Step 4 (continued). Membership - Planned Giving
Planned Giving is the process of making a charitable donation of estate assets to a non-profit organization. It should be considered in conjunction with the donor's estate, financial, and tax planning. Planned giving provides financial benefits for both the donor and the organization receiving the donation.
The current demographics in the United States suggest that over the next several decades there will be a tremendous intergenerational transfer of assets. It is predicted that between 1998 and 2052, a wealth transfer of at least $41 trillion will occur in the United States. This situation provides nonprofit organizations with the opportunity to encourage donors to use their assets to benefit a vision they believe in (through your organization) and at the same time enhance their own estate and financial plans. Your organization can use this money to maintain a reserve or start an endowment.
- Be at least ten years old
- Have a five to ten year plan
- Have had a budget surplus for several years
- Have at least one thousand regular donors
- Have a healthy "major donor" program
- Have a planned giving program so that donors may leave assets to the organization
- Have an established operating reserve
Planned giving includes:
- Outright gifts, such as stock, property, and real estate that the organization can use immediately. The donor benefits by avoiding capital gains tax on assets that have increased significantly in worth. The donor also receives a tax deduction based on the current value of the donation. Example: If a donor bought stock at $600 that is now worth $1000, s/he can make an outright donation of the stock and receive a $1000 charitable deduction on his/her income tax with no income tax. If s/he had cashed the stock first, this person would have had to pay income tax on the $400 again, even if s/he donated all the proceeds.
Bequests are gifts through a donor's will. The donor to retain the asset through
his or her lifetime and the organization receives the gift after the donor's death.
Typically, bequests can be created and changed at any time during life
and can be restricted if desired. Bequets make up the majority (85-90%) of planned gifts. They are also the highest generator of planned gift money for nonprofits nationwide.
- Life Income Gifts allow the donor to give the asset to your organization while
continuing to receive income for life. This can be done through a variety of means,
- Charitable gift annuities. The gift immediately become the property of the nonprofit. The nonprofit pays a fixed income, part of which is not taxable, to the donor for the rest of his or her life.
- Deferred gift annuities. A donor makes a gift now receives an income tax deduction, but does not receive income until a fixed date (such as retirement). Since the gift has compounded over time, this can provide a significant amount of income.
- Retained life estates. A donor gives his or her residential property to the nonprofit organization, but has full rights to the estate while still living. The donor receives an immediate deduction on the remainder interest value of the estate
These gifts are often the most complicated, and the details should be handled by a professional. However, these options can also be very beneficial to the donor because they can still receive income on the asset and the asset can be managed by a professional with no extra cost to them.
Citation: See Resources, Works Cited #13