Everything Donors Need to Know
What is Planned Giving?
Planned giving, also known as legacy giving, refers to charitable donations that are arranged during a donor’s lifetime but are fulfilled at a future date, typically through their will or estate. These gifts are often larger and more impactful than regular donations, as they can include various types of assets and financial instruments.
For more information about planned giving, contact John Rodenhausen at John@cfaac.org or call 410.280.1102, ext. 102.
Types of Planned Gifts
- Bequests: A bequest is a gift made through a donor’s will or trust. It can be a specific dollar amount, a percentage of the estate, or a particular asset such as real estate, stocks, or personal property.
- Charitable Gift Annuities: This is a contract between the donor and a nonprofit organization, where the donor makes a substantial gift, and in return, receives a fixed annual income for life. After the donor’s passing, the remaining funds go to the charity.
- Charitable Remainder Trusts: These trusts allow donors to place assets in a trust that provides income to the donor (or other beneficiaries) for a specified period. After that period, the remaining assets go to the designated charity.
- Charitable Lead Trusts: This type of trust provides income to a charity for a specified period, after which the remaining assets return to the donor or other beneficiaries.
- Beneficiary Designations: Donors can name a charity as a beneficiary of retirement accounts, life insurance policies, or other financial accounts.
- Real Estate and Personal Property: Donors can gift real estate or valuable personal property either during their lifetime or through their estate.
- Retained Life Estate: Donors can transfer ownership of their property to a charity while retaining the right to live there for the rest of their life. After their passing, the charity takes possession of the property.
Benefits of Planned Giving
- Legacy and Impact: Planned gifts allow donors to make a significant, lasting impact on the causes they care about, often creating a legacy that endures for generations.
- Tax Advantages: Planned giving can offer substantial tax benefits, including income tax deductions, estate tax reductions, and the avoidance of capital gains taxes on appreciated assets.
- Financial Planning: These gifts can be an integral part of a donor’s financial and estate planning, allowing them to achieve both philanthropic and financial goals.
- Flexibility: Planned gifts can be structured in various ways to meet the donor’s specific needs and circumstances, providing flexibility in how and when the gifts are made.
- Simplicity: Many planned giving options are straightforward to set up and do not require complicated legal arrangements.
- Lifetime Income: Some planned giving vehicles, like charitable gift annuities and remainder trusts, provide donors with a steady income stream during their lifetime.
Steps to Make a Planned Gift
- Assess Your Assets: Evaluate the assets you own, including cash, stocks, real estate, life insurance policies, retirement accounts, and personal property.
- Choose the Type of Gift: Decide which type of planned gift aligns with your financial situation, philanthropic goals, and family needs.
- Consult Professionals: Work with financial advisors, estate planners, and legal professionals to understand the implications and benefits of your planned gift. They can help you navigate the tax benefits and ensure your gift is structured properly.
- Select the Charity: Identify the nonprofit organization(s) you want to support. Ensure that they align with your values and philanthropic goals.
- Document Your Wishes: Clearly document your planned giving intentions in your will, trust, or beneficiary designations. Provide detailed instructions to ensure your wishes are followed.
- Inform the Charity: Let the chosen charity know about your planned gift. This helps them prepare for the future and may allow you to discuss specific uses or recognitions for your gift.
- Review and Update: Periodically review and update your planned giving arrangements to ensure they still reflect your current financial situation and philanthropic goals.
Considerations for Planned Giving
- Family and Heirs: Consider the needs and expectations of your family and heirs. Balance your philanthropic goals with your desire to provide for your loved ones.
- Legal and Tax Implications: Understand the legal and tax implications of your planned gift. Consulting with professionals is crucial to maximize benefits and avoid potential pitfalls.
- Charity’s Stability and Reputation: Ensure the charity you choose is financially stable and reputable. Review their mission, financial health, and impact to ensure your gift will be used effectively.
- Communication: Keep open communication with your family, advisors, and the charity to ensure everyone understands your intentions and plans.
- Recognition: Decide if you want your gift to be publicly recognized or if you prefer to remain anonymous. Many charities offer recognition programs for legacy donors, which can inspire others to give.
- Planned giving is a powerful way to leave a lasting legacy and make a significant impact on the causes you care about. By carefully considering your options and working with professionals, you can ensure that your philanthropic goals are achieved in a way that aligns with your financial and personal objectives.
Working with CFAAC to support your Gift Planning
The Community Foundation of Anne Arundel County is a tax-exempt, non-profit organization that manages and distributes charitable funds to support local needs and improve the quality of life within a specific geographic area. CFAAC pools contributions from various donors into a coordinated investment and grant-making strategy to address a wide range of issues, including education, health, the environment, arts, and social services.
Reflect on what causes and issues are most important to you.
Determine if you want to support a specific program, field of interest, or geographic area.
Decide whether you want to make an immediate impact or establish a lasting legacy.
Schedule a meeting with CFAAC’s staff to discuss your philanthropic goals and interests.
Learn about the CFAAC’s services, expertise, and the types of funds we offer.
Discuss how CFAAC can help you achieve your charitable objectives.
· Donor Advised Funds (DAFs): These funds allow you to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time.
· Designated Funds: These funds support specific organizations you choose.
· Field of Interest Funds: These funds target a particular area of interest, such as education, health, or the environment.
· Scholarship Funds: These funds provide financial aid to students.
· Unrestricted Funds: These funds give the foundation flexibility to address the most pressing community needs.
· Legacy Funds: These funds are established through planned gifts and can support causes in perpetuity.
Work with the foundation’s staff to create a plan that outlines your giving strategy.
Consider the types of assets you can donate, such as cash, securities, real estate, or personal property.
Decide on the timing of your gift—whether it will be a current gift, a deferred gift, or a combination of both.
Consult with your financial advisor, attorney, and tax professional to ensure your gift plan aligns with your overall financial and estate planning.
Discuss the tax implications and benefits of your planned gift.
Ensure all legal documents are in place, such as your will, trust, or beneficiary designations.
Complete the necessary paperwork to establish your fund with CFAAC.
Make your initial contribution to the fund.
Define any specific terms or conditions for the fund, such as grant-making criteria or naming the fund.
Work with CFAAC’s staff to manage your fund and monitor its impact.
Participate in regular reviews of the fund’s performance and grant-making activities.
Receive reports on the outcomes and impact of your grants.
Stay involved with the foundation by attending events, participating in site visits, and joining advisory committees.
Share your story to inspire others in the community to give.
Periodically review your gift plan free of charge to ensure it continues to meet your philanthropic goals and financial situation.
Make adjustments as needed, in consultation with the foundation’s staff and your professional advisors.