PMA Consulting, LLC

Understand Planned Giving…then Start the Conversation!

Planned giving is an area of philanthropy that nonprofits don’t spend a great deal of time promoting or discussing with their donors. It can be a difficult conversation to start because individuals aren’t comfortable asking donors what they’ll do with their money at the time of their death. However, planned giving is an opportunity for donors to begin thinking about what their legacy will be within their community.

First, let’s define what a planned gift is and what the benefits are to a donor. A planned gift is a method of supporting a nonprofit that enables a donor to make a major gift upon their death as a part of a donor’s overall financial and/or estate planning. These gifts help the donor in estate and tax planning and help maximize the gift while minimizing tax implications on their estate.

While those working for a nonprofit organization don’t need to understand what the tax implications are or how to set up planned gifts, it is important to be able to start the conversation. A donor might not be a major donor today, but with planning, might become a major contributor in the future.

There are several types of planned gifts a donor can give to a nonprofit.

  1. Bequests: This is the most common type of planned gift. A bequest is a provision in a donor’s will directing that a gift will be paid to a certain organization on their behalf at the time of their death. A donor can give an organization a flat amount of money or item of property to an organization. The donors can restrict where the bequest is used in a particular program or activity, or allow it to be used at the discretion of the organization (unrestricted).
  2. Charitable Lead Trust: This type of planned gift is income paid to a nonprofit organization for a term of years or for the lifetime of the donor. When the trust terminates, the remaining balance is returned to the donor or the donor’s heirs.
  3. Life Insurance: A donor can select a nonprofit organization to be paid the death benefit on their life insurance policy to be paid to an organization as a charitable gift.
  4. Retirement Plans: Donors can name organizations as a successor beneficiary of all or a portion of their retirement plans.

While members of a nonprofit organization aren’t certified to set these plans up or give financial advice, it will help to plant a seed that donors most likely have not considered. Setting up a planned gift will benefit the nonprofit, but will also benefit the donor to leave their legacy on what is truly important to them.