A planned-giving program can be a crucial fundraising tool and an avenue for accessing additional philanthropic dollars.
According to the highlights from the Giving USA 2014 report, approximately 8 percent of all charitable contributions in the United States in 2013 were made by bequests, and giving by bequest was estimated to have increased by 7.2 percent after inflation that year.
So, if your organization is thinking about creating a planned-giving program, where do you start?
In this article, we’ll briefly address some of the basic steps you should take and questions you should ask from a legal perspective.
Examine Your Organization
First, consider whether the organization is in an appropriate position to successfully launch a sustainable planned-giving program. Does it have sufficient resources to dedicate to the program, including knowledgeable development and financial personnel, monetary resources, and time? Does it have an established track record of accomplishing its mission and attracting increasing donor support and a clear strategic plan for ongoing success and sustainability that will attract legacy donors?
You should also look to the board of directors to determine if they understand what a planned-giving program is and fully support creating a program at the organization. Is the board willing to commit the necessary resources and effort for establishing a thriving program and to be actively involved in the program’s development?
While some form of a planned-giving program, even if it is just to suggest to donors that they include the organization in their will, may be appropriate for any charity, regardless of age or size, being sufficiently prepared and equipped is essential to launching a successful planned-giving effort.
Pick Your Planned-Giving Vehicles
If the organization has the resources and support that it needs to launch a planned-giving program, it should next determine what planned-giving vehicles it will offer to donors.
Will the organization offer or accept bequests, gifts of life insurance, retirement-plan benefits and IRAs, pooled income funds, charitable remainder trusts, charitable lead trusts, or charitable gift annuities?
Although most planned-giving contributions are made upon the donor’s death, an organization will ideally be able to offer donors other giving options that provide tax benefits during the donor’s lifetime.
Appropriate individuals at the organization should be in a position to understand the donor’s needs so that they can direct the donor to the giving instrument that is most appropriate. They should also have at least a basic understanding of why certain gift vehicles might be more advantageous to donors than others from a tax perspective.
However, representatives of the organization should be careful to avoid giving legal or tax advice to donors, and donors should be advised to obtain their own counsel as part of the planned-giving process.
Establish Policies
The organization should then establish a gift-acceptance policy or revisit its current policy in light of the planned-giving program.
It should clearly determine and set forth in the policy who within the organization is authorized to negotiate the terms of a planned-giving instrument and whether any additional approval, such as from the board, is necessary before an instrument may be signed. The policy should also make clear the types of contributions that may be accepted by the organization, recognizing that certain forms of property, such as real property and closely held stocks, carry additional risks and responsibilities for the organization.
In some cases, it may be appropriate to require approval from the chief executive officer or board before an organization may accept certain types of gifts.
Depending on the instruments the organization plans to offer or accept, the policy should also set forth other relevant guidelines. For instance:
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If it plans to offer charitable remainder and charitable lead trusts, will the organization serve as trustee of the trusts, or will it be the donor’s responsibility to secure a trustee?
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Will the organization have a minimum gift amount it is willing to accept for each type of gift instrument?
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If the organization plans to offer charitable gift annuities, which may subject it to additional state regulations and require a separate license or registration, will it act as administrator of the annuities?
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Will it have a minimum age requirement for donors before agreeing to enter into a charitable gift annuity agreement?
These are all questions that should be answered before launching the planned-giving program and should be set forth in a gift-acceptance policy.
Think of the Legal and Investment Implications
Finally, the organization should also consider the investment implications of accepting certain types of planned gifts.
For instance, if the organization will be soliciting for endowments, it will be subject to endowment laws, including potentially the Uniform Prudent Management of Institutional Funds Act, and should ensure that it is aware of such laws and the requirements for compliance. If it does accept endowments, will it house them internally, or externally in a subsidiary or at a community foundation in order to better protect the organization’s other assets or the endowment assets?
The organization may also want to think about whether the acceptance of restricted gifts, such as endowments, will affect its general fundraising efforts with respect to unrestricted gifts.
These are just a few of the many considerations for organizations contemplating a planned-giving program. Although all charities may benefit from some form of a planned-giving program, the appropriate scope and nature of the program will likely depend on many factors, including the organization’s size, budget, age, staff, and financial stability.
It may be advisable for many organizations to work with an experienced planned-giving professional in establishing a planned-giving program.