If you would like more information or have questions about planned giving please contact Brad Stoldt, Vice-President of Development, at firstname.lastname@example.org or 800.456.7651.
Definition of Planned Giving
"Planned Giving" is any charitable gift that requires assistance by a qualified professional to complete.
Types of Gifts
The most common gift is one made through a will or a trust. All assets including cash, securities, real estate, and tangible personal property, such as works of art, may be transferred through an estate. A charitable estate gift can be made in the following ways:
In a bequest, one or more charities receive a specific dollar amount, a specific piece of property, or a stated percentage of the estate. This is the most common form of estate gifts. With a residuary or remainder bequest, one or more charities receive all or a stated percentage of an estate after distribution of specific bequests and payment of debts, taxes, and expenses.
Life Insurance and Retirement Plans
Donors can also choose to name a charity as a beneficiary in a life insurance policy or retirement plan. There are several ways in which a donor may use life insurance to make a gift.
Make a gift of an existing life insurance policy, naming the charity as beneficiary.
Establish a new policy and name a charity as the owner and beneficiary of the policy.
Use life insurance to replace the value of gifts to a charitable trust.
Because of the significant tax penalties on over-funded retirement plans, some donors may find that leaving a charity as a beneficiary of their retirement plan avoids passing on huge tax burdens to heirs. Heirs should be named or beneficiaries of assets not subject to income tax while tax-exempt charities receive taxable retirement plan assets.
A gift of appreciated securities such as stocks, mutual funds, and bonds can provide attractive benefits to donors. An outright gift of long-term appreciated securities (securities held for more than a year) avoids capital gains taxes and qualifies for a charitable deduction.
Donors can make a gift of commercial or residential real estate or undeveloped land to a charity and receive substantial financial benefits. A donor may give the property outright and qualify for a charitable income tax deduction based on the appraised value of the property. Donors may use a home or land no longer wanted or needed to fund a life income gift.
Life Income Gifts
Planned gifts can also be done during a person's lifetime and can provide income for the individual or their beneficiaries as well as a gift for a charity upon death. Three popular types of life income gifts include:
1. Charitable Gift Annuity
A gift annuity is a contract between the donor and a charity that provides advantages for both. The donor makes a gift and receives the following benefits:
Guaranteed fixed payments for life, to one or two beneficiaries, a portion of which is nontaxable
Charitable income tax deduction for a portion of the gift
Reduced capital gains taxes
The pay out rate on an annuity is based on the age of the donor at the time the gift is made. After the donor passes on, the amount remaining in the charitable gift annuity is given to the charity.
2. The Pooled Income Fund
The pooled income fund is similar to a mutual fund. A donor's gift is pooled with other donors' gifts and assigned a proportionate interest in the fund. Current earnings of the fund–dividends and interest–are paid out proportionately to each beneficiary on a quarterly basis. The rate or return is variable. A second beneficiary may be named to receive a life income from the fund after the death of the donor. Ultimately, the gift will pass to a designated charity. Donors can generally participate in a pooled income fund with smaller gifts than a charitable gift annuity.
3. Charitable Remainder Trusts
A charitable remainder trust provides a donor with a lifetime income and a charitable income tax deduction. The donor selects the pay out rate, usually between 5% and 7%. The higher the pay out rate, the lower the charitable income tax deduction. This gives the donor and/or other beneficiaries an income every year for life. If the donor funds the trust with appreciated securities, the donor will avoid capital gains taxes. The donor may choose the trustee to manage the trust. A charitable remainder trust may be established in one of two forms:
Charitable Remainder Annuity Trust (CRAT)
Payments are made in a fixed amount annually
Charitable Remainder Unitrust (CRUT)
Payments expressed as a percentage of the value of the trust's assets that are valued annually and will vary each year.