This article will explore the basics of planned giving,

Nonprofit Basics: Planned Giving

Planned giving is an important part of a robust nonprofit fundraising strategy. These large gifts tap into an unpredictable source of donations, since they can come from infrequent donors and exceed donation amount expectations.

It can be challenging for small and growing nonprofits to get started, but it brings significant benefits to donors and organizations alike. So how can you campaign for planned gifts? First, you’ll need to understand planned giving and how it works. We’ll look at the basics below:

What is planned giving?

Planned giving is a form of philanthropic giving in which donors arrange for a donation to be made to a nonprofit as part of their financial or estate plan. Planned gifts are often deferred, meaning they will be given when the donor passes away.

What are the primary types of planned gifts?

There are numerous options when it comes to planned giving. Each type of planned gift has different requirements and some may be preferable to others, depending on a donor’s wishes and financial situation. The most common planned gifts include:

  • Bequests: A donor leaves a portion of their estate to a nonprofit in their will.
  • Retirement plans and life insurance: A donor chooses to name a nonprofit as the beneficiary of a life insurance policy or donates unused retirement assets.
  • Charitable gift annuities: A donor gives a large donation in exchange for a fixed income payment. The nonprofit can invest these funds and keep any remaining funds when the annuity’s terms are up or the donor passes away.
  • Charitable remainder trusts: A donor gives a gift of cash or securities in exchange for an income payment of a percentage of the principal amount, which can be revalued and increased annually depending on the type of trust created.
  • Charitable lead trusts: A donor makes payments to the nonprofit for a certain number of years or their lifetime. At the end of that term, the payments are returned to the donor or their beneficiaries.

Bequests are by far the most popular and common type of planned gift, but there are numerous other options. To learn more, Freewill offers an in-depth explanation of the primary types of planned gifts.

What are the benefits of planned giving?

Planned giving can help both the donor and the nonprofit in significant ways. Let’s take a closer look.

Benefits for donors

Donors are attracted to your organization because of their affinity for your mission. When donors make planned gifts, they’re securing their involvement in your cause during their lifetime and, possibly, for years and years after. Planned gifts allow them to leave behind a legacy of involvement and impact on your organization’s work.

This type of giving also lets the donor decide exactly how their funds will drive impact by specifying the particular programs or projects to be funded. Wills can also be easily updated, so the donor has total flexibility if they change their mind on how they’d like the money to be used.

Donors also receive tax benefits from planned giving, which can be a major motivator for some. The various types of planned gifts can significantly reduce a donor’s estate taxes Although the tax benefits of planned gifts should be confirmed on a case-by-case basis, these benefits may incentivize planned giving and at higher levels than expected.

Benefits for nonprofits

Because planned gifts are typically much larger than regular donations, nonprofits can use planned gifts as a projectable and unrestricted source of funding. For example, these gifts might contribute to your organization’s overhead costs throughout the year while other fundraisers fund your mission-centric work. Nonprofits may also see an increase in annual giving by donors who left a charitable bequest in their will, which could further support your operational funding.

Planned gifts are unexpected donation opportunities, since this money is generally a lump sum left behind. For example, you might have a lifelong saver among your donors. While you’re focusing your fundraising efforts on your top supporters, a less frequent donor could be preparing for their life savings to be left to your cause.

Since planned gifts don’t interrupt someone’s day to day cash flow, the most unexpected donors might give the largest gifts. Someone’s budget might not allow them to donate large gifts regularly through their lifetime, but by naming a nonprofit in a bequest or as the beneficiary of their life insurance policy, they could leave behind a large sum of money to your cause. Committing to a significant gift without feeling the financial effects of the donation can also be a great motivator for the donor.

How do you get started with planned giving?

Just as planned gifts require the donor’s planning, your organization should spend time creating a strategy for its planned giving program before getting started. Follow these steps to successfully execute your program:

These are the steps to getting started with planned giving.

  1. Educate and organize your teams. Decide your goals and the structure of your team. Everyone should know their roles and the objectives of the program.
  2. Gather the right tools. You’ll need tools to market your program, track donation data, and help donors set up their planned gifts. Utilize resources that make it easy for donors to write their wills online.
  3. Identify potential donors. Reach out to long-time and annual donors. Include the people most dedicated to your cause, including board members, volunteers, and longtime donors.
  4. Create a legacy giving society. This can cultivate a feeling of community and inclusion in your organization, especially with perks like public acknowledgment or access to special events.
  5. Outline a marketing strategy. Use marketing tools to explain what planned giving is and why it’s beneficial to your nonprofit and the donor. Make it easy for donors to access, such as by adding it as a donation option on your website.
  6. Steward and learn more about planned donors over time. Never stop pursuing your donors, even if they’ve already committed to a planned gift. Make them feel connected to your organization and appreciated for their contributions.

Think about planned giving as an investment in your future. Once you establish your planned giving program, it can provide funding for the long-run.

Other Resources to Explore

Nonprofit Basics – Learn more nonprofit management essentials by exploring other expert resources.

Fundraising Strategy – Explore tips for planning other types of campaigns and measuring their success.

Planned Giving Marketing – Here are 7 strategies to get your donor base on board with planned giving.