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1. |
It is almost
impossible to predict the growth of a gift planning program because it is so
dependent on how the charity handles its mission message. Put simply, it is
engaged donors who make legacy gifts. If they believe in the mission, and
believe it has a long-term future, they will create legacy gifts to support it.
If the charity does not have a following that has been encouraged to believe in
the mission, or the leadership has caused donors to question the long-term
viability of the charity, then it can take a long time for planned giving to
produce results. I run into this more than you would expect, which is why I
wanted to lead with it.
That said, if a
charity has a loyal donor base that has been giving on a regular basis, year
after year, it should start to see new estate intentions and legacy gifts right
away, with some consistency in new commitments within three years. At the same
time, annual revenues should go up, as the typical legacy donor doubles the
size of his/her annual gift once the legacy gift is on the books, because
he/she is even more invested in the future of the charity. When legacy gifts
mature depends a lot on the demographics of the donor-base. If it is older,
they are likely to mature sooner. Just keep in mind that most legacy donors
tend to get quality medical care and outlive the government’s life expectancy
tables. Hence the old adage “If I sign up for a gift annuity, I add five years
to my life expectancy.” While the result is true, it is not a causal
relationship.
I suggest that most
charities worry not about closed legacy gifts, but the percentage of their
identified planned giving pool asked to consider a legacy gift. If a charity is
consistently out meeting with donors and asking for legacy gifts, the program will
grow quickly. Of donors who are ready, one in three will say yes right away,
creating some easy wins. If a charity has 1,000 planned giving prospects and
asks 100 a year, that should be about 30 new legacy commitments per year for
ten years. By the time ten years have gone by, there are likely going to be
many new additional prospects to ask, plus all of those who did not say yes at
the time, but are likely to be ready now. So look at your pool, look at how
many you can ask, and start asking! The results will surely follow.
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2. |
We define it as any major gift, made in lifetime or at death as part of a donor's overall financial and/or estate planning. By contrast, gifts to the annual fund or for membership dues are made from a donor's discretionary income, and while they may be budgeted for, they are not planned.
(Our handy Planned Giving Pocket Guide describes all planned gifts.)
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- First, outright gifts that use appreciated assets as a substitute for cash;
- Second, gifts that return income or other financial benefits to the donor in return for the contribution;
- Third, gifts payable upon the donor's death.
(Our handy Planned Giving Pocket Guide describes all planned gifts.)
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4. |
They can use cash, securities (stock, bonds, mutual fund shares) or real estate. They can give tangible personal property (artwork, books, artifacts, equipment, etc.) They can fund a gift plan with a business or partnership interest (closely held stock, a share in a professional corporation, an investment in a limited partnership). They can give you a paid-up life insurance policy. Donors can also direct a charitable distribution from the balance remaining in their retirement plan (IRA, 401(k), Keough, etc.) at death. They can also make your organization the owner and beneficiary of a new life insurance policy. Note: Some gift assets can prove challenging for a non-profit to administer and/or liquidate, and your organization should review offers of non-traditional assets carefully before accepting them.
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Donors make an irrevocable gift, but with your agreement retain the right to receive income payments in return, usually for lifetime. Depending on the gift plan chosen, income can be paid to the donor and/or to family members or other individuals. Donors receive an income tax charitable deduction for the fair market value of their gift, minus the present value of the income interest they have retained (calculated as a function of the gift's payment rate and how long payments are expected to be made to the beneficiaries).
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It depends on the asset used to fund the gift, whether the gift was made during the donor's lifetime or at death, and whether the donor retained an income interest from the gift. Here are the guidelines: - Outright, lifetime gifts of cash, or of assets like securities held by donors for more than 1 year ("long-term capital gain property"), are deductible at fair market value.
- The charitable deduction for a gift that returns income to donors and/or other beneficiaries, such as a charitable gift annuity or a charitable remainder trust, is the fair market value of the gift asset minus the present value of the income interest retained.
- Revocable gifts that will be paid to your organization upon the death of the donor do not generate an income tax deduction. Therefore, donors do not receive a deduction for including a charitable bequest when they write their will, for naming you the beneficiary of a life insurance policy, or for designating your organization to receive the remaining balance of their retirement plan.
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7. |
| Type of Property | Valuation Method* | | Publicly traded securities | Mean of high and low selling prices on date of gift | | Mutual fund shares | Closing redemption price on date of gift | | Closely held stock | Independent appraisal if worth $10,000 or more | | Real estate | Independent appraisal if worth $5,000 or more | | Artwork, collectibles, etc. | Independent appraisal if worth $5,000 or more |
*Property of any kind that the donor has held for less than 1 year is considered short-term capital gain (or "ordinary income") property by the IRS, and its value for deduction purposes is limited to the donor's cost basis.
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First, the donor receives a charitable income tax deduction for the full, fair market value of the assets contributed, minus the present value of the income interest retained.
Second, if the donor uses appreciated property to fund the gift, no upfront capital gains tax is applied to the transfer, meaning that the entire amount donated can be put to work earning income for the donor.
(Our handy Planned Giving Pocket Guide describes all planned gifts.)
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9. |
You've come to the right place. Purchase The Ultimate Quick Reference Planned Giving Pocket Guide that also comes with a fold-out "cheat sheet" titled When How and Why to Plan a Gift. At $24.95, it's a bargain. (Quantity discounts for staff, board members and volunteers.)
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