Legacy Gift: A Comprehensive Guide to Creating a Legacy Gifts for Lasting Impact

A legacy gift, sometimes called planned giving, is a donation arranged during your lifetime but fulfilled after your passing. These gifts to nonprofits are a way for you to support your favorite charities after your passing and are often substantial in the amount of funding. These gifts are normally arranged through wills or estate planning and can be used strategically to help with lowering estate taxes.

For the nonprofit they’re an important part of fundraising and can often offer funding needed to help plan for long term projects and expand their reach. These types of donations can take on many forms from cash left through a will, to royalties from copyrighted materials like books or other digital assets.

The biggest problem for both donors and charities is that legacy gifts are often overlooked as a way to make a donation as many people are unaware of what they are or how they work. So we will explain the 15 most common types of legacy gifts and ways to educate both yourself and your donors so that everyone can become aware of their power and usefulness when it comes to charitable giving.

Types of Legacy Gifts

Legacy gifts often mean more to people than just making a simple donation. They are a way to feel useful even after the person is long gone and can give both the donor and their families emotional benefits that far outweigh the donated gift’s monetary value. Legacy gift planning allows you to ensure your values live on while supporting organizations that align with your values.

Below is our comprehensive list of types of legacy gifts (also known as planned gifts) that can be given to a nonprofit organization along with descriptions and an example for each one to better clarify.

1. Bequests in a Will

Description: Your donor includes your nonprofit in their will or trust by either specifying an amount of money (cash), a percentage of their entire estate, or particular assets like art or stocks to be donated after their passing.
Example: A donor leaves 10% of their total estate to an animal rescue organization in their will.

2. Charitable Gift Annuities

Description: Annuities are a way for a donor to give a lump sum to a nonprofit while they are alive and then receive fixed payments for life. Upon their death the remaining funds are passed on to the nonprofit which is why these types of gifts are also called split gifts.
Example: A retired individual donates $50,000 to a charitable foundation and receives annual payments based on their age and the agreement terms of the annuity while still alive.

3. Charitable Remainder Trusts (CRTs)

Description: A CRT provides the donor with a steady income stream for a specific time period or for life. Assets are placed in the trust giving the donor a number of tax advantages. Assets placed in a CRT are excluded from the donor's taxable estate and certain assets like stocks are not subject to capital gains taxes. When the donor passes, all remaining assets are left to the nonprofit.
Example: A donor transfers stock valued at $100,000 to a CRT and receives a predetermined amount of income for 15 years and the remaining funds are given to a local food bank.

4. Charitable Lead Trusts (CLTs)

Description: This is the opposite of a CRT in that this trust provides income to your nonprofit for a set period time, but after the set period any remaining assets return to the donor or their heirs, often with tax benefits.
Example: A donor establishes a CLT that pays $10,000 annually to a human trafficking charity for 20 years. After the time period is up, any remaining funds go to the donor’s grandchildren.

5. Life Insurance Policies

Description: A donor names a nonprofit as the beneficiary or transfers ownership of a life insurance policy to their favorite charity. This is often an easy and straightforward way to leave a legacy gift.
Example: A donor names a mental health charity as the sole beneficiary of a $500,000 life insurance policy.

6. Retirement Plan Assets (IRA/401(k))

Description: Donors are allowed to designates a nonprofit as the beneficiary (or one of many beneficiaries) of their retirement plan assets which can often help reduce taxes for their estate and heirs.
Example: A donor names a nonprofit as the recipient of 50% of their IRA thus also avoiding the income tax that would otherwise apply to their heirs.

7. Real Estate Gifts

Description: A donor gifts real property or real estate to your nonprofit upon their passing which can then be sold or used to support its mission. This is often a great way to secure office space or land for conservation projects.
Example: A donor gives their vacation home to a conservation nonprofit which then in turn sells it to fund programs and initiatives or keeps it for office space or for conservation means.

8. Stocks and Securities

Description: Donating securities often gives the donor an immediate tax deduction while also avoiding taxes on capital gains. They can also be gifted through a trust with the same advantages as we spoke about above
Example: A donor gifts $20,000 worth of Xylem (NYSE:XYL) stock to a nonprofit rather than selling it and incurring capital gains taxes. The deduction counts for the total value of the stock at the time of transfer.

