Planned giving programs: A guide for nonprofits
Planned giving is a win-win approach to philanthropy that lets your donors leave a legacy and helps secure your nonprofit’s future at the same time.
In a nutshell, your donors arrange a charitable gift that’s given to your nonprofit organization at a future date. Often, planned gifts are included in a will and granted after the donor’s death, but this isn’t always the case. There are many kinds of planned gifts that donors can take advantage of during their lifetime; some options even provide donors and their heirs with income for a period of time.
This method of giving is “planned” because the gift isn’t always a direct cash donation.
It could be a piece of real estate, artwork to display or sell, stock in a company, or money from your donor’s 401(k) retirement fund. So, your donors will need to do some estate-planning to figure out how to transfer these assets to your nonprofit when they’re ready.
Excitingly, planned gifts are on the rise. These gifts tend to be some of the largest contributions donors ever give. But many nonprofits hold off on planned giving programs — and miss out on an important opportunity — because of the sensitive subject matter and confusing terminology.
We’re here to help. Below, we’ll break down the common types of planned gifts in simple terms. Learn the benefits of planned giving for you and your donors, and then launch your program confidently using our step-by-step guide.
6 common types of planned gifts and who uses them
Planned gifts come in many shapes and sizes, ranging from simple transfers of money or personal property to more complex trusts and investment funds. Here are seven popular planned giving options and who they’re best for.
Deferred planned gifts
Generally, gifts in this category are given out only after the donor has passed away. The donor usually needs to name your nonprofit in their will or as the beneficiary (the person or entity that receives the benefits) of their accounts.
1. Bequest 🎁
A bequest is a gift that’s left to a person or organization through a will. It’s one of the easiest, most popular, and most flexible planned giving tools. Charitable bequests are often cash (such as $25,000), a percentage of the estate (10% of an $850,000 estate), or the value of the estate after everything else is paid out. They also include personal property, real estate, stocks, bonds, and more.
Great for: Donors of any kind.
2. Retirement plan gift 🌴
Donors can name your nonprofit as the beneficiary of their retirement plans — like 401(k)s, IRAs, and pensions — whether it’s a portion or the full fund. Your nonprofit receives the donation, and donors avoid income and estate taxes on that amount.
Great for: Donors who don’t need the retirement income and want tax benefits.
3. Life insurance gift 💙
Similarly, donors can name your nonprofit as the beneficiary of their life insurance policy and receive tax advantages on the remaining amount.
Great for: Donors who have a paid-up insurance policy and don’t need the proceeds.
Planned gifts that pay donors back
These gifts create a lifelong relationship between your nonprofit and your donor (and their heirs). You’ll use these funds to further your mission and set aside a portion to pay back the donor(s).
4. Charitable gift annuity 💰
With a charitable gift annuity, your donor transfers cash or stock to your nonprofit in exchange for fixed payments for life. After the donor passes away, you’ll use the remaining funds for your nonprofit.
Great for: Donors who want to give a large gift but need some income now.
5. Pooled income fund 👥
A pooled income fund combines gifts from multiple donors that support your nonprofit. You’ll invest their contributions and pay dividends (a slice of the profits) to your donors for the rest of their lives. As each donor passes away, your nonprofit receives a gift in the amount of that donor’s share of the fund.
Great for: Donors who are passionate about investing.
Planned gifts that let donors use their assets
Your donors don’t always have to completely give up their assets to contribute to your nonprofit. Instead, they can make this type of donation.
6. Retained life estate 🏡
With a retained life estate gift, your donor transfers the deed for a property to your nonprofit, but they have the right to use it or live near it for a period of time. They’ll also cover any property expenses or maintenance costs during their lifetime. In exchange, they receive a tax deduction for the property.
Great for: Donors who want to donate property but keep using it for a period of time.
There are also charitable remainder trusts, charitable remainder unitrusts, charitable lead trusts, charitable bargains, and more planned gift options. Read this in-depth list of planned gift types to brush up before you launch your program.
Our recommendation? Start with a bequest campaign — these gifts are super flexible and accessible to the biggest group of donors.
Benefits of planned giving for donors and nonprofits
Of course, planned gifts can provide a boost for your organization and further your cause, but it’s also important to understand the perks from your donor’s point of view. This will help you easily explain planned giving and present it in your marketing materials for maximum effect.
- Receive significant gift amounts: The average planned gift is reportedly 200 times larger than a donor’s largest annual gift. With the right fundraising strategy, your planned giving program could cover your expenses for the entire year or more.
- Expand their major donor pool: Many donors wish they could make a huge outright gift but can’t due to everyday budget constraints. However, they can commit to a future major gift, that gives them plenty of time to build up savings and wealth.
