Planned Giving Types and Techniques

Planned Giving Types and Techniques

There are many ways for your donors to make a big impact

Understand all the ways a donor can choose to make a planned gift to your organization. What Is Planned Giving?“Planned Giving” means finding smart ways for your donors to make bigger gifts than they imagined possible, and to do it in ways that best fit their needs and work well for your station.When most people think about charitable giving, they think about how much money they have available in their checking accounts and how much…

Understand all the ways a donor can choose to make a planned gift to your organization.

What Is Planned Giving?

“Planned Giving” means finding smart ways for your donors to make bigger gifts than they imagined possible, and to do it in ways that best fit their needs and work well for your station.

When most people think about charitable giving, they think about how much money they have available in their checking accounts and how much they can give without limiting their ability to pay bills and spend money on other things they need or enjoy. Planned giving is a way to expand options and philanthropic capacity. A planned gift is one that typically requires the help of someone other than the donor to complete—a professional advisor or a gift officer, for example.

A planned gift is sometimes thought of as a gift that involves anything more than writing a check for cash, making a credit card donation, or transferring marketable securities. Donors may be surprised to learn how easy it can be to make a planned gift to your station.

Planned giving consists of a variety of giving techniques, vehicles, and types of property gifts:

Will (and Revocable Trust Agreement) Provisions

Gifts through wills (or through revocable trusts), sometimes called “bequests” are perhaps the best-known way to make a planned gift to charity. Estate gifts for unrestricted general use are most helpful, but gifts designated to the parts of the mission donors value most are valuable too. If donors wish to make a gift for a restricted purpose, it is best to have them contact you in advance so you can make sure the gift can be accepted and their intent can be honored.

Beneficiary Designations for Retirement Accounts and Life Insurance Policies

A beneficiary designation in a retirement account (IRA, 401(k), 403(b), 401(a), etc.) or life insurance policy usually is the easiest, most cost-effective way for a donor to make a planned gift to your station. For many people, retirement accounts and life insurance policies represent a large part of their overall wealth, and your station can be named a beneficiary of a percentage or all of an account or policy simply by filling out a new beneficiary designation form and submitting it to the plan administrator or financial firm. Many beneficiary designations can be completed online in a matter of minutes. Moreover, when there is a choice to be made about what property to leave to family and what to leave to charity at death, retirement accounts almost always are the best asset to give to charity, leaving other assets for family, primarily for income tax reasons.

Donor Advised Funds

A Donor Advised Fund (DAF) is a fund or account maintained and operated by a public charity—a 501(c)(3) organization—known as a “sponsoring organization.” The sponsoring organization receives contributions from an individual donor or donors, for which the donor receives a charitable income tax deduction at the time of the initial contribution. The contributed property is then legally the property of the sponsoring organization, but the donor retains advisory privileges to make recommendations to the DAF sponsor about where he or she would like grants made by the DAF.

Continue reading

Donor Advised Funds can be quite useful and have become very popular in recent years. If your donors have a DAF, they can recommend your station as a grantee. (DAF sponsors do not always identify the advisor, so please ask them to include the donor’s name and contact information along with the grant to your station.)

Finally, many DAF sponsors (particularly community foundations) will allow donors to designate charitable beneficiaries to receive gifts after their lifetimes, either in a single distribution or in perpetuity. Donors also can consider adding your station as a testamentary beneficiary of their Donor Advised Funds.

Payable on Death (POD) and Transfer on Death (TOD) Designations

Donors can make a POD designation for your station on a bank account or a TOD designation for your station on a brokerage account or stock portfolio. They should contact their bank or brokerage firm for more information.

Life Income Gifts: Charitable Gift Annuities and Charitable Remainder Trusts

Do your donors know they can receive income for life AND a current income tax deduction in exchange for a contribution to benefit your station? They can do that with a charitable gift annuity (CGA) or a charitable remainder trust (CRT).

Charitable Gift Annuities

Charitable gift annuities provide donors with a safe fixed income for their lifetimes, as well as significant tax benefits. In an uncertain economy, the stability of a charitable gift annuity is very attractive.

