The Power of Planned Giving

    When it comes to wealth management, planned giving can be a valuable tool in aligning your philanthropic vision and values.

    How we respond to life’s challenges show our significant other, our kids, our friends, our neighbors, and our community who we are and what we stand for. We are building a legacy—a legacy of what we believe in—every day we are alive.

    Estate planning is a tangible way to look at our life or legacy—not only in terms of relationships, but also in terms of wealth, possessions, and property. It is a way of reviewing how we can best give to the greater good. Every adult should have an estate plan, yet statistics show that 7 out of 10 people do not have a will. Without an estate plan, chances are your estate probably won’t be distributed as you might have intended. Effective estate planning usually takes time, effort, a good financial advisor and a good attorney. In the end, your plan will allow your family to avoid the delay, tension, and needless expenses that can occur without a will.

    By thoughtful will and trust arrangements you can benefit those who mean the most to you—including the charitable causes you support.

    Planned giving, as part of an estate plan, is a type of charitable giving that allows you to express your personal values by supporting your favorite charities. You can also remember your favorite charities by naming them as a beneficiary of an insurance policy, a 401(k) or an IRA.

    Contrary to popular belief, you do not have to be rich and famous to make use of planned giving, and you don’t need to wait until you die. Your gifts can be made throughout your lifetime. A planned gift can be made with cash or by donating assets such as stocks, bonds, mutual funds, real estate, or business interests—even property/collectibles such as artwork and books (although those are often more complicated to administer).  When it comes down to it, charitable giving is fundamentally an expression of values.


    The reasons people give can’t easily be summed up in one simple description. Many give for a combination of reasons: donating can be an excellent income or estate tax planning strategy—providing tax benefits and/or income for life, they care about a cause or charity, they want to improve the quality of life for future generations, and they want to leave a legacy.

    “Many national studies have been done on ‘donor motivations,’” says Jaclyn D. Schroeder, director of philanthropic planning at the Minnesota Community Foundation and The Saint Paul Foundation. “My experience is that people give because they care!  Caring about other people; caring about a better world; a cleaner environment with bigger, healthier, older trees; the beautiful sound of a simple melody played on a violin— we care about these things. Most of us want to stop hurt, share beauty, celebrate opportunity, and be a part of what feels good and right.”

    One organization that has greatly benefited from planned giving is Minnesota’s Nongame Wildlife Program, working to protect the state’s 500 species of wildlife. Funds have helped protect the loon, bald eagle, trumpeter swan, Eastern bluebird, Peregrine falcon, and osprey. Donors can designate the DNR Nongame Wildlife Program as a beneficiary when doing estate planning, or write in a tax-deductible donation on the check-off part of their tax forms (the line with the loon symbol beside it). The needs of Minnesota’s wildlife and land depend more than ever on all partners giving what they can.

    “Giving is an important part of culture,” explains Bob Potter, creator and host of the Sound Money radio program as well as Midday and Morning Edition on MPR.

    “It’s woven into the fabric of who we are.”

    And when people of all ages, incomes, and social statuses come together to declare that the work of a nonprofit organization has an important place in the future—no matter what the cause—the results can make a profound difference.


    At one point in time, establishing a private foundation was the preferred way for single donors to retain maximum control over grant-making while creating a legacy of family philanthropy. It wasn’t cheap (there are extensive set-up fees), it wasn’t easy to operate, and it wasn’t, well, private (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. These are public records and are often compiled into grant-seeker directories).

    Eventually, community foundations—tax-exempt public charities created by and for the people in a local area—started popping up in states across the country in an effort to simplify the giving process. Operating as a sort of savings account for the entire community’s benefit, with funds growing in an endowment account, these foundations enable people to easily and effectively support the issues they care about.

    “Community foundations are especially good if you have multiple charitable interests,” explains Mary Ellis Peterson, gift planning advisor with the Minneapolis Foundation. “You can make one gift of appreciated stock, for example, and recommend grants from that transaction to as many charities as you like. We also do due diligence on charities and can give you ideas of organizations working in areas where you have an interest. We keep you up-to-date on what’s going on locally and in the general area of philanthropy. You can recommend grants online, by fax, by e-mail, in writing or by telephone. You will also have a record at year-end of the gifts and grants you have made.”

    Once you decide who you want to support, how, exactly, do you do that? One of the fastest growing tools of family philanthropy are Donor Advised Funds (DAFs), component funds managed under the tax umbrella of a public charity. The way a DAF works is that a donor makes an irrevocable gift to the host charity, and because the host charity is recognized by the IRS as a 501c3 tax-exempt organization, the donor gets a fair market value tax deduction in the year of the gift. Assets are deposited into an investment account where they can grow tax-free.

    “Donor Advised Funds provide a simple, flexible, efficient way for a person to manage their charitable giving,” explains Bruce Helmer, president and founder of Wealth Enhancement Group. “They provide an immediate tax advantage, allow one to make grants on a flexible timetable, build one’s charitable legacy, and increase the value of the account for future grant-making.”

    Charitable giving trusts also have unique advantages, allowing donors to distribute their wealth to both family members and charities through the same tool. They can be complicated, though, so it’s important to talk to a financial advisor or attorney.

    One of the most commonly forgotten benefits of charitable giving is the positive tax consequences of giving an appreciated asset to a charity—such as a stock or mutual fund—instead of writing a check, says
    Schroeder with the Minnesota Community Foundation and The Saint Paul Foundation. “By asking your broker or financial planner to transfer the stock to the charity, or by gifting closely held assets or real estate, you can avoid recognizing the capital gains AND you can take a charitable income tax deduction for the value of the gift.  Use that checkbook to reimburse your investment account with a fresh infusion of cash instead.”


    Whether you’re just starting the estate planning process or have had a plan in place for awhile now, think about the legacy you want to leave. Talk to your financial advisor about what’s important to you and what you want to happen with your assets, Potter says. “This may seem counter-intuitive given the current economic and market conditions, but it’s more timely now than ever before to have this conversation with your financial advisor and figure out your best options and choices.”  

    If you feel like you can’t make a planned gift right now, consider donating your time or talents to a nonprofit organization.

    In the wise words of Anne Frank, “How wonderful it is that nobody need wait a single moment before starting to improve the world.”