Mon, 06 Feb 2023

Now, more than ever, nonprofit organizations must invest in planned giving. As the vast and affluent Baby Boomer generation ages over the next 25 years, an estimated $68 trillion will be passed on. This will be the largest wealth transfer in human history, and philanthropy will have an extraordinary opportunity.

 

In addition, Americans have rushed to draught wills in response to the Coronavirus epidemic. During the week of March 23-30, we had a 600% increase in bequest gifts compared to the same period in 2019. This resulted in roughly $100 million projected new donations for the month.

 

Suppose nonprofits build supporters today and make it simple for contributors to include their organization in their wills. In that case, they can capitalize on the greatest opportunity for planned giving in history.

 

Every day, about 10,000 baby boomers turn 73.

 

What are planned gifts?

Nonprofit organizations use the phrase planned to give to refer to donors committing to a planned gift. Planned donations are charitable contributions made as part of a donor's estate or financial planning.

 

While there are other ways to give through planned giving, endowments are the most popular and straightforward. Bequests are gifts placed in a donor's trust, will, or estate plan and distributed to a charitable organization following the donor's death. In 2018, according to a report by Giving USA, bequests accounted for 9 percent of all charitable contributions.

 

Typically, nonprofits develop planned giving programs, also known as legacy programs, to increase their planned gifts and secure their organizations' future. Officers of planned giving cultivate relationships with prospective contributors of planned gifts and assist and develop existing donor relationships. Because planned donations might take years to materialize and donors may amend their wills, organizations must stay in contact with these donors and remind them of the impact of their gifts.

 

The effect of planned contributions on nonprofit organizations.

Planned giving significantly impacts an organization's ability to prepare for the future and sustain itself over time. Here are three significant advantages of scheduled giving programs for nonprofits:

 

1- Planned gifting creates an untapped revenue source.

Because planned donations do not affect a donor's day-to-day financial flow, these gifts are available to everyone, from those whose incomes rarely permit charitable contributions to significant, devoted givers. While most planned giving officers concentrate on establishing relationships with major contributors, our founders' research demonstrates that donors who have been lifelong savers are frequently in the best position to leave big bequests.

 

In addition, according to our 2019 planned giving study, 79% of our users had never created a will. Despite this, we've amassed more than $1,300,000,000 in bequests. Our consumers' bequests range from as little as $5 to more than $10 million, indicating an untapped source of revenue from planned giving.

 

2- Planned contributions are big donations that assure an organization's future.

According to Blackbaud, the typically planned donation in the United States was between $35,000 and $70,000 in 2011. The average bequest size from our user is $78,630. These significant donations provide continuous financing and support for nonprofit organizations, even when economic downturns or annual contribution declines.

Recent changes to the tax code in the United States have made it even more important to secure these gifts. As standard deductions increase, fewer Americans may itemize deductions on their tax forms. This resulted in the first annual decline in charitable contributions from people in over five years in 2018. Nonprofits can recoup these losses by acquiring planned gifts from diverse prospects.

 

3- Annual donation is increased via planned giving.

Planned giving is commonly believed to be at the apex of the classic donor pyramid, following significant gifts.

 

Gifts planned Officers are frequently part of the large contributions team at their organizations, using the discipline's tools:

  • identifying top prospects, 
  • visiting with them in person, and 
  • then securing bequest pledges progressively. 

Professor and expert in planned giving at Texas Tech, Russell James, did an in-depth analysis of philanthropic giving in 2014. Donors whose wills included a charitable gift increased their average annual contributions by more than $3,000.

 

Donors can also take advantage of planned gifts in several ways.

 

1- Through planned giving, contributors can leave a legacy.

If a donor has supported your organization for years, a bequest in their will is an effective method for them to leave a legacy. And suppose they haven't been able to make a sizable donation during their lifetimes. In that case, they can build their legacy by leaving a bequest in their will and supporting their favorite organization for generations.

 

2- Donors can choose how their contributions are utilized.

Donors might specify how or where they wish a legacy to a nonprofit organization to be utilized. Because it is relatively simple to revise a will, donors can keep their bequests up-to-date by consulting with gift officers about where their contributions will have the greatest impact.

3- Planned gifts may be eligible for tax deductions.