Continue reading

  • Annuitants receive a fixed income for life (one or two lives), paid in monthly, quarterly, or annual installments, backed by all of the assets of the charity.
  • Donors receive an immediate charitable income tax deduction for a portion of the contributed amount based on an IRS formula, taking into account the age(s) of the annuitant(s) and the applicable federal interest rate in effect for the month of the gift (or one of the two previous months).
  • The payout rate is determined by the age(s) of the annuitant(s), based on a schedule established by the American Council on Gift Annuities. The higher the annuitant’s age, the higher the payout. For example:
    • 4.7% for an individual, age 70, or 4.2% for a couple, both age 70
    • 6.5% for an individual, age 80, or 5.4% for a couple, both age 80
  • If income is not needed now, a donor can obtain both a higher payout rate and a larger current income tax deduction by choosing to begin income payments at a later date.
  • Assets commonly used to fund gift annuities include cash, publicly traded stock, and mutual fund shares. Capital gains can be partially bypassed with gifts of appreciated property.
  • The minimum age for a gift annuitant is determined by the station (or other issuing organization), almost always based on rates recommended by the American Council on Gift Annuities (ACGA). The minimum amounts for establishing a gift annuity with your station are also determined internally (e.g., $10,000 for an immediate gift annuity or $20,000 for a deferred gift annuity. Large gift annuities above a certain dollar amount may require special approval.
  • After the annuitant(s) lifetime(s), whatever assets remain go to support your station, either for general use or a designated purpose.

Some of the reasons CGAs are popular include:

  • Safe, stable income for life
  • Excellent way to increase income from appreciated assets or cash
  • Easy to set up and manage
  • Reduces income tax and capital gains tax

Charitable Remainder Trusts

A charitable remainder trust provides income for a life or lives (or a term of years), a partial income tax deduction, and potential bypass of capital gains, but offers greater flexibility than a gift annuity. With a charitable remainder trust, the donor contributes property to a trustee to administer a trust to provide income to the donor or other loved one(s) designated by the donor. At the end of the trust term, the remainder is distributed to your station. The donor chooses the payout, preferably 5% to 6%. Charitable remainder trusts come in two main types: charitable remainder annuity trusts (CRATs) and charitable remainder unitrusts (CRUTs).

Continue reading

CRUTs are workhorse planned giving vehicles that can be used to accomplish multiple goals. Rather than a fixed dollar amount, the distribution from a CRUT is a fixed percentage—the unitrust amount—of the trust assets, revalued each year. Thus, donors or other income beneficiaries can enjoy increased payments as trust assets grow (but also have some downside risk if investments perform poorly). CRUTs can be funded with marketable securities or cash, but they also are the vehicle of choice for turning nonmarketable assets (e.g., appreciated real estate, closely-held business interests, fine art, high-value musical instruments, etc.) into income streams, with a charitable beneficiary at the end of the term or lives of the income beneficiaries.

Comparing CGAs and CRTs

CRTs come with more expense (hiring an attorney to draft the trust agreement and ongoing trustee fees and administration costs) but also a little more flexibility compared to CGAs. Conversely, CGAs are more limited in what they can do but are simpler and generally easier and less costly to set up and administer. Everyone’s situation is different, and CGAs work better for some while CRTs work better for others.

Charitable Lead Trusts

Charitable lead trusts (CLTs) are like the inverse of charitable remainder trusts. After a CLT is established, income is paid to charity for a term of years, and then the remainder is distributed to individual beneficiaries at the end of the term. Most often this vehicle is used to reduce estate taxes for people having taxable estates, and the remainder beneficiaries typically are the donor’s children or trusts for their benefit.

Continue reading

Another use of CLTs, though, can be to make large payments to charity for a period of years—such as during a campaign—with the donor receiving an income tax deduction in the first year and receiving back whatever remains in the trust at the end of the charitable term. CLTs are most attractive in a low-interest rate environment. As with any other type of gift, the donor should consult with their professional advisors about whether this type of gift may be appropriate for their situation and, if so, how to structure it.

Gifts with Retained Life Estates

Donors may make charitable gifts of certain types of property—most commonly real estate—and retain the right to use the property for life, and at the same time receive a partial income tax deduction. For example, if the donor owns a home, lot, or vacation property free and clear (not subject to any mortgages, liens, or other encumbrances) and your station agrees to accept it subject to a life estate, the donor could deed the property to your station reserving a life estate and continue to live on and use the property for the rest of their life or as long as the donor wishes. (While living on or using the property, the donor is responsible for insuring, maintaining, and paying taxes on the property.) At the end of the donor’s life—or earlier, if the donor decides they no longer wish to live there—the property is then owned fully by your station and can be sold or otherwise used for your station’s benefit. These types of gifts also are very attractive in a low-interest rate environment because they can generate very large current income tax deductions.

Continue reading

Outright or deferred gifts of:

  • Real estate
  • Closely-held business interests
  • Tangible personal property
  • Crops or livestock
  • Life insurance
  • Oil and mineral rights
  • Intellectual property gifts: Copyrights, Trademarks, Patents, or Royalties

See more from the Planned Giving Toolkit

Joe Thiegs

Greater Public Planned Giving Advisor

(612) 999-3940 (Central Time Zone)
jthiegs@greaterpublic.org
Main contact for planned giving