9. Donor-Advised Funds (DAFs)

Description: A donor sets up a fund at a financial institution or community foundation and offers grants to your nonprofit over time while they are alive and final gifts after their passing.
Example: A donor establishes a DAF with $100,000 and recommends annual grants of $10,000 to your nonprofit. If they pass before the time period, the balance goes to your nonprofit when they pass.

10. Tangible Personal Property

Description: A donor gifts valuable items like artwork, jewelry, antique cars or signed collectibles to a nonprofit for their use or to be sold upon their passing.
Example: A donor gives a collection of rare books to a library nonprofit which either auctions them to raise funds or houses them as a collection at the library.

11. Pooled Income Funds

Description: A group of donor’s contribute to an income generating fund that provides each donor lifetime income. When all donors have passed your nonprofit receives the remaining balance.
Example: A donor contributes $25,000 to a pooled income fund benefiting an addiction charity and receives annual dividends decided upon in the agreement.

12. Endowments

Description: A donor contributes to an endowment fund that invests the principal with only the earnings going to the charity to be used for its programs.
Example: A donor gives $1 million to a nonprofit to establish an endowment for scholarships and any money earned (through investing, interest, etc…) ensures perpetual funding for the charity.

13. Retained Life Estate

Description: A donor transfers ownership of real estate to a nonprofit but retains the right to live there for life. The charity is not responsible for maintenance or any cash outlays while the donor is living.
Example: A donor deeds their home to a nonprofit but continues living there until they pass away.

14. Savings Bonds

Description: A donor names your nonprofit as the beneficiary of their savings bonds which allows them to avoid taxes on the interest income earned from the bonds.
Example: A donor designates a nonprofit as the beneficiary of $10,000 in Series EE savings bonds.

15. Mineral, Oil, and Gas Interests

Description: A donor gifts rights to income generating natural resources which can potentially fund the charity forever.
Example: A donor donates oil rights from their property to an environmental nonprofit.

Each of these legacy gifts offer unique advantages for donors and nonprofits alike and the ability to create a gift that works for both. These types of donations address both the tax benefits and the donor’s financial goals either while living or after passing.

Steps to Creating a Legacy Gift

Planning a legacy gift doesn’t have to be complicated, but it does require some careful planning. Here’s a step-by-step guide to help you get started:

1. Identify Causes and Organizations to Support

Start by thinking about the objectives of your gift, the issues and causes you’re passionate about. Is it animal welfare, education, or helping underserved communities? Research nonprofits that align with your own unique values. Look into their mission, financial health, and long term goals to make sure your contribution will be used in the best way possible.

Example: If you’re passionate about education, consider supporting a scholarship fund or an organization that provides resources for underserved schools or children with disabilities.

2. Consult with Financial and Legal Advisors

Always speak to a financial advisor or estate planning attorney before making any concrete decisions. They can guide you on the best strategies to structure your gift while minimizing tax implications for you and your heirs. They’ll also make sure that your plans are legally binding and will be used per your specifications while also aligning with both your long and short term your financial goals.

Tip: Ask about options like charitable trusts, bequests, or donating appreciated assets to find the best fit for your current and future situation.

3. Choose the Type of Legacy Gift

Decide how you want to give. We’ve included 15 of the most common types of gifts above. But the three major gifts include:

• Bequests: Leave a specific amount or percentage of your estate in your will.
• Charitable Trusts: Provide income to beneficiaries for a set period before transferring the remainder to a nonprofit.
• Retirement Accounts or Life Insurance Policies: Name a nonprofit as a beneficiary to simplify the process.

Example: Naming a charity as the beneficiary of your 401(k) could help you avoid taxes on unused retirement funds.

4. Document and Communicate Your Decision

Document your legacy gift either through your will, trust, or other estate planning documents and make sure all documents are legally binding. Share your plans with your chosen nonprofit so they can honor your wishes and talk to you about any special requests or demands you may have. You should also inform your family or potential beneficiaries of your other assets so thy understand your intentions and aren’t caught off guard.

Tip: Many nonprofits offer recognition programs to to celebrate legacy donors such as plaques on their donor wall or offering VIP event invitations which can all further your connection to your chosen cause.

By following these simple steps you can create a legacy that works for you both financially and philanthropically. Which ever type of gift you decide on, just know it will have a meaningful impact for generations to come.

