Recently Lawrence Pierce-Durance did a YouTube video called Planned Giving Part I by Lawrence Pierce-Durance on setting up a planned giving program for small and medium size nonprofits and discussed the most common planned giving instrument…wills and bequests.
That video also reviewed what role the Board of the nonprofit has in establishing a planned giving program.
Today Lawrence will give a brief overview in layman’s terms of some of the other most popular planned giving instruments.
But first an important disclaimer – this video should not be viewed as legal advice.
Organizations will need to contact a local attorney in their state if planning to consider moving forward with any of these planned giving instruments.
Lawrence Pierce-Durance has found that in dealing with many nonprofits about planned giving that too often the nonprofits spend a tremendous amount of time in “selling” the tax advantages of some of these instruments and getting wrapped up in the legalese and details too early in the process.
True there are often some tax advantages for the donor but Lawrence urges nonprofits to not focus on these especially in the early stages of discussions with a potential donor.
The reason being that any and all nonprofits are able to sell the same tax benefits. This does not make your organization unique and a reason to make a planned gift to it.
Instead, Lawrence strongly advocates focusing on your case for support and what makes your organization special and worthy of support, including planned gifts.
So prior to considering a planned gift program, organizations should review their case for support and if weak or nonexistent go through steps to have a vibrant compelling case.
For suggestions on developing your case, organizations might take a look at an earlier video Lawrence did on YouTube “Lawrence Pierce-Durance Fundraising Part II
Another thing before describing key planned giving instruments. Donors and nonprofits needs to remember that charitable intent is a central element in planned giving.
Without charitable intent, planned giving programs simply will not work. Sometimes prospective donors get quite wrapped up in making a “deal” that works very well for them.
Lawrence Pierce-Durance recalled working with a prospect trying so hard to squeeze more and more tax advantages.
Finally, Lawrence said that if the prospect wanted to save the most money (which quickly got the prospect’s attention), not to give any away.
The prospect did not like hearing this initially, but in time got back to focusing on the nonprofit and making a “tax efficient” gift with charitable intent. The point being there is no substitute for charitable intent.
Lastly, before getting into the planned giving instruments, Lawrence Pierce-Durance urges all concerned to remember cash and appreciated securities are king.
For most nonprofits, money is needed annually for operations and the planned giving program should be seen as longer term support. So be careful to not let annual support be sidelined.
Planned Giving Instruments..
- After wills and bequests, one of the most popular and used instruments is charitable gift annuities. Simply put this is a contract between the donor and the nonprofit.
Donor agrees to give money (often these annuities have a minimum of $5000 to $10,000) and in exchange the nonprofit agrees to pay the donor for life a fixed interest rate on the money in the annuity.And the rates are much better than any bank pays and the older the donor the higher the rate. When the donor passes away, the remaining funds from the annuity go to the nonprofit.
Lawrence Pierce-Durance indicated that donors of charitable gift annuities are often 50+ years old.
And noted that as donors see the benefit they get and the ties to the nonprofit grows, some donors will set up additional annuities as the interest rates gets better and better the older the donor is.
- Life insurance (notably paid up policies) is a useful option for some donors. They can transfer ownership of the policy to the nonprofit and the nonprofit receives the proceeds when the donor passes away.
Lawrence said this instrument is easy to understand for all concerned and that anyone with a policy can make this kind of gift. But a word of caution – Lawrence Pierce-Durance discourages marketing life insurance gifts to younger donors.Why – because some young donors will think they have done so much with the policy gift and not be interested in continue annual support.
On the other hand, older donors who are in the habit of annual giving and want to do something more, might see a life insurance gift as a possibility.
- Charitable Remainder Trusts are a useful instrument for some larger donors. Basically, Lawrence indicated a donor sets up a trust and puts in money or other assets (often these trusts are set up at a minimum of $100,000).
During the life of the donor, he/she receives and agreed interest rate on the funds for the donor’s use. Upon death, the trust funds go to the nonprofit.
Lawrence Pierce-Durance indicated candidates for this kind of gift are well off; often middle age or older; love the nonprofit; and want to do something significant for the nonprofit in the long term.
- Charitable Lead Trusts are fundamentally the flip-flop of remainder trusts. Lawrence said with this instrument a donor sets up a trust with a large amount of money (often seven or eight figures) for a fix period of years with a negotiated fixed interest rate and passes the income onto the nonprofit during the life of the trust and at the end of the trust the assets revert back to the donor (or often the donor’s children or grandchildren).
Lawrence Pierce-Durance indicated candidates for this type of trust are wealthy (in many cases first generation wealth ie, think of some leaders and employees in the tech industry); do not need income from the trust now; but are concerned that in the long term their family be taken care of.
In summary, planned gifts come in many shapes and sizes. This has been a brief, simple overview but hopefully enough to get nonprofits to start thinking about the pluses in setting up a planned giving program.
Lawrence believes the first step in setting up a planned giving program is to establish a wills and bequests program with appropriate involvement and commitment from the nonprofit’s Board. And then in time walk – not run – into adding some of these other planned giving instruments.
If anyone has questions or issues about planned giving as described in these two YouTube videos, Lawrence Pierce-Durance said you are welcome to contact him, and there would be no charge, through his website – pdsolutionsfundraise.com.
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source http://lawrencedurance.com/planned-giving-fundraising-part-ll-by-lawrence-pierce-durance/
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