Planned GivingThomas P. Holland, Ph.D., Professor

UGA Institute for Nonprofit Organizations

Kelly C. Holloway, AttorneyFortson, Bentley & Griffin

What is Planned Giving?

A planned gift is a donor’s commitment to contribute assets in such a way that the organization does not expect to have use of the donor’s gift until some time in the future. Usually, the donor reserves use and enjoyment of the assets for a lifetime or a series of lifetimes (spouse or children).

Types of Gifts

• Current– Annual campaigns– Major gifts– Capital campaigns

• Deferred, planned– Bequests– Life Income gifts through trusts or annuities

Planned Giving in Context of Fundraising

• Annual campaigns identify regular and more generous givers.

• All must be encouraged to upgrade, especially more generous givers.

• Building relationships with individual attention is essential for upgrading.

• This will allow you to become familiar with the interests of each of them.

• Tailor asks to their interests.• Thank them often for their gifts.

Major Gifts

• Build on annual gifts but seek larger amounts• Small number of givers will provide most funds• Seeking major gifts is most cost-effective way to

fundraising• May be used for– New or expanded programs– Capital for buildings or equipment– Endowments– Sponsorship of special need or activity

More on Major Gifts

• Usually come from person’s assets (savings) rather than his/her current income

• Gifts go to organization’s assets rather than its current operations.

• Require extensive personal cultivation, deep understanding of givers’ interests and styles.

• Take years to develop. No shortcuts.

Individualized Attention

• Engage generous givers with participation in identifying organization’s long-term needs.

• Look for aspects of those needs that closely match givers’ interests.

• Ask and thank. Ask and thank.• In time, you will establish a close and trusting

relationship with each individual giver.• Include general mention of planned giving in those

conversations.• At appropriate time, ask individual about his/her

interest in planned giving.

Talking about Planned Giving

• Older and wealthier people usually have wills and are already thinking about disposal of their estates.

• Many hope they can leave some of their money to do good (beyond just enriching their children).

• If they have already been generous to your organization, an easy step is to think about including it in their estate plans.

• “I hope you will consider this organization in your plans for your estate. Wouldn’t you like to leave a legacy here?”

• Their response will tell you how to proceed.

Listen for

• “I can’t give at the leadership level. My only asset is a family business that produces relatively little cash. I want to pass it along to my children in a few years when I retire.”

• “I never realized how burdensome inheritance and estate taxes could be.”

• “I can’t give you anything now, but I’m in the process of revising my will.”

• “I’ve got all this appreciated stock that doesn’t provide much income.

• “Is there any way to get a tax deduction now but keep the income into the future?”

More things to listen for

• “I plan to offer the organization my house, but I need to live there until then.”

• “I’d like to sell this land, but the capital gains would kill me.”

• “I am in the process of selling (or closing) my business.”

• “I’m tired of the management hassles with this rental property, but I don’t want to give up the income.”

• “My C.D. and investment income has been awfully low lately. I wish there were a way to increase the income.”

Federal Gift and Estate Tax Rules

• Such taxes are termed “transfer taxes”• Paid by the transferring party, not the

recipient• Rates vary depending on amount of money

being transferred.• Rules on rates and exemptions are repeatedly

changed by Congress.

More on Federal Gift and Estate Tax Rules

• Gift tax paid on lifetime transfers– Tax imposed on lifetime gifts over $13,000 per

recipient per year– If both spouses agree, a married couple and give

up to $26,000 per year per recipient• Estate tax paid at death– Imposed on the value of all assets owned by the

individual

Wills

• Easiest form of planned giving• Ensure that assets will be transferred as

person desires• Provide for transferring assets with least

amount of expenses and probate court involvement.

• Can save estate taxes but do not have any current tax advantages.

Options Beyond Wills

Other options have present tax benefits.– Life Insurance – Retirement accounts– Charitable Lead Trust– Charitable Remainder Trust– Charitable Gift Annuity– Pooled Income Fund

Life Insurance

• Life insurance is part of one’s taxable estate unless nonprofit is identified as the beneficiary.

• Individual takes out policy on own life and pays premiums as specified in policy.

• For heirs, the payout is free from income taxes but not estate tax.

• Value of the charitable gift is the cash surrender value of policy (not the face value).

• For nonprofit, the payout is not taxed.

Retirement accounts

• Any retirement savings account (such as IRA, SEP IRA, 403b) must have a designated beneficiary.

• May be specified as family member or nonprofit organization.

• Payout to nonprofit is not taxed.

Pooled Income Fund

• Person puts capital (cash or investments) into a pooled fund, which invests it.

• Income returns to him/her for lifetime• At death, capital goes to nonprofit• Benefits– Deferred gift to the nonprofit– Avoid taxes on capital gains in fund– Current charitable deduction– Removes assets from the estate while retaining income

Charitable Gift Annuity

• Person gives capital to nonprofit, which opens an annuity

• Annuity provides income to person for lifetime• At death remainder belongs to nonprofit• Benefits– Deferred gift to the nonprofit– Allows charitable deduction to person on annual income

taxes– Removes assets from person’s estate while retaining

income

Charitable Remainder Trust• Person establishes a trust and puts assets (such as a business)

into it.• Trust sells the business; does not have to pay capital gains taxes,

leaving full amount to be invested.• The trust manages the assets and pays person percentage of

value of trust (called a Unitrust) or a fixed amount (annuity).• After person’s death, the trust terminates and the assets go to

the nonprofit.• Benefits

– A secure source of income– Deferred gift to the nonprofit– Avoids capital gains taxes on the assets– Provides current charitable deduction– Removes assets from estate while retaining income

Charitable Lead Trust

• Person creates a trust and puts capital into it.• Trust provides predetermined amounts to the nonprofit or to

the person each year.• At time set by person, assets return to person to be used as

s/he directs or may go to nonprofit.• Benefits

– A portion of the gift will qualify for federal gift tax charitable deduction

– The charity will receive annual payments from the trust for a designated term of years.

– The beneficiaries of the trust will receive all of the trust’s assets when the trust terminates.

– The growth of asset value during the term of the trust goes to beneficiaries free of gift or estate tax.

– Provides support to the designated charity.

Do not try this at homeGet expert advice

When person is interested in setting up any sort of deferred gift plan, encourage him/her to get advice and counsel from experts.– Estate planners– Tax planning specialists– Legal help with setting up trusts