Tap into planned giving to help secure your nonprofit's future - Butler Financial, LTD
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Tap into planned giving to help secure your nonprofit’s future

Building a long-term pipeline may deliver the confidence your organization needs. 

For a nonprofit that relies on donors to keep it operating, wondering when the next wave of funds will come can be stressful. This has become even more relevant recently because according to the Giving USA 2023 report, total giving to US charities in 2022 declined compared to the previous year.

While economic uncertainty and high inflation are partially to blame for the decrease, there are always ebbs and flows in charitable giving. However, focusing on a long-term planned giving strategy could help smooth the waves, fill your nonprofit’s pipeline – and work toward securing its future.

Benefits of planned giving

In 2022, individual donations accounted for only 64% of overall contributions received by nonprofit organizations. Although nonprofits invest a significant amount of resources appealing to individuals for specific campaigns throughout the year, there is a more strategic (and potentially higher value) approach that can have a greater impact on your fundraising efforts.

Planned giving, where donors designate charitable gifts to a nonprofit for a future date, has benefits for both parties. For nonprofits, it amounts to a projectable, dependable source of general funding. You can count on what funds will be coming your way and may even know when they’re coming, depending on the type of vehicle used.

For a charity, planned giving acts as a buffer against economic uncertainty and can counteract a drop in donations. Planned giving can also deepen relationships between the donors and nonprofit, leading to larger or more regular gifts outside of the commitment. One study found donors that added a charity to their wills increased their annual gifts by more than $3,000 in the following years.

For donors, there are multiple ways to execute these planned gifts, making giving more flexible. Planned giving widens the potential donor pool and attracts people who may not be able to make a cash donation now but have charitable giving in their heart.

Donors who leave significant planned gifts to their favorite charities can be recognized for their support during their lifetime while leaving a meaningful legacy behind. The preplanned nature of the donation allows the donor to add requirements to their gift, giving them more control over how the funds are used. Another advantage? These gifts usually offer tax breaks for the donor’s heirs.

Different types of planned giving

The best way to approach a planned giving strategy is proactively. Unfortunately, charities tend to set up planned giving programs in response to donors asking for them, which leads to a haphazard approach. Be thoughtful in the creation of your planning giving strategy, considering what would most benefit your organization and best appeal to a broader donor audience.

Some of the most common planned giving strategies include:

  • Beneficiary designation: The simplest form of planned giving is donors naming your nonprofit as their beneficiary, so your organization will receive the funds after the donor’s passing. The donor doesn’t have to part with the money during their lifetime and doesn’t owe any estate taxes on the amount of the bequest.
  • Charitable gift annuities: A donor makes a sizeable donation to your organization, which is set aside and invested. The donor gets immediate tax savings and receives a fixed monthly or quarterly payment from you (supported by the investment) for the rest of their life. At the end of their life, your charity receives the remainder of the gift.
  • Charitable remainder annuity trust (CRAT): A CRAT allows the donor to benefit from immediate tax savings and provides an income stream to the donor or its beneficiaries for an extended period. It distributes a fixed annuity amount each year for the term of the CRAT, and gifts the named charity the remainder.
  • Charitable remainder unitrust (CRUT): A CRUT also allows the donor to take advantage of immediate tax savings and provides income for them or their beneficiaries. It differs from a CRAT only in that the annual distribution is a percentage of the trust, between 5% and 50%. The named charity gets the remainder.
  • Pooled income funds: A type of charitable trust, a pooled income fund allows contributors to pool their resources for investing purposes. The investment provides dividends for contributors during their lifetime; the remaining funds go to the nonprofit.
  • Donor advised fund (DAF): This type of fund, which is eligible for an immediate tax deduction, allows donors to recommend grants to their preferred charities. Donors can add to the fund as often as they like and distribute contributions at a later time.

How to implement a program

While putting together a planned giving program may feel like an overwhelming endeavor to take on, it can be delegated to a trusted partner, like Raymond James. While it requires time and effort to set up a giving program, the payback on this long-term strategy could be the steady, reliable income stream your nonprofit needs.

Once your plan is in place, market the benefits of planned giving to your donors. Show them how they can enjoy potential tax savings on their estate now while having full control over the legacy they want to leave once they’re gone. Emphasize the long-term impact their commitment will have on your organization’s mission.

Be thoughtful in your approach to creating and sharing planned giving opportunities – and your organization will reap the reward.

Next Steps:

As you consider implementing a planned giving strategy in your organization:

  • Familiarize yourself with the different types of planned giving opportunities you can offer.
  • Think about how you can share these planned giving options with potential donors.
  • Talk to your advisor and legal consultant about the strategies that would most benefit your nonprofit.

Sources: philanthropyroundtable.org; resources.freewill.com; fidelitycharitable.org; nbcnews.com; trustandwill.com; keela.co; donorbox.org

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Dividends are not guaranteed and must be authorized by the company’s board of directors.

Please be aware that there may be substantial fees, charges and costs associated with establishing a charitable remainder trust or some of the other strategies mentioned.

Strategies mentioned may not be suitable for all investors. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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