Rresident Kennedy once said, “The raising of extraordinarily large sums of money, given voluntarily and freely by millions of Americans, is a unique American tradition.” This spirit of generosity is nowhere more evident than through planned giving, described in plannedgiving.com as “a method of supporting nonprofits and charities that enables philanthropic individuals or donors to make larger gifts than they could make from their income.” A planned gift is any major gift made during a donor’s lifetime or at their time of death that’s part of their overall financial and/or estate plan.
“Planned giving allows donors to provide greater support to the charities they care about most,” explains Jean Vukas Roberts, vice president of development for 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.”
Cash, stocks, bonds, mutual funds, real estate—even property/collectibles such as artwork and books. Donors can make these gifts through their will or trust, life insurance, bequests and beneficiary proceeds, charitable remainder trusts and gift annuities.
The Benefits of Giving
Planned gifts can be a powerful and effective way to make a lasting impact in the community. While most people give because they want to join with others for the common good, call attention to an issue, or improve the quality of life for future generations, proper planning can also create significant tax benefits, says Anne Ward, CFP® Senior Advisor with JNBA Financial Advisors, based in Minneapolis. In order to utilize appropriate strategies, it’s crucial to work with qualified financial advisors and tax professionals.
For example, Ward explains, if a stock, piece of property, or family business has been held longer than one year and has a substantial capital gain, gifting these (as opposed to cash) is the most tax-efficient way to transfer wealth to a charity (in most cases). “Individuals avoid paying capital gains tax on the transferred asset, and in many cases—will receive a charitable deduction for the fair market value, subject to certain IRS rules and restrictions,” she says.
One popular way to give is through a community foundation, a tax-exempt public charity. A foundation streamlines the process, enabling people with philanthropic interests to easily support the issues they care about.
Donating through a foundation offers tax advantages, simplicity, a variety of charitable giving options, and planning expertise. “We help donors fulfill their goals and work with communities to identify issues that need attention,” explains Jaclyn Schroeder, director of gift planning with the Minnesota Community Foundation and The Saint Paul Foundation. “By bringing people together around a common mission, and creating links between resources, we’re helping ensure that our communities stay vital and strong.”
One way to make a planned gift is through a Donor-Advised Fund, especially useful for donors who—because of tax or estate planning issues—wish to take a tax deduction one year and spread contributions over future years. It’s a flexible, uncomplicated way to give that includes the tax benefits of a public charity.
“For individuals who are in high tax brackets, or have a one-time event that will put them into a high tax bracket such as the sale of a business or executive compensation payout, utilizing a foundation or donor-advised fund can be a wonderful way to establish a charitable fund and receive a sizeable income tax deduction in the year of the contribution,” explains Anne Ward of JNBA Financial Advisors.
Transferring family values along with the transfer of wealth can create 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 family members can become inspired to take action through an endowment fund bearing the name of a loved one.
Building a Better Future
Donors who support nonprofit organizations help to build a better future for everyone. Through their generosity, local organizations such as the March of Dimes, Children’s Cancer Research Fund, Make-A-Wish Foundation of Minnesota, American Red Cross Twin Cities Chapter, Ronald McDonald House Charities, and United Way continue to survive and thrive.
“Planned gifts ensure the future of lifesaving programs and services throughout the Twin Cities metro area,” says Lori Bents, development officer, American Red Cross Twin Cities Area Chapter.
A planned gift supports not only disaster response and blood services, but community outreach such as babysitters’ training, service to Armed Forces, and health and safety courses like CPR and First Aid (among others).
At Greater Twin Cities United Way, planned gifts help support the organization’s Agenda for Lasting Change, an aggressive plan to create pathways out of poverty for people most in need. “United Way stabilizes people in crisis by providing food, shelter, and other essential services,” says Michael Moore, Greater Twin Cities United Way planned giving manager. “We strengthen families for long-term success by focusing on education, income, and health. And we help streamline systems and solutions and build new alliances to create lasting change, while continuing to support over 400 high-quality programs. We believe that when you reach out a hand to one, you influence the condition of all.”
Charitable organizations make a tremendous difference in our community, and people of all walks of life choose to donate resources.
“People have an innate sense of community and the desire to improve the world in which they live,” Wards says. “Whether a person feels wealthy enough to ‘give’ oftentimes has little to do with their actual dollars and cents wealth, and more about their compassion toward others.”