Educating Your Donors About Legacy Gifts

Educating your donors about legacy gifts isn’t all that difficult, it just requires clear communication, relatable messaging, and multiple engagement channels so they can become better informed. Here are some solid ideas to help you increase awareness.

1. Create Simple Informative Content

Build a dedicated webpage on your nonprofit’s website explaining what legacy gifts are in simple language. Go on to list the types available and how they make a lasting positive impact. Include FAQs that can help answer simple questions, any donor testimonials you may have and an easy way to contact you for more information. Or go further and offer a free downloadable PDF legacy gift planning guide that outlines benefits, options, and steps to get started and share it on your website, email and social media channels. Make it easy to download in exchange for their email address so you can send follow up emails to deepen your relationship.

2. Host Legacy Gift Information Sessions

Organize webinars or in-person workshops featuring financial advisors or estate planners who can explain the process in plain language. If at all possible, give examples of how legacy gifts have supported your nonprofit during your sessions and the impact they’ve created for your mission.

Use success stories to highlight the importance of legacy gifts for your cause. These stories can help people see how they can offer the same or more advantageous support and leave a legacy of their own.

3. Include Legacy Giving in Your Communications

Send a series of emails explaining what legacy gifts are and how they can benefit both your nonprofit and the donors themselves. You can also have a link to your web page on legacy gifts at the end of all your email communications. Additionally you can add a section in your regular newsletters with a brief legacy gift story or an FAQ section that highlights the benefits of them. Or use social media posts with engaging visuals, videos or donor quotes to spark people’s interest in legacy giving and include links to all of your information and contact page.

4. Personalized Outreach

Look for long term supporters and schedule one-on-one conversations with them with the intention of educating them on these types of gifts. Explain how easy these gifts are to set up and how they will make a difference long after someone has departed. You can also send personalized letters or cards to thank donors for their current support and introduce legacy giving as a meaningful next step in helping you reach your mission’s goals.

5. Partner with Advisors

Collaborate with local estate planners, financial advisors, and attorneys in order to bring awareness to your cause and help you find donors interested in offering legacy funding. Give them all of the information they’d need to inform their clients on your nonprofit’s mission so they can discuss the possibilities of funding your cause.

7. Make It Easy

Since many people aren’t aware of what a legacy gift even is, it may seem like a lot to learn and a hassle to use this type of donation. So you need to provide clear, simple steps on how to include your nonprofit in a will or trust. Consider creating fillable forms or templates to make the process easier.

Or better yet offer direct contact information for a knowledgeable staff member who can answer questions or an advisor who is willing to donate their time to your cause.

By consistently incorporating legacy giving into your outreach you are subtlety educating them on an entirely new way of supporting your cause. And as people become more familiar with their options, some may find that offering your charity a legacy gift is the perfect fit for their current economic and philanthropic circumstances.

Wrapping Up

Legacy gifts are a fantastic way to offer your continued support for your favorite charities long after you are gone. By carefully planning and selecting the type of legacy gift that aligns with your goals, you can make a significant impact on the causes that matter most to you. Whether it's supporting education, conservation, or social justice, your gift can create ripples of positive change for generations to come.

For nonprofits these gifts are a vital source of long term funding that can help you expand your reach, tackle ambitious projects, and achieve sustainable growth for years to come. Through educating your donors about the power of legacy gifts and offering them clear guidance on how to set them up, you’re able to create deeper connections with your supporters while offering them a myriad of ways to leave a lasting positive impact.

10 FAQs with Short Answers

Why should I consider a legacy gift?

Legacy gifts allow you to support your favorite causes, reduce estate taxes, and leave a lasting impact on the world even after you are gone.

What types of legacy gifts can I give?

Some of the more common options include bequests, charitable trusts, life insurance policies, retirement plan assets, real estate, and stocks.

Can I still receive income from my gift during my lifetime?

Yes, options like charitable gift annuities or charitable remainder trusts allow you to receive income while donating at the same time.

What are the tax benefits of legacy gifts?

Legacy gifts can reduce estate taxes, avoid capital gains taxes, and offer income tax deductions in some cases.

Can I change my mind about a legacy gift?

Yes, most legacy gift arrangements, like those in a will or trust, can be revised at any time before your passing.