Planned & Legacy Giving

Donation Page Optimization, Donor Retention, Engaging Constituents, Fundraising Tips, General / By

Leaving a legacy is a powerful thing. While we aim to be remembered for how we treated others during our lifetime, too many stimuli pull our contemporaries’ attention in other directions, making it easy for those to overlook the good we’ve done. However, what if we could continue our generosity and kind spirit years after we’ve passed?  Planned and Legacy giving — charitable donations after a donor’s life through wills, bequests, beneficiary designations and more — is a way to create a lasting legacy of support that continues long after we’ve left this world.

Planned gifts ensure a foundation of future funding, and as these donations are typically some of the largest a nonprofit will receive, the organization sees a significant, immediate and (if the donation is distributed over an extended period of time, as is often the case) long-lasting impact. Income from Planned/Legacy gifts makes it much easier to set budgets and meet operational commitments. Nonprofits with robust Planned/Legacy giving programs can more easily thrive in stable economic times, and better adapt when times are leaner. 

Legacy gifts can take many forms, with the most common being wills, trusts, gift intent forms, beneficiary designations, bequests, life insurance policies, real estate, equity and business interests. Read on to learn more….

PLANNED/LEGACY GIVING: AN UNDERUTILIZED REVENUE STREAM

According to CCS Gift Planning Practice Group‘s 2024 State of Planned Giving in Fundraising, Planned/Legacy gifts totaled only 16% of overall fundraising, and only 11% of campaigns. And some fundraising pundits place that estimate much lower — including a 20-year planned fundraising professional who thinks that less than 1% of nonprofits take planned giving seriously.

One benefit of Planned/Legacy Giving is the minimal administrative costs associated with most gifts. Because there is typically very little ‘red tape’ to work through for such donations, Planned Giving boasts the highest ROI of all major fundraising categories, including Individual gifts, Corporate donations, Foundation giving, Events and in-kind gifts. Additionally, several industry studies have shown that Planned giving does not cannibalize individual annual gifts; in fact, it has been shown to boost annual giving by as much as 50%.

 

PLANNED GIVING REACHES AN UPPER ECHELON OF DONORS

Although the number of U.S. households owning stock either through individual shares, mutual funds or retirement accounts hit a new high in 2022, that total only hit 58% — meaning more than 42% of the population likely does not have much (if any) disposable income to donate.

Planned/Legacy giving helps organizations uncover high-affinity donors — who do have investment accounts. This economic demographic has the greatest amount of disposable income, making them the singularly most compelling group in the donor audience. And as nonprofits know, it’s the higher-affinity donors who tend to donate more sizeable gifts.  In the 80/20 rule of ‘80% of revenues come from 20% of donors,’ Planned/Legacy supporters most certainly reside in that 20% group.

 

DONORS CAN MAKE A DIFFERENCE BEYOND THEIR LIFETIMES…AND AT A VALUE THAT INCREASES

One of the most meaningful gifts is one that helps an organization’s work perpetually.  A Legacy/Planned donation can help fund positive outcomes long after the donor’s life span, strengthening the donor’s support and legacy.  In addition, a gift of unliquidated stock, mutual funds or similar growth fund can, if the market grows, increase by as much as 10-15% every year commensurate with the market — even in the face of a recession or other economic decline.

Because of the size, options and maturity growth of these gifts, the ROI-per-dollar is higher than just about any other form of charitable giving. Planned gifts traditionally have a higher dollar value than individual or major gifts in part because they can come from a variety of sources which usually cannot be liquidated during the donor’s lifetime (more on those options below). For most donors, charitable gift amounts are usually derived as a certain percentage of their annual income. However, Planned/Legacy gifts are typically gifts of assets — from their retirement, life insurance payout, proceeds from a house sale, etc. — which have built up over decades, and therefore are generally much greater in value than any other donation.

By making a Planned/Legacy gift, donors ensure a legacy of generosity that will outlive them, and the nonprofits they support secure enduring long-term financial support to sustain their mission.

 

A PLANNED/LEGACY GIFT DOESN’T AFFECT A DONOR’S CURRENT FINANCES 

One of the most common hurdles to securing a charitable donation is the oft-spoken “I wish I could (donate), but I just don’t have the money right now.”  That’s one objection that’s immaterial in the world of Planned giving. When your donors add a gift to your nonprofit as a charitable bequest in their will, life insurance policy or real estate deed, it has absolutely no effect on their current cashflow status.  The everyday financial ‘valleys’ that people experience — mortgage payments, tax bills, unforeseen home or vehicle expenses, saving for a major vacation, a down investment year — are completely inconsequential when dealing with Legacy gifts. Your supporters can make a very generous gift to a cause near and dear to them, knowing that they will not feel a personal financial burden because of it. And if the will is meticulously calculated, the beneficiaries of your donor’s estate will not feel any financial constraints.
 
 

TAX ADVANTAGES OF PLANNED/LEGACY GIVING

Increasing Legacy/Planned gifts lets donors take advantage of more donor-friendly tax conditions. Planned gifts offer a handful of key tax benefits, depending on the type of gift. Sizeable estates of more than $11.7 million are on the hook for federal taxes, but donations (whether they be cash, investments, real estate, or other assets) can be deducted against an estate’s value, thereby lessening its tax bracket. Other kinds of Legacy gifts yield significant tax benefits as well; a Charitable Remainder Unitrust, also known as a ‘CRUT’, distributes (typically either annually or quarterly) a fixed percentage of the value of its assets to a non-charitable beneficiary, who then transfers the distribution balance to the nonprofit. And when donors gift real estate, their estates receive an income tax deduction equal to the property’s value — and avoid capital gains taxes altogether.
 
The U.S. increased the standard tax deduction thresholds in 2017 with the Tax Cuts and Jobs Act (TCJA), nearly doubling the annual deduction amount for individual, joint and household returns. This new legislation has led to a renewed commitment to charitable giving that has seen heightened levels of donations, peaking in 2020 and 2021. If a donor is older than 70-1/2 years, they can use a Qualified Charitable Distribution (QCD) as a Planned gift, and the tax-free gift from their IRA is permissible under their Required Minimum Distribution (RMD). 

If you’d like to talk about where your Planned & Legacy program currently sits — and how you can make it more predominant within your Giving plan, please drop us a line!