- Build a foundation for the future: It’s easy for busy nonprofits to get lost in the present, but a planned giving program forces you to focus on the future. What will your nonprofit look like in five, 10, or 20 years? How much money will you need, and how will you use it? You’ll have to answer these questions convincingly to attract planned gifts.
- Leave a lasting legacy: Planned giving programs are often called “legacy programs,” because they give small and large donors a chance to make an impact long after they’re gone. They’re often the culmination of a life of hard, passionate work and partnership with your nonprofit.
- Control how funds are used: For what is likely the first time, your donors get to spell out exactly how they want their donation to be spent and how they want to support your mission. Of course, your nonprofit team can keep them updated on needs and key goals.
- Enjoy unique financial benefits: Many planned gifts are not only tax-deductible, they also provide a stream of income and additional tax savings to donors and their estate heirs for years.
5 important steps to start a planned giving program
A planned giving program could be a game-changer for your nonprofit, but keep in mind that it isn’t a quick fix for current needs. You’re planting the seed now — investing time in research, nurturing donor relationships, and adjusting your program — to reap the benefits of your full-grown funding “tree” in the future.
Setting up a successful planned giving program doesn’t have to be complicated. Here are five key steps to start off on the right foot.
1. Talk to the experts
You don’t have to be an expert on estate plans and tax codes to launch your program, but you should know the basics of each gift type. The best way to stay in-the-know is to establish relationships with financial advisors who have experience with charitable organizations. They can keep you updated on new gift planning options and advise you on which gifts to accept. They may even refer clients to you when they’re planning for the future!
This step goes both ways. Encourage your prospective donors to talk to their own professional advisors well before they plan to give. Here’s an example: The American Cancer Society’s planned giving page offers a donor resource list with leading attorneys and accountants, plus free educational tools.
2. Determine the type of gifts you’ll accept
Weigh the benefits and costs of the planned gifts we discussed above and determine which options work best for you and your donors. Once you’ve decided, create a clear policy that explains which gift options are available, the minimum donation or value for each, and what the donor will receive in return. Nominate a board member as a point of contact for all planned gifts or have a separate lead for each gift type.
It’s a good idea to have a financial advisor or consultant take a look at your policy before you unleash it into the world. Another pro tip? Include a sentence that says your team will discuss each potential gift before it’s accepted. That way, you aren’t stuck accepting gifts or terms you aren’t comfortable with.
3. Research your donor base
Which donors are most likely to make planned gifts? Research tells us that 53% of donors make their first planned gift when they write their first will, and the average donor is aged 44 at the time of writing their first will. Also, 50% of last wills — written when donors are in their 80s — include charities for the very first time.
Does this mean you only reach out to 44-year-olds and 80-year-olds? Definitely not. Age, gender, location, marriage status, average gift size, and number of years donating can all point you toward your next planned giver. Planned gifts may often come from older donors who have been giving for years, but the target demographic will look different for every nonprofit.
So, dive deep into your specific donor database. You can save time on research and draw out more insights using tools in your all-in-one fundraising platform or customer relationship management (CRM) software.
4. Nurture your donor relationships
Donors give because they believe in your organization’s mission and trust that their gift will make a bigger difference in your hands than theirs. Planned gifts take this relationship to the next level. Donors are weighing what to leave behind for their family and the other meaningful organizations in their lives. If you want to be a candidate, you must engage early and often.
We recommend building off your donor retention strategy (or creating one if you don't have one yet). Create multiple activities and touchpoints, so your donors feel seen, heard, and central to your nonprofit's success at all times. Share impact stories, create donor-only content, send personalized thank-you emails, host community events, and more. Have a plan for how often and how you'll reach out, so your donors never slip through the cracks.
5. Promote your program
Finally, use the information you gathered in step three, the research stage, to plan your program launch and multichannel marketing tactics.
Take a look at your past awareness campaigns and see what worked. Email, direct mail, and social media ads are all reliable ways to get the word out and create buzz, especially with older demographics. It's also worth it to create a distinct planned giving program page so you can detail what's available, answer any FAQs, and measure interest.
Keep your messaging positive, active, and focused on the present. You don't have to talk about death or taking money away from heirs and other organizations. Choose language that looks forward and highlights the possibilities, like "Preserve your culture and heritage for years to come" or "Inspire and empower the next generation of conservationists."
Today’s plan, tomorrow’s gift 🌱
Planned giving lets a wider range of donors make a lasting impact while reducing their tax burden down the road. It can take years of thoughtful, frequent engagement before a donor is ready for a planned gift, so get started early.
First and foremost, make sure you understand the different types of gifts you’re asking for, whether it’s a bequest, charitable gift annuity, or pooled income fund. Run through your plans and questions with a financial advisor and ask your prospective donors to do the same. Keep your donor relationships healthy and create a promotional strategy that connects with your most likely planned givers. The sooner you begin, the better!