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What is Planned Giving and Why Should I Have a Planned Giving Program?

A planned gift is any major gift, made in lifetime or at death as part of a donor’s overall financial and/or estate planning utilized as a method of supporting non-profits, and charities, enables philanthropic individuals, or donors, to make larger gifts than they could make from their income.

Whether a donor uses cash, appreciated securities/stock, real estate, artwork, partnership interests, personal property, life insurance, a retirement plan, etc., the benefits of funding a planned gift can make this type of charitable giving very attractive to both donor and charity.

There are numerous benefits for making planned gifts (from PlannedGiving.com):

  • Donors can contribute appreciated property, like securities or real estate, receive a charitable deduction for the full market value of the asset, and pay no capital gains tax on the transfer.
  • Donors who establish a life-income gift receive a tax deduction for the full, fair market value of the assets contributed, minus the present value of the income interest retained; if they fund their gift with appreciated property they pay no upfront capital gains tax on the transfer.
  • Gifts payable to charity upon the donor’s death, like a bequest or a beneficiary designation in a life insurance policy or retirement account, do not generate a lifetime income tax deduction for the donor, but they are exempt from estate tax.

Example: A Donor has a child with disabilities. Her child has received support services from Agency A to provide residential and life-enriching supports for her child. As with most not for profits, Agency A could serve more families, but has limited revenue which restricts its ability to expand its services. The Donor, in consultation with her Estate Planning Attorney and her local Community Foundation, creates a Testamentary Donor Advised Fund, with said Community Foundation, to benefit Agency A. Upon the death of the donor, 1/3 of her estate, exempt from any estate tax, is designated to fund her Testamentary Donor Advised Fund. Per the parameters of the Fund Agreement, Agency A will receive 4% of the principle balance, of the Donor Advised Fund. Per the Fund Agreement, Agency A will utilize those funds to provide services to as many new families as the funds will allow.

In this example, the Donor is able to ‘Leave a Legacy’ of support to an organization that her child had a long-time relationship with and would like to see others have that same opportunity. In addition, 1/3 of any estate tax burden, to her estate, is relieved by this bequest.