Planned Gifts Complete Guide: A Comprehensive Guide for How to Create and Market Planned Giving Programs for Your Nonprofit

Your donors want to make a difference through your nonprofit. 

This is particularly true of long-term donors who contribute year after year to your fundraisers. These supporters truly believe in your mission and feel it's important to keep your programs and projects active for the community.

Some donors feel so strongly about this that they include your organization in their estate plan -- providing a planned gift, or charitable contribution so they can help keep your nonprofit running long after they're gone.

Planned gifts can be some of the largest donations your nonprofit receives. According to online estate planning provider Free Will, the average gift size for their will makers is $30,000 for younger donors and over $55,000 for older contributors. In 2023, planned gifts known as "bequests" totaled $1.8 billion on Free Will's platform. And over the next generation, an estimated $68 trillion is expected to be transferred, largely by the aging Baby Boomer population.  

These figures show the importance of creating a planned giving program (also known as a legacy giving program) for your charity or nonprofit. Planned giving programs help your organization find and solicit donations from potential planned giving donors. They also provide guidance on how to navigate the legal and financial issues involved in managing planned gifts.

This article offers a comprehensive guide to planned gifts. You'll learn what different types of planned gifts are, how both nonprofits and donors can benefit from them, the legal requirements of leaving and accepting a gift, and how to promote your planned gifts program using digital marketing tools like those found on the PayBee platform. Please use this complete guide to planned gifts to help start your own legacy giving program.       

Introduction to Planned Giving

Planned gifts -- also called legacy gifts or deferred gifts -- are charitable donations a donor commits to a nonprofit organization or charity in their financial or estate plan. Donors can choose to offer cash, property, stocks, digital items, and/or other assets as part of their planned gifts.

Planned giving is often arranged through the creation of a will, allowing charitable donations to be made to a nonprofit organization after the donor passes away. However, other planned gifts, like Qualified Charitable Distributions (QCDs), can be made while a donor is still alive.

Because planned gifts can be given to a nonprofit after the donor's death, this form of "deferred giving" allows donors who normally can't offer large donations a chance to leave a substantial contribution to their favorite nonprofit. Planned gifts like bequests don't cost a donor anything during their lifetime, yet they can leave a charity or nonprofit with significant funds.

And since donors can create bequests from their entire estate (and not just their cash assets) they can afford to be very generous with these type of charitable contributions.

Thus, by making donors aware of this option, nonprofits can gain significantly large donations from all their supporters.

Planned giving also benefits the donors. Donors with large estates can help their heirs avoid income and estate taxes by gifting their retirement accounts and paid-up life insurance policy to a nonprofit. This reduces the overall value of their taxable estate, potentially saving their other beneficiaries money. 

In other cases, the donors can enjoy some tax benefits while they're still alive. For instance, wealthy donors over the age of 70 can choose to give recurring donations from their traditional IRAs instead of making cash donations. These Qualified Charitable Distributions (QCDs) are then deducted from their overall taxable income, lowering their tax liability during their lifetime. This strategy also provides donors with a way to make their Required Minimum Distributions (RMDs) from their IRA and avoid tax penalties. 

By educating donors about the benefits of planned giving, a nonprofit can earn goodwill and donations from their supporters. And since donors usually need to work with lawyers and estate planners to set up their legacy gifts, it's to a nonprofit's advantage to make donors aware of all the legal and tax considerations involved in planned giving so contributors have time to work out the details of their estates. 

The Importance of Planned Giving for Nonprofits

Planned giving improves nonprofit sustainability by allowing NPOs to secure large donations on par with major gifts from corporate partners or philanthropists. And in the case of QCDs, planned gifts can be a welcome source of recurring donations, giving your nonprofit long-term financial stability.

But it's not just about financial security. Receiving a legacy gift from a donor means that supporter regards your organization as a true beneficiary -- even a member of their family. This is a big indication of how well-regarded you are by your community, and how much your contributors believe in your mission. People who see your supporters offering planned gifts view your nonprofit as trustworthy and worthy of supporting. This can increase your overall fundraising success -- and attract more legacy giving.

Thus, planned giving is all about building positive relationships with donors and establishing trust. Older nonprofits with long-term supporters and a history of helping their community are in a better position to inspire this level of loyalty. However, younger organizations can also motivate donors to offer planned gifts -- if they communicate the types of planned gifts donors can make, the benefits of each, and the legal issues involved. Below, we'll offer a planned gifts nonprofit guide that covers these topics.         

