Planned gifts, also known as deferred gifts, are set up by an individual in the present to mature at a later date. Gifts of life insurance policies or retirement assets, charitable gift annuities and charitable remainder trusts are all forms of planned gifts.
The most popular form of planned gift is simple enough – a bequest that an individual designates to one or more charitable organizations as part of his or her will or estate plan.
You may have heard some of these interesting statistics: approximately 70% of Americans do not have a will or estate plan. Of the people who do have a will or estate plan, only 5% leave a gift to charity. For many donors, a bequest gift is the largest charitable donation they are ever going to make, a legacy gift made not during a lifetime but at the end of a lifetime. Statistics show that the average bequest gift nationwide is $70,000.
A bequest gift is fairly straight forward and easy to organize as part of the estate planning process. When an individual is thinking through how to transfer assets and making provisions to care for family members and other loved ones, he or she might consider donating a fixed dollar amount or a portion of the estate to a charitable institution. Questions to help guide this process include: are there charities I care about that I have supported during my life time? Might I want to make a gift from my estate? What tools and techniques are available to me to make a planned gift? The donor should have his or her estate planning attorney include the official legal name and tax identification number of the nonprofit organization right in the will.
Many people do not consider charitable bequests because they want to leave their life savings to children and other family members. But many people would be happy to leave a gift to their church or alma mater or the community they called home as a lasting legacy, in their memory and honor. When a couple has no heirs, or when a family’s estate is sufficiently large, planned giving to charity is an attractive alternative to seeing assets go to the government in the form of estate taxes.
80 percent of all planned gifts organized by donors are simple bequests. The second most frequent planned gift is a charitable gift annuity. A donor gifts assets to a charity and receives a guaranteed annual payment of a certain percentage of the assets or fixed amount for the duration of his or her lifetime. The remainder of the assets are available to the charity when the donor passes away. IRA accounts and other retirement assets are a great gift to leave to charity for people with larger estates, as the tax “hit” to these assets at the time of transfer to the donors’ children is significant, perhaps as high as 50 or 60%.
There are many many tools and techniques for planned giving, and they are complex. From a donor’s perspective, planned gifts need to be carefully considered within the context of a comprehensive financial plan or estate plan. To start the process or explore the options available, please schedule a meeting with your financial advisor and family attorney. And if you have charitable intention, please consider a planned gift to one or more favorite charity.
Anne Wenzel is the executive director of the Western Colorado
Community Foundation, a regional organization managing charitable endowments to benefit our community.