A well-organized and thoughtfully developed planned giving program creates a steady pipeline of charitable gifts—easing the pressure on annual campaigns, major gift campaigns, capital campaigns, and other fundraising efforts. Why, then, do so many nonprofits approach the idea of starting a planned giving program with hesitation?
While many nonprofits have well-established and highly effective planned giving programs, others avoid planned giving until they’re faced with an important donor who expresses an interest in establishing a charitable gift annuity or making another type of planned gift. Reacting to these types of immediate opportunities, however, often leads to hastily designed programs that fail to gain significant traction.
Planned giving basics
Planned giving can incorporate any combination of outright bequests, a beneficiary designation on life insurance policies, or a beneficiary designation for assets held in an annuity or trust (i.e., a split interest arrangement). In split interest annuities and trusts, the donor receives a charitable deduction and a stream of income for life, while your organization receives the remainder when the arrangement matures. Common split interest planned giving vehicles include:
- Charitable gift annuities
- Charitable remainder trusts
- Charitable lead trusts
- Pooled income funds
Purpose and structure—the keys to an effective program
Being thoughtful and strategic in building a planned giving program alleviates concern and establishes an appropriate structure that aligns with your organization’s purpose, needs, and objectives. To start:
- Become proficient in planned giving basics and the functions of various giving vehicles;
- Take time to carefully analyze your current donor base to determine the potential opportunity for split interest arrangements; and
- Finally, garner organizational buy-in and begin to create the necessary marketing, policy, and administration infrastructure.
Some or all of the administrative and investment management responsibility associated with planned giving can be effectively delegated to a collaborative strategic partner. Truist Foundations and Endowments Specialty Practice, our team of planned giving experts provides structural guidance, insights into industry best practices, and full-service administration and investment management to a wide range of nonprofits—enabling clients to direct internal resources towards donor cultivation and revenue growth.
Still on the fence?
Let’s take a look at two simple examples of how planned giving split interest arrangements can be a tremendous win-win for potential donors and the organization’s that they support.
The graph below depicts a simple charitable gift annuity funded with $100,000 in 2011 by an 82-year-old donor who agreed to take a 6.8.% annual income payout on the originally funded amount, and is based on a 70/30 equity to fixed income investment allocation.
The donor would have received an immediate charitable deduction of $48,040 upon funding the annuity, along with annual income payments totaling $68,000 through the end of 2020. Assuming that the annuity matured at that point in time, the organization would then receive the remaining $105,066 (105% of the original gift). The donor benefits from both a tax deduction and predictable income, while the charity receives a sizable gift at a specific point in time.
The next graph illustrates a charitable remainder trust funded with $250,000 in 2011 by a 75-year-old donor receiving a 5% annual income payout beginning immediately. This example assumes a 65/35 equity to fixed income investment allocation.
The donor would have received an immediate charitable deduction of $61,246 upon funding the trust, along with annual income payments totaling $159,212.46 through the end of 2020. Assuming that the trust matured at that point in time, the organization would then receive the remaining $363,750 (146% of the original gift and additional contribution). The donor benefits from both a tax deduction and income while the charity receives a sizable gift at a specific point in time.
Don’t wait until it’s too late
Planned giving is a long-term strategy which, if established thoughtfully and structured smartly, can yield tremendous benefits to your organization. If you already offer split interest arrangements, marketing diligence (regardless of market conditions) will be vital to growth and long-term sustainability. There are effective ways to tailor your message and emphasize different planned giving benefits based on the prevailing economic environment. If your organization has yet to implement a program, don’t wait! Be prepared for the conversation with potential donors who are interested in establishing split interest arrangements. Take steps today to secure your organization’s future through planned giving.
About Truist Foundations and Endowments Specialty Practice
Truist has more than a century of experience working with not-for-profit organizations. Fiduciary stewardship is the heart of our culture. We’re not just a provider, but an invested partner—sharing responsibility for prudent management of not-for-profit assets. Our client commitment, not-for-profit experience, and fiduciary culture are significant advantages for our clients and set us apart. The Foundations and Endowments Specialty Practice works exclusively with not-for- profit organizations. Our institutional teams include professionals with extensive not-for-profit expertise. These professionals are actively engaged in the not-for profit community and are able to share best practices that are meaningful to their clients. Team members offer guidance and advice tailored to the various subsets of the not-for-profit community, including trade associations and membership organizations. Our Practice delivers comprehensive investment advisory, administration, planned giving, custody, trust and fiduciary services to trade associations, educational institutions, foundations, endowments and other not-for profit clients across the country.
Interested in learning more about implementing and administering a planned giving program? Contact your Truist relationship manager or investment advisor or call us at 866-223-1499.