6 Common Types of Planned Gifts: Making a Lasting Impact
By Rhen Hoehn, Director of Marketing
Planned giving is a powerful way for donors to support causes they care about while also leaving a legacy that lasts beyond their lifetime.
Nonprofit organizations rely on thoughtful contributions like these to continue their vital work and make a difference in the world, but many fundraisers are unfamiliar with the various types of planned gifts and how they work.
Let's explore six of the most common types of planned gifts that your organization might receive:
- Bequests
Bequests are gifts made through a donor's will or estate plan. They're often straightforward to set up and can have a significant impact.
Take Sarah, for example. Sarah, a passionate advocate for education, decides to leave 10% of her estate to her alma mater to establish a scholarship fund for underprivileged students. Through her bequest, Sarah ensures that her commitment to education lives on, helping students achieve their dreams.
- Charitable Remainder Trusts (CRTs)
CRTs allow donors to provide income for themselves or loved ones while supporting a nonprofit organization's mission.
John, a retired businessman, sets up a CRT with appreciated stocks as the funding asset. This trust provides his spouse, Mary, with an annual income for life. After Mary's passing, the remaining assets go to a retreat center, fulfilling John's desire to support the faith life of others in the local area.
- Charitable Lead Trusts (CLTs)
CLTs are trusts where income is distributed to a nonprofit for a set period, with the remaining assets going to the donor's beneficiaries. In essence, the opposite of the remainder trusts discussed above.
Donors may establish CLTs to support charitable causes during their lifetime, potentially reduce gift and estate taxes, and transfer assets to their heirs with reduced tax consequences.
For instance, Alex, a philanthropist, creates a CLT to support a children's hospital during his lifetime, ensuring ongoing financial support for pediatric healthcare. After a specified period, the remaining assets pass to his grandchildren, providing for their future while leaving a legacy of charitable giving.
- Charitable Gift Annuities (CGAs)
CGAs offer donors a fixed income stream for life in exchange for their charitable contribution.
Emily, a retiree with no heirs, purchases a CGA with her savings and names a local parish as the beneficiary. She receives a steady income while supporting the parish's mission to bring the Gospel to the community.
- Life Insurance Policies
Donors can name nonprofit organizations as beneficiaries of their life insurance policies, providing a significant future gift with relatively low ongoing costs.
David, a successful entrepreneur, designates a campus ministry as the beneficiary of his policy. Upon his passing, the nonprofit receives the death benefit, which helps fund outreach to and formation of the next generation of Catholic university students.
- Retirement Plan Assets
Donors can designate nonprofit organizations as beneficiaries of their retirement accounts, ensuring their savings support causes they're passionate about.
Maria, a dedicated teacher, names a nonprofit focused on promoting literacy as the beneficiary of her IRA. Her retirement savings will continue to support educational initiatives, enriching the lives of future generations of students long after she's gone.
Whether through bequests, trusts, annuities, life insurance, or retirement assets, donors have the power to create a lasting impact and leave a legacy of generosity that benefits communities for years to come.
For development professionals, the real trick with planned gifts can be keeping the different options straight and knowing who to call for help when a donor would like to set up a more complicated gift like a charitable remainder trust.
To help you out, Petrus Development has created a Planned Gift Cheat Sheet outlining these gift types, the typical financial reasons that a donor may make each type of gift, and which types of professionals can help set these gifts up.
Access the Planned Gift Cheat Sheet for free by clicking HERE.
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