You can’t take it with you.
But with a little forethought and preparation, you can support a beloved charity, alma mater or non-profit from the Great Beyond — and realize concrete income, tax or estate benefits that could save you and yours a lot of money and promote your philanthropic values among future generations of your family.
It’s called “deferred giving” or, more commonly, “planned giving,” a term coined nearly five decades ago by financial planner Robert F. Sharpe, whose Sharpe Group offers capital fundraising services to churches, educational institutions and other not-for-profit institutions.
Planned giving offers opportunities for giving under the tax codes that can provide an immediate income for the donor or the charity, or a future income to the charity, while allowing the donor to maintain access or control of the donated funds or property and realize tax benefits —including in capital gains, gifts or estates.
Anybody in their 30s or 40s who attended college or otherwise had contact with a charity or non-profit has probably received fundraising postcards, mailers or e-mails from these entities extolling the work of the organization and the potential benefits to the donor and charity of planned giving.
The vehicles involved in planned giving include various scenarios for gifting or creating trusts. The assets to be conveyed can include cash, stocks or securities, business interests, a life insurance policy, real estate or personal property and even benefits from a retirement plan.
Options for giving abound. Anyone contemplating making such a gift should talk to two people — their professional financial advisor or attorney who specializes in estate planning and someone from the charity they’re considering supporting — to discuss ways the gift might be made and to best integrate the gift into the charity’s future plans.
Anne Hamilton is president of the Planned Giving Council of New Hampshire and Vermont, which since the 1980s has promoted planned giving and provides training and development opportunities for its 120-odd member non-profits and charities.
Professional advice is important in estate planning whether one intends to give or not, Hamilton said.
“It’s thinking about your estate, what your wishes are and where you want to put your money when you’re no longer around,” Hamilton said. “In addition to your family and your friends, charity is obviously one area people can think about.”
A potential donor can approach a representative of any nonprofit or charity to discuss the idea, Hamilton said.
“There are certainly people who have personal interests, where they’ve supported charities during their lifetime and this is a way to think of that for the future. It’s not only for end of life, but as you plan around a business,” Hamilton said. “There are a lot of instances where you can plan around what you want to see happen.”
Larger institutions such as a university or a medical center will often have offices dedicated to development, donations or giving. Dartmouth College’s website has a “Giving” tab in the upper right-hand corner of its main page. The University of Vermont, as well as Champlain and St. Michael’s colleges all have development departments. But most charities in Vermont and New Hampshire are small, and often one staff member is charged with facilitating planned gifts. More often still, the staff member will be an executive director who wears many hats in a small organization.
“And dimes to donuts, that person at the charity would encourage them to talk to their own financial advisors,” Hamilton said. “A staff person at any charity I know would look for charitable intent, but would encourage them to talk to their financial advisor to construct a gift that could be beneficial to them from a tax perspective and also benefit the charity, as well.”
Ways to Give
The most common gifts, Hamilton said, are bequests of money — a specific amount or a percentage of an estate — made to a particular charity. Then there are gifts of personal items, property and real estate, and a lot of tax law has been written around those issues.
Planned Giving Council of New Hampshire and Vermont board member and Burlington attorney Leigh Keyser Phillips’ law practice includes estate planning services. Phillips said there are a number of ways to make a planned gift to a charity.
“You can do retirement plan designations through your 401K or IRA, you can do a life insurance policy, you can do a Charitable Gift Annuity (CGA) or a Charitable Remainder Trust (CRT),” she said.
Someone who doesn’t wish to pay an attorney could easily set up a donation through a retirement account such as a 401K or an IRA by naming the charity as a beneficiary of either a set dollar amount or a percentage of the account. It is good to discuss the gift with the charity, though.
A Charitable Gift Annuity (CGA) offers the option of donating a lump of money — with a tax benefit — to a charity, which in turn pays interest back to the giver of the gift during the giver’s lifetime. When the benefactor passes away, the remainder goes to the charity.
If such a gift is made for the charitable uses and purposes of the organization, it’s not difficult to set up, Phillips said. But a donor who wants to set up a special scholarship fund, support an endowment or a special program needs to ensure the language to make that wish happen is all correct. A CGA is an irrevocable contract with a charity.
A Charitable Remainder Trust (CRT) is generally an option for the very wealthy — those with a million or two to set aside for a favorite charity. There are different types where the donor can realize an income and then the charity receives the gift at the end of the line, so to speak. They can be complex and professional help would be vital in their preparation, Phillips said.
“You should definitely talk to an accountant or an attorney,” Phillips said.
Not Just For the Rich
But planned giving isn’t just something the wealthy do.
More modest gifts — particularly regular, ongoing ones — are just as important to a charity as the big endowments are.
“The big donors are important, but a charity should look at who’s given consistently over 10 or 15 years,” Phillips said. “Those are the people most likely to come forward and give a planned gift if they understand it. When a donor dies, a charity loses that support and that membership and there is a way to keep it, which means the charity doesn’t have to scramble to replace that.”
When it comes to endowing a regular, ongoing gift, development planners use something called the “Rule of 20.”
“Let’s say you’re a regular supporter and you give a charity $100 a year,” Phillips said. “The ‘Rule of 20’ says that if you left 20 times that gift in your will, you’re basically endowing that gift and you can gift it in perpetuity. Your support of the charity can continue.”
Hamilton agreed.
“It’s more about helping an organization you’ve loved in your lifetime in the future,” she said.
This article was contributed by Ron Maloney.
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