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What Is Planned Giving? A Legacy Giving FAQ

Planned giving is a wonderful way to make a larger, lasting contribution to a cause you care about. Learn about planned giving, and how to get started.

An Estate Plan represents the opportunity to preserve your legacy and use your finances to make an impact on others. A great way to accomplish this is through Planned Giving. This philanthropic practice represents the perfect opportunity to make a lasting impact for the cause of your choice.

If you have ever considered making a major donation to a charitable organization or nonprofit, consider making it a part of your Estate Plan. There are numerous tax and legal benefits to this practice, not to mention the potential reach it could have. Continue reading to learn more about how to get started: 

What Does “Planned Giving” Mean?

Planned Giving is the practice of designating a major gift to a charitable organization in life or as part of an Estate Plan. The gift could include cash, real estate, life insurance, equity, or personal property. Planned Giving is sometimes referred to as Legacy Giving. 

Planned Giving is often done as someone creates an Estate Plan, as there are certain investment or tax strategies that could be done to maximize the gift’s impact. If the gift is part of the Estate Plan it will typically be distributed after the donor has passed away. 

What Are the Benefits of Planned Giving?

There are numerous benefits associated with planned giving but perhaps the most obvious is the support it provides to charitable organizations. Many charities do not rely on planned gifts, as they can be hard to predict or ask for, but they almost always make a significant impact on operations. 

Not only does Planned Giving represent the opportunity to provide long term support to an organization, but it also gives donors a chance to establish a legacy. This philanthropic gesture can be a great way to leave a memory of life. Other benefits of Planned Giving include: 

  • Planned Giving represents the opportunity to leave a major gift that may not have been possible in their lifetime due to financial constraints. 

  • Charitable Gifts are often exempt from Estate Tax, meaning more of the gift would go directly to the organization. 

  • Donors can avoid capital gains taxes when they transfer assets as part of a Planned Gift -- again maximizing the contribution to charity. 

How Does Planned Giving Work?

Planned Giving typically starts during the Estate Planning process, or when a donor realizes they want to make a significant contribution to a charitable organization. Most major gifts are organized with the help of an attorney or Estate Planning lawyer; this is because there are various legal and tax strategies available that can maximize the impact of the gift. 

The process of Planned Giving is commonly done as individuals make an Estate Plan, as this is the perfect time to set aside assets. The gift could be established in your Last Will and Testament or created as part of a Trust. An Estate Planning lawyer will be able to guide you through the best structure based on your goals and finances. 

Why Is Planned Giving Important?

Planned Giving is important because of the financial impact it can have on charitable organizations. As mentioned above, most charities do not count on receiving major gifts at any point in time. However, receiving one could result in years of financial support, the development of new programs, and the opportunity to expand overall reach. 

In comparison, Planned Giving results in significantly larger gifts than membership fees or other donations a charity might receive. Major Gifts also give the organization the opportunity to use funds however they want -- as there are no stipulations attached to these contributions. The long term support Planned Giving can provide is relatively unmatched by other streams of income. 

Types of Planned Giving 

There are a few different ways to make a major gift, each with the potential to significantly impact an organization. Here are the three main types of Planned Gifts to be aware of: 

Intro this section with a brief paragraph and then explain each type of planned gift (3 headers listed below) in 2-3 sentences. Try to give an example for each gift type (can be hypothetical).

1. Outright Gifts

Outright Gifts are one time contributions made directly to the charitable organization. Outright Gifts could include cash, personal property, securities, or stocks. For example, you could donate a piece of real estate to an organization. The charity could either use the property, or sell it and keep the proceeds. 

2. Gifts That Return Income

Gifts that return income refer to anything that continuously provides financial support to an organization. A Charitable Remainder Trust would be considered a gift that returns income, as the Trust would annually pay either a fixed percentage or set dollar amount to the organization of your choice. 

3. Gifts Payable Upon the Donor’s Death

Gifts payable upon the donor’s death are typically laid out within an Estate Plan, and will generally avoid estate tax. An example would be if you named a charitable organization as the beneficiary of your life insurance policy. 

Planned Giving Calculator

There is not an exact amount you must set aside when planning a major gift -- in fact each one is going to look entirely different. There are various types of planned gifts, and organizations will utilize them in different ways. If you are trying to estimate how much to leave or how to maximize your contribution, the best thing to do is meet with an Estate Planning lawyer. 

How to Get Started with Planned Giving? 

Planned Giving can be a relatively straightforward process, especially if you leave the financial planning in the hands of a good attorney. If you are considering making a major gift, here are a few steps you can take to get started: 

  1. Research organizations and causes that you care about or have worked with over time. You can request information on how they spend donations and what development projects they have planned for the future. Consider both local and national groups. 

  2. Review your finances and long term goals as you start Estate Planning. A great time to start gift planning is when you create your Last Will and Testament. Review any assets or property you could potentially leave to a charity. 

  3. Meet with an Estate Planning lawyer to discuss the best strategy for making your gift. This will involve identifying the right type of Planned Gift for your goals, and taking any extra steps to maximize its effectiveness. 

Planned Giving often represents the opportunity to make the largest contribution of your life to a charitable organization. This practice can not only change the financial landscape of that charity but it is also a great way to preserve your legacy. Consider how Planned Giving can fit into your Estate Planning process today.