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What is planned giving?A well thought-out planned giving program— when giving is integrated as part of an overall financial and estate plan—should offer the same amount of variety as the menu at your family’s favorite restaurant. Young donors will probably want something different than their older friends, and donors with modest means may want different options than those with large estates. A good planned giving program can be adapted to meet each person’s charitable and future financial goals.
Planned giving is a thoughtful and strategic approach to giving that helps nonprofit organizations while advancing a person’s own financial and personal objectives.
“Planned giving allows donors to provide greater support to the charities they care about most,” explains Jean Vukas Roberts, vice president of development for the Minnesota Community Foundation and The Saint Paul Foundation. “It encompasses any charitable giving that requires thoughtful planning either because of the timing, the complexity, or the size of the gift.”
A planned gift can be made with almost anything: cash, stocks, bonds, mutual funds, real estate—even property/collectibles such as artwork and books.
The reasons people give are as varied as the individuals themselves. Donating can be an excellent income or estate tax planning strategy, providing tax benefits and/or income for life. Some give because they want to join with others for the common good or call attention to an issue. Some want to improve the quality of life for future generations.
Planned giving encourages the planning process and benefits all who are concerned by providing valuable information, encouraging visits to professional advisors, and promoting action. Family values can be transferred along with the transfer of wealth, creating a new generation of donors.
For example, generous grandparents can teach their children and grandchildren about organizations that matter to them, the family can become involved as income recipients of various deferred gift plans, and some family members may find inspiration through an endowment fund bearing the name of a loved one.
Families, businesses, and individuals create personal and lasting charitable legacies through community foundations, which are tax-exempt public charities. A foundation streamlines the process, enabling people with philanthropic interests to easily and effectively support the issues they care about—immediately or through a charitable bequest. Donating through a foundation offers tax advantages, simplicity, and planning expertise. They exist for everyone, created by and for local residents, says Vukas Roberts of the Minnesota Community and Saint Paul Foundations.
“We see people from all income levels making philanthropy a priority in their financial plans,” she comments.
The Minneapolis Foundation, another community foundation option, has been connecting individual donors with nonprofits for decades. According to their website, “We offer customized assistance with mission clarification, fund development, community outreach, issue research, grant guidelines, and evaluation—supporting the full range of activities that comprise an effective and rewarding giving program. Our clients range from established family foundations to venture philanthropists, emerging community funds to major corporations.”
A private foundation—like those established through financial services companies—act as their own corporation, with one primary financial source (community foundations are designed to accept gifts from many sources). A private foundation is only required to distribute 5 percent of its asset value per year to charity. Therefore, the IRS has to establish limits on how much of a charitable deduction can be used in any particular year. Not so with a community foundation.
“Because a community foundation is a public charity, donors receive maximum financial benefits allowable by law,” Vukas Roberts explains.
Other benefits of community foundations include no out-of-pocket costs to establish or maintain a fund, and the option of creating a fund for as little as $5,000.
“Practically speaking, you need a minimum corpus of $10 million to operate a private foundation,” explains Chris Andersen, executive director/president of the Lutheran Community Foundation, a national faith-based community foundation located in Minneapolis. The community served by the Foundation represents the common values and beliefs of Lutherans, but extends beyond the Lutheran community to include public charities anywhere, and people of any faith tradition who want to leave a legacy. “We have the flexibility that allows people to give according to their interests and values. Another reason people come to our organization is because they can give independently according to family values and interests, yet come together as a collective voice in the community.”
Another benefit of a community foundation is privacy. Private foundations are required to file detailed tax returns on grants issued, investment fees, trustee fees, staff salaries, asset size, etc. and then publish a notice to the public that the tax return is available for public viewing.
Donors who support nonprofit organizations help to build a better future for everyone. Through their generosity, organizations such as Big Brothers Big Sisters and United Way continue to survive and thrive.
The nonprofit organization of Big Brothers Big Sisters of the Greater Twin Cities builds young people’s lives through lasting relationships with mentors.
“Each year, we serve thousands of children in Minnesota, and we provide each child with a caring volunteer mentor. A donation helps us recruit mentors for those children waiting for one,” says Martin Conover, vice president of development for Big Brothers Big Sisters of the Greater Twin Cities.
The success of the organization is dependent on a process that professionally screens, interviews, matches, and monitors the youth (ages 6 to 18) and the mentors in the program.
“Because training is essential to the success and safety of our mentoring relationships, donations provide instructors and instructional materials during our professional training sessions,” Conover says.
Donations also support education and enrichment programs for Little Brothers and Sisters, such as the Mentoring Children of Prisoners Program, created to mentor children with a close relative (such as a grandparent, parent, or sibling) in the corrections system.
“In a national study, 70 percent of prisoners surveyed reported that they had a parent or other significant relative who also had been incarcerated, which indicates that children of prisoners have a significant chance of ending up in the system,” he says. “By pairing youth with these mentors, at a cost of $1,400 a year, we’re saving the state, taxpayers, and society more than $30,000 a year, the approximate cost of keeping a youth in the corrections system.”
Greater Twin Cities United Way is also reliant on the generosity of donors who make planned gifts. Donors may use bequests, charitable remainder trusts, annuities, or other planned gifts to make a meaningful impact on their programming and community.
“We’re working to produce measurable change through our Agenda for Lasting Change,” says Randi Yoder, senior vice president of donor relations at United Way. “With our community partners, we are attacking the communities most challenging problems: reducing hunger, improving the financial stability of families, increasing access to health care, helping children succeed in school, and nurturing children and families. Planned gifts help us achieve those goals.”
Planned gifts to the Greater Twin Cities United Way typically are typically invested in their endowment. “An endowment is a great asset to a nonprofit, because it produces income we can plan on every year,” Yoder comments.
“A planned gift gives our donors an opportunity leave a legacy to the community,” she says. “It’s a gift that keeps on giving in perpetuity, helping those that need it most.”
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