Written by Alex Comfort, CFRP
Last month, I discussed creating a passive planning giving program. It's simple and straightforward. You simply have to include the line “Have you considered leaving a gift in your will or estate plan to (charity name)?" on your printed materials.
Here’s how to take it a step further.
Six Types of Planned Gifts
There are six types of planned gifts. Each must be promoted differently. It would be in your best interests to find a premade brochure that discusses each of these in detail and include it in your donor mailings. If you're feeling really industrious, you can create your own, but this is a good resource.
1. Wills and living trusts
Everyone needs a will, but between 60 and 70% of Americans do not have one. Not having a will causes immense headaches for your heirs. Charities should constantly remind their donors to make a will and to leave something to their charity. Send out a yearly letter in May (that’s when most wills are done – kudos to those who know why) and offer your nifty brochure for free. And the donor can always change their will.
2. Beneficiary mentions in IRAs and other retirement funds
Charities are great for the secondary or contingent beneficiary slot. The spouse should usually be primary, but leaving it to your kids may require them to pay an additional amount of tax. Find a brochure for this one, too.
3. Life insurance
For $50 to $100 a month, you can leave your charity a very nice piece of insurance. Your insurance person may love these, but wouldn’t you, as the charity, prefer to have that money now? That’s why life insurance has never been a favorite tactic for planned giving. But some people like it, so it's worth mentioning.
4. Your house or land
Many people leave their houses or properties to their church or favorite charity. The house can be left in a “Retained Life Estate.” That means you can continue to live in it as usual, maintain it, but the charity gets it. And you, as the donor, get a sizeable deduction. An attorney can explain the details, but everyone intending to leave a house or property should consider this. There’s a brochure for this, too.
5. Life income gifts
Aha, this is the mail your college sends you. In brief, your donor can give a charity a direct gift of (usually) $10,000 or more. In return, the donor gets three things back:
- Income for life, usually it will be about 6% depending on your age. (My mother got 8.4% when she set one up at age 85!)
- The capital gains tax will be eliminated.
- The donor gets a nice tax deduction.
Now these can get complicated, but the Charitable Gift Annuity, or CGA, (the most used type) is a single contract with your charity. Normally this kind is used if the donor has between $10,000 and $300,000 to invest. The Charitable Remainder Trust, or CRT, is much more flexible, but it is also much more complicated – it will require an estate planning expert attorney. (But your job is only to explain the basics and send them to the attorney.)
6. Charitable lead trusts
This final type of planned gift is seldom used and basically only favor very wealthy donors who have major assets like a parking garage or a working farm that bring in income they don’t really need. The charity can get a gift for 10 years or so and the IRS freezes the asset level at the time of the gift. Therefore, if the asset is rapidly appreciating, this can be a good thing. I wouldn’t bother trying to explain this one.
Educate Supporters About Planned Giving
To be most effective, offer your supporters brochures on wills, the benefits of naming a charity as a secondary beneficiary in a retirement plan, charitable gift annuities, and occasionally on charitable lead trusts. You can create a very successful active planned giving program by sending out a quarterly letter to your donors who are older than 50 and using a passive phrase like “Have you considered leaving a gift in your will or estate plan to (charity name)?" on all materials.
Next time I will discuss the use of a “Legacy Society” to draw all this together.