A Guide to the Different Types of Planned Giving

Planned gifts can cover a wide range of contributions, including cash, stocks, cryptocurrency, and other valuables. Supporters can also choose to donate at different times, including during their lifetime and after their death. Here are some of the most common forms of planned giving a donor can offer.

Deferred Planned Gifts

Deferred planned gifts are what most people usually think of as legacy gifts. These donations are given to a nonprofit or charity only after the donor reaches the end of their life. However, these gifts can take on many different forms.

Bequests, for instance, are items left in a will to a beneficiary. These can be gifts of cash, property, or other types of valuables. Since these donations are not given until the person bequeathing the item(s) dies, they are a popular way of donating to a nonprofit. Both young and older donors can (and do) offer bequests, although younger donors tend to offer smaller gifts. That said, if your organization maintains positive relations with donors, their lifelong support can pay major dividends.

A donor can also make your nonprofit a beneficiary of their life insurance policy or retirement assets, such as an IRA, 401(k), or pension. While these benefits usually go to family members or friends, by making a nonprofit or charity the main beneficiary, the donor can lower the taxable value of their overall estate. This helps alleviate financial burdens from their family, making insurance policies and retirement accounts a popular form of deferred giving. 

Income Generating Planned Gifts

Not all planned gifts need to be given to a charity after the donor passes. A charitable gift annuity, for instance, allows a donor to give a nonprofit a certain amount of cash or securities to invest and grow while the donor is still alive. The donor then receives a fixed income payment for the rest of their life (or a set term) from the charity. 

Why would a donor want to contribute like this? To protect their income. The donor receives an immediate tax deduction for the initial donation. They can also wait until after they retire to receive their annuity payments, allowing them to collect a higher yearly income and enjoy a nice retirement. 

This also works out nicely for the nonprofit since, after the donor passes away, they can use any leftover funds to run their operations.

Other "life income gifts" include charitable remainder annuity trusts and charitable remainder unitrusts. While the exact details vary, each arrangement pays the donor from the donated assets and then allows a nonprofit to use the remainder after the donor's death. Due to their complexity, these type of planned gifts often require some outside help to set up.  

A nonprofit may also be able to combine multiple donor contributions into a single charitable trust called a pooled income fund. This functions similarly to a mutual fund where the fund is invested and donors receive payments based on their shares in the fund. While this carries some risk, it also provides some good tax deductions and benefits for the donors. And as each donor passes away, the nonprofit receives their shares in the fund.

Charitable Lead Trusts and Retained Life Estates

Charitable lead trusts provide nonprofits with a temporary regular stream of income. Like a charitable remainder trust, a charitable lead trust is funded by a gift made by the donor (who receives a tax benefit for the donation). Both the nonprofit and the donor receive a fixed income stream from the trust for a specific term. Unlike a charitable remainder trust, however, once that term ends or the donor dies, the assets go back to the donor or their beneficiaries. This is a nice way to reduce tax liabilities for a donor, provide the nonprofit a fixed revenue for a certain time, and still allow the donor's family to inherit their wealth. 

With retained life estates, a donor transfers a deed or title to a nonprofit while they're still alive. The donor can then still use the property during their lifetime. Once they pass away, the nonprofit can sell or use the property for their own programs. This is a good way for donors to reduce their estate taxes while retaining use of a property.

Non-Cash Gifts

Most of the planned gifts described above involve the transference of cash assets or, in the case of retained life estates, the deed to a type of property like a house or building. However, nonprofits can accept many other types of non-cash gifts, including appreciated securities like public stocks, cryptocurrency, jewelry, cars, and more.

Accepting such complex assets does come with some caveats, though. First, you'll want to make sure the gift acceptance policy in your nonprofit bylaws allows you to accept certain types of non-cash gifts. Your gift acceptance policy will also cover how these donations should be liquidated, managed, tracked, and reported. The policy also details how donors will be acknowledged for tax-deductible non-cash gifts.

When accepting stock gifts, you can establish a brokerage account to transfer donated funds. Similarly, cryptocurrency can be transferred with processing tools. In the case of more unusual gifts like cars and jewelry, you should have some legal and financial professionals on call to advise you on the best way to accept such donations -- and if it's in your organization's best interests to accept such gifts at all.

