names charitable organization in will Provide for family first Estate tax deduction full amount of bequest Life Insurance Gift of old or new policy with charitable organization as beneficiary and owner Donor makes large gift with little expenditure Income tax deduction No estate tax when life insurance proceeds are paid to the charity Retirement Plans Gift by naming a charitable organization as remainder beneficiary after donor’s death If retirement plan assets pass directly from plan to charity both income and estate taxes are avoided 6 Brief Description of Planned Gifts

TimingInstrumentDescriptionBenefits to Donor Gifts that GIVE BACK to the DONOR Charitable Gift Annuity Contract: Donor transfers cash or stock. Charitable organization pays donor a % of gift annually for a lifetime Fixed income payments to donor and/or other beneficiary for life A portion of each payment is return of donor’s principal and is free from in come tax. Part of each payment is taxable as ordinary income Capital gains tax reduced and spread over donor’s lifetime Charitable Remainder Unitrust Trust: pays variable income (fixed % of value) to donor or other beneficiaries for life or specific term up to 20 years Annual income to donor, could increase if trust value increases Partial income tax deduction No capital gains tax is paid when assets are transferred into the trust Estate tax savings possible Charitable Remainder Annuity Trusts Trust: pays fixed income ($ amount) to donor or other beneficiaries for life or specific term up to 20 years Fixed annual income to donor or other beneficiaries Partial income tax deduction No capital gains tax is paid when assets are transferred into the trust Estate tax savings possible 7

Planned Gift Instruments (Summary) Wills and bequests Charitable gift annuities Deferred payment gift annuities Charitable remainder unitrusts Charitable remainder annuity trusts Charitable lead trusts Retained life interest gifts Life insurance gifts Retirement plans Pooled income funds 8

Gifts of Appreciated Securities Great tax savings for donor if stock has significantly grown Gift deduction value is the average of the high and low on the date of transfer to the charity Donor transfers using the charity's DTC instructions Charity usually immediately sells the stock and invests proceeds 9

Wills Simplest to initiate by organization Impetus of planned giving Can be promoted through mass marketing Face-to-face negotiations best approach Beneficiary must be clearly indicated Is a revocable gift Gifts larger than lifetime gifts May lead to other lifetime gifts Makes a large deferred gift possible Sec. 3, 47 10

Qualified Retirement Plan Most people have this resource Name the charity via Beneficiary Designation Form Substantial tax planning savings for the donor 11

Life Insurance Policies may be contributed to charitable organization. Organization should be made an irrevocable beneficiary and owner of policy. When existing paid policy is given, or when premiums are paid, donor may claim tax deduction. Premiums are considered deductible charitable gift. Organization should be aware of IRS rulings on insurance as gifts; check with your state’s IRS office for information. Sec. 3, 87 12

Start-up Steps for a Planned Gifts Program Secure commitment of board, staff, and development personnel. Appoint study committee; make recommendations to the board. Adopt a plan. Determine training programs needed for staff. 13

Start-up Steps for a Planned Gifts Program Hire planned giving staff. Organize gifts committee. Prepare promotional plan. Establish office management procedures. Begin mail cultivation. 14

Thank you 15