Depending on the donor's planned donation, they may receive certain tax advantages. Not only can bequests lower federal estate taxes for heirs, but these deductions can also apply to real estate, IRAs, and shares. The IRS grants tax-exempt status to several types of planned gifts, such as charitable remainder trusts. The tax benefits of planned contributions can be somewhat complex. Therefore gift officers should assist donors in evaluating them on a case-by-case basis.

 

Four prevalent types of planned presents

Planned contributions can range from simple bequests to sophisticated trusts, each with varying criteria and benefits based on the circumstances of the giver. However, planned donations typically fall into a few categories: straightforward gifts of cash or non-monetary assets, gifts that pay an income, and more complicated gifts that safeguard a donor's assets.

 

Within these broad categories, the following are systematic ways to donate:

  1. Bequests

Bequests are a common and very straightforward way to make a planned gift. These "absolute" gifts are charity contributions bequeathed through a formal will. Typically, they consist of a specified dollar sum, a donor's inheritance balance after previous bequests have been paid, or a percentage of the donor's entire fortune.

  1. Charitable donation annuities

A charitable gift annuity enables a donor to contribute substantial cash or securities in exchange for a lifetime stream of fixed-income payments. The nonprofit organization retains any unspent funds as well as any investment returns.

  1. Donation-remainder trusts

There are a few different forms of charitable remainder trusts, but in each case, the leftover monies are distributed to the charity upon termination of the trust. A charitable residual annuity trust provides a fixed amount to the donor based on a proportion of the trust's starting assets. A charitable remainder unitrust provides a percentage of the trust's principle to the donor and is revalued annually so that payments increase over time.

  1. Nonprofit lead trusts

When a donor makes this form of donation, the charitable lead trust pays an 'income' to the charity for a predetermined number of years or the donor's lifetime. And after the term, the assets are returned to the donor or their beneficiaries.

Non-cash assets such as stock or real estate, gifts from IRAs (also known as Qualified Charitable Distributions or QCDs), and Pooled Income Funds are additional donation categories that some organizations include in their planned giving programs.

 

How to get started with planned gifting

If your nonprofit organization is new to planned giving, there are a few procedures you need to follow to kick it off. We go over these steps in detail in this article on jump-starting your planned giving program, but here is the high-level overview:

 

Step 1: Unify your teams.

Before you launch a planned giving program, everyone at your nonprofit should be on board. You must understand where this program will fit within your organization's infrastructure. Your company will need to ask itself questions such as:

  • Will planned giving belong to the big gifts department? Will it have its department?
  • Will your organization hire an expert or train an existing staff member to collect planned gifts?
  • What resources will your organization allocate to increasing or marketing planned gifts?

However your organization decides to approach planned giving, development and communications teams must be aligned and on the same page about marketing planned to give to your supporters. These teams should create shared goals and balance competing priorities to identify key moments to solicit supporters and fundraise for your organization.

 

At this point, the planned giving team should also work closely with major gifts to identify top prospects for outreach.

 

Step 2: Outline your marketing plan.

Your organization must create a detailed marketing plan to start bringing in planned gifts. Just like communicating to your supporters about other fundraising options or campaigns, repetition and ease are key for marketing planned giving.

 

As the first step in this process, you should make it incredibly easy for supporters to find and access this new way to give. Add planned to give as a donation option on your website, or create a dedicated landing page to explain how a donor can make a planned gift. Give them resources that make it easy to leave a legacy, such as making a will through MinaWill, or offer them support by giving them a person to contact for more information.

 

Then, create marketing materials, such as emails and direct mail, to speak to your donors about the impact and benefits of planned gifts. Identify the best marketing channels for planned giving, and add a few planned giving campaigns per year into your organization's communications calendar.

 

Once your program is set up, your planned giving team should also start meeting with top prospects to help them make a planned gift.

 

Step 3: Acknowledge your donors.

 

Planned gifts can be difficult to track, especially bequests left in a will. Some organizations occasionally survey their supporters to see if any donors have left legacies and forgotten to notify them. When you learn about a planned gift, make sure you thank the donor and acknowledge their impact on your organization's mission. If you're setting up a legacy society with any special perks, such as public acknowledgments, access to special events, or organizational communications, make sure you invite them to take part. Doing so will help make the donors feel like a part of the community and strengthen their relationship with your organization.

 

Ready to kick start your planned giving program? MinaWill can help.

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