Bear in mind that a potential donor's wealth is often held in property, not in cash. Thus, by creating gift acceptance policies that show your organization can accept non-cash gifts, your nonprofit can receive more support and funding from donors interested in planned giving.  

How to Promote Legacy Giving Programs

When marketing your nonprofit's planned giving programs, be sure to focus on your donor's needs and desires. Remember: donors who engage in planned giving want to make a meaningful impact on causes that are personally important to them. By concentrating on this, you can build more effective marketing campaigns.

One good place to start is by creating a planned giving page for your website. This page provides short descriptions of the type of planned gifts your nonprofit accepts (bequests, charitable gift annuities, retained life estates etc.). Keep in mind that some giving options can be pretty complex, so don't take up too much space with legal jargon. Just give an enticing basic definition and refer them to someone who can help work out the details. 

Create incentives for planned giving. Mention the financial benefits and opportunities for legacy building. Some nonprofits even create legacy societies for donors who make planned gifts, which provide additional perks, like invitations to exclusive events.

Finally, include a call to action on your planned giving page that directs visitors to the legal forms and/or resources to establish these contributions. 

You can further educate your donor pool about planned giving by mentioning your program in email newsletters and social media posts. Each article or post should include a link directing readers to your planned giving page. Time these articles and posts to go out at specific times. For instance, August is National Make-A-Will month, while Giving Tuesday (the Tuesday after every Thanksgiving), is known for attracting generous donations.  

Try not to emphasize death in your marketing materials. Instead, highlight how these giving programs allow donors to make a lasting impact on an important cause in their life. Share testimonials of satisfied donors who have participated in your planned giving program, and offer examples of both young and older donors to show that this program isn't just being aimed at people nearing end-of-life, but can be enjoyed by everyone. 

Dealing with Complex Assets and Appreciated Securities: Legal and Financial Considerations

Planned giving attracts donors not only for the legacy-building opportunities but also the immediate tax advantages. Donors can deduct the fair market value of real estate and other appreciated assets from their income tax by donating these assets to nonprofits. They can also enjoy a capital gains tax deferral as well as an estate tax exemption, which can benefit their heirs after their death.

That said, nonprofits need to be prepared for the legal considerations involved in accepting planned gifts. While most nonprofits can handle large cash donations, they may be ill-equipped when it comes to accepting gifts of real estate and handling the property taxes that come with them. This is also true if the gift falls into an unusual category -- such as a large boat or livestock. These gifts might be valuable, but if the nonprofit isn't able to handle licensing issues, dispose of hazardous materials, or feed and care for animals, they could be opening themselves up to all sorts of legal challenges.

Because of this, it's useful to come up with a clear gift acceptance policy that details what your nonprofit can and cannot accept when it comes to planned giving. This policy should be included within your nonprofit bylaws and should be acknowledged in certain legal forms (for instance, IRS Form 990 asks if the nonprofit has a gift acceptance policy and requires NPOs to fill out a Schedule M to report any non-cash contributions). 

You should also have access to lawyers and other legal advisors who can provide advice and help work out any special requirements that come with accepting different planned gifts. Your planned giving committee should also be able to refer potential donors to legal resources that can help them with their own legal considerations (like how to make out their will or estate planning). Make sure to let actual legal experts answer technical questions rather than attempt to handle them on your own. This will help you avoid complications later on.     

Best Practices for Managing Planned Giving

Donor stewardship, or the practice of maintaining positive relationships with your donors, is an essential part of managing a successful planned giving program. You should be as transparent as possible about you planned giving options and gift acceptance policies. Provide donors with access to legal and financial resources that will help them manage their wealth ethically and avoid any problems with estate planning.

Actively solicit donors to see if they're interested in giving planned gifts. Make sure they know the legacy-building and financial benefits of planned giving and share testimonials of other satisfied donors who have participated in your planned giving program. While it's always possible that a dedicated supporter will make your NPO a beneficiary in their will without your knowledge, it's always best to work with donors who want to leave planned gifts. At the very least, you'll be able to thank them within their lifetime!

Keep your donor data up-to-date. This will help you identify potential donors and show you what motivates them to give large donations (tax write-offs, legacy-building etc.). Remember: donors can change their wills or estate plans at any time, so even after they promise to make you a beneficiary in their plan, continue maintaining a positive relationship with them. Invite them to join your legacy society and interact with other donors who've made your nonprofit part of their wealth distribution plan.

One useful way to help donors navigate the legal hurdles of planned giving is to introduce them to donor advised funds (DAFs). These are charitable investment accounts that can accept contributions of cash, stocks, or other assets. Donors receive an immediate tax deduction and the donated funds can be grow tax-free. Donors can then offer grants from this account to any IRS-qualified public charity and include their DAF in their estate plan for planned giving. Making donors aware of this popular form of giving could be a great way of simplifying the legal issues of planned giving. 

Moving Forward with Planned Giving

Planned giving programs provide some of the largest donations for nonprofits and can play a pivotal role in funding nonprofit programs. Yet, many nonprofits still overlook this type of fundraising.

Help your organization and supporters enjoy the benefits of planned giving by implementing a planned giving program in your nonprofit today. Create a planned giving page that educates donors about the benefits of leaving planned gifts -- from immediate tax deductions to long-term legacy building. Highlight the fact that planned gifts can be given during a donor's lifetime and can be offered by donors of any age. Show appreciation for planned gifts by creating a legacy society for donors who have made your nonprofit a beneficiary in their estate plan.

Be aware of the legal considerations that come from planned giving. Make sure to only offer planned giving options and accept planned gifts that your NPO is capable of managing. Networking with legal professionals and securing the services of qualified lawyers can go a long way in making your planned giving program run smoother.

Once you've established your planned giving program, be sure to publicize it. Actively solicit qualified donors from your database and promote your program on social media and e-mail newsletters. Let supporters know about your planned giving options at fundraising events and highlight the benefits of joining this important form of legacy building.

Investing in an online fundraising platform can help organize your marketing efforts and better publicize your planned giving program. PayBee offers user-friendly digital marketing tools that let you reach out through popular social media channels and email messaging. Our backend reporting system also helps identify giving patterns among your donors that could indicate potential donors. Learn more by signing up for a free demo of our platform and seeing how we can help you move forward with planned giving today!

Frequently Asked Questions (FAQs)

Let's cover some additional questions concerning planned giving.

How can nonprofits identify potential donors who may want to offer a planned gift?

Refer to your donor database and identify donors who match the profile of planned gift donors. Many of these supporters tend to be high net-worth individuals nearing or at retirement age (over 60). Prospective donors may also be known for giving large gifts to a nonprofit and/or recurring donations.

That said, prospective donors can fall into any age or income bracket. Young donors who actively volunteer in your organization may be interested in offering a planned gift. While their estates may not be as large as older donors, the fact that planned gifts don't require any investment during their lifetime could motivate them to donate generously.   

How can nonprofits promote planned giving to younger donors?

Reach younger donors through platforms they're receptive to, like Instagram. Share testimonials from similarly aged donors to establish that planned giving isn't just for older supporters. Offer planned giving options that are feasible for a younger donor's finances, such as a bequest, charitable gift annuity, or a donor-advised fund. Above all, show that planned giving is an excellent opportunity for young people to build a lasting legacy supporting a cause they believe in.

How do charitable gift annuities differ from charitable remainder trusts?

Charitable gift annuities (CGAs) do not require trust agreements or trustees to set up like a charitable remainder trust (CRT), and are easier to establish. CGAs can also be started with lower investments of $5000, making them easier for young people to start. Donations placed into a CGA are invested in an account with a charity or nonprofit and provide fixed annual payments to the donor until their death. After this, the charity claims the remainder.

In contrast, CRTs are tax-exempt, irrevocable trusts that pay annuities to the donor and/or their beneficiaries for a set period. After this period ends, the account is donated to a specified charity or DAF.

CRTs are more complicated to set up and tend to be funded with larger donations. Contributions to a CRT can also be made in cash, real estate, cars, or other valuables and cannot be returned to the donor once given. On the other hand, donating these assets reduces your taxable estate.

CRTs also pay an annuity to the donor which can be a fixed amount if the donor opens a Charitable Remainder Annuity Trust (CRAT). However, if donors create a Charitable Remainder Unitrust (CRUT), the annuity is based on a fixed percentage, meaning the payout can vary based on the current value of the trust. Unlike CRATs, which are funded only by the initial donation, donors can continue to fund CRUTs with tax-deductible donations.

The most important thing to remember about CRTs is the 10 percent rule. Under this rule, a donor must donate at least 10 percent of their CRTs assets to a charity at the end of the trust term. Failure to follow this rule could result in the forfeiture of tax benefits and require the donor to pay large amounts of money to the government (and not the nonprofit or charity).