There are numerous advantages of planned giving for both nonprofit organizations and donors. Donors safeguard their legacies through planned giving, while organizations ensure a financially secure future for themselves.
Five advantages of planned gifting for charities
Those nonprofit organizations with robust legacy-giving initiatives will endure regardless of the circumstances. Suppose you're attempting to persuade your board or employer to make new investments. In that case, you'll need to demonstrate the benefits of planned giving and how a successful program can support your organization's goal for decades.
1. Planned gifts safeguard the future of an organization.
A significant advantage of planned gifts is that they guarantee future financing for an organization. There are other ways to donate a planned gift, but the most common one is through a bequest in a will. They are also occasionally provided huge sums of money that a charity can invest or use to generate a long-term "income."
For planned gifts to remain in donors' wills over time, nonprofits must manage their connections with planned gift contributors. Nonetheless, they can utilize this anticipated cash to budget and plan for the future, including economic difficulties.
Blackbaud data indicates that some organizations receive more than 25 percent of their annual revenue from planned gifts. Blackbaud has demonstrated that planned gifts increase by approximately 5% annually, even during recessions when other revenue sources fall. The more planned gifts an organization can secure, the better off it will be when other giving channels decline.
In addition, when the United States increased the standards for the standard tax deduction in 2017, charitable contributions from individuals declined for the first time in over five years. By investing in legacy initiatives today, nonprofits will benefit from planned gifts and be better positioned to recover future losses of this nature.
2. Planned giving delivers the highest return on investment of all fundraising methods.
Another advantage of planned giving is that these gifts are frequently substantial yet relatively inexpensive to secure. As a result, planned giving delivers the highest return on investment among all fundraising methods.
On average, charities may anticipate a return of $56.83 for every dollar invested in fundraising bequests. Compared to regular giving, large giving returns $33.33 per dollar, whereas regular giving returns $8.41 per dollar.
One of the greatest advantages of planned giving is its average return on investment, which exceeds $50 per dollar spent.
Not only do planned gifts have a high return on investment, but they are also typically greater than other gifts. On FreeWill, the average bequest to a nonprofit organization is $50,424. The average value of a planned contribution is $5,000, which is significantly higher than the typical online cash give of $128.
3. Annual donation is increased via planned giving.
Some nonprofit professionals are concerned that planned gifts would reduce their organizations' annual contributions. However, it has been discovered that scheduled gifts result in a 75 percent increase in annual donations.
Dr. Russell James, a professor at Texas Tech and expert in planned giving, undertook an in-depth investigation of charitable giving in 2014. He discovered that donors who include a charity will raise their annual contributions by more than $3,000.
In addition, the Center on Philanthropy at Indiana University discovered that even among those who did not increase their contributions, 47% of contributors maintained their yearly giving rates, resulting in no decrease in annual giving revenue.
It has been demonstrated that planned giving increases annual contributions from donors who leave legacies.
This implies that planned giving offers an extraordinary potential to support your organization's future and bring in substantial gifts immediately. Efficient donor stewardship is essential. You must cultivate and sustain relationships with these donors to increase annual donations. According to research, if you do so, these donors will likely donate again and in much higher amounts, resulting in a rise in annual giving revenue.
4. The accessibility of bequest donations inverts the typical donor pyramid.
Including a charitable bequest in a donor's will does not affect a nonprofit's normal financial flow. As a result, planned giving is available to anyone who writes a will, regardless of their income. By investing in planned gifts, nonprofits can benefit from the loyalty of any ardent donor.
Small-dollar donors account for the vast majority of planned gifts at most organizations. When researching planned giving, the founders of MinaWill spoke with numerous organizations. Seventy percent of a significant environmental organization's planned giving money comes from donors who are not in the top ten percent of donors. And a university in the Midwest revealed that 38% of its bequest funds come from donors who have never given before.
This fact, along with the ability of planned giving to raise annual donations, indicates that a real benefit of planned giving is its ability to effectively reverse the traditional donor pyramid.
Donors who provide bequests typically occupy the pyramid's apex, first becoming yearly or significant donors. And planned giving officers are frequently a component of their organizations' big donations teams. Consequently, they adopt these teams' fundraising techniques. They locate high-net-worth prospects, meet with them, and progressively obtain bequest pledges.
A significant advantage of planned giving is that it inverts the typical donor pyramid, allowing bequests from more donors than just huge donors.
However, smaller donations and long-term savers are frequently in the best position to leave a substantial legacy. By managing these donors, charitable organizations can tap into a reservoir of untapped planned giving revenue.
In our 2020 Planned Giving Report, we discovered that more than 12% of will-writers, which is double the national average, will leave a donation to charity when prompted during the estate planning process. This is still the case even if their estates are worth less than $200,000. Suppose you can expand your pool of prospects, simplify the will-making process for your supporters, and encourage them to donate. In that case, your organization can raise more money from more donors.
5. Planned giving creates more giving chances.
As stated previously, many individuals cannot make annual or substantial charitable contributions throughout their lifetimes. However, this does not imply that they would not if given a chance.
The sporadic donors, volunteers, and other supporters at the base of the donor pyramid are still strongly invested in the organization. Therefore, NGOs should provide donors with as many donation options as feasible. These include solutions that have no direct impact on income.
Similarly, a sophisticated planned giving program simplifies securing non-cash gifts from wealthy donors. Once a donor has made a bequest (often a percentage of their inheritance), they will be primed to consider gifts other than cash.
This might serve as a springboard for discussions about additional ways your supporters can participate in your cause. For example, requesting a gift from a donor's IRA account lessens their sense of financial loss because it is far more doable than sacrificing a substantial salary.
Three advantages of planned gifting to donors
How should you respond to the question "Why leave a bequest?" in donor interactions? Planned donations provide contributors several advantages, including membership in an organization's legacy society and tax benefits. If nonprofits adequately communicate these advantages, planned giving can be immensely effective for raising donations and advancing their missions.
1. Donors can leave a lasting impression on themselves or their families.
Donors can leave a lasting legacy through planned giving. Because of this, planned gifting initiatives are frequently referred to as legacy programs or societies. Donors benefit from planned gifts because they can have a lasting impact on an important cause, whether they are leaving a legacy as a homage to a loved one or creating a legacy for themselves.
While great donors can have a significant impact during their lifetimes and are infrequently acknowledged with naming possibilities, charity bequests are one of the few means by which any donor can receive comparable recognition. NGOs frequently provide benefits like public acknowledgments or special events to recognize these donations. Some colleges even offer memorial scholarships in honor of the giver.
By asking contributors with planned gifts to join a legacy society, charities will enhance ties to their mission. And this care can be crucial to guarantee the longevity of the planned contribution. Many bequest donors alter their charitable intentions as they amend their wills over time. Nonprofits maintain flourishing donor relationships and persuade contributors to include them in their wills by utilizing legacy societies.
2. Donors can guarantee the tax advantages of planned giving for themselves and their heirs.
Depending on the gift type, a few tax benefits are associated with planned gifts. Donors with big estates benefit most from the tax advantages of bequests. Over $11.7 million in estates will incur federal taxes. However, bequests of cash or other assets (such as real estate, automobiles, or stocks) will be deducted from the estate's valuation. This decreases federal estate taxes for the heirs of a donor.
Other planned donation kinds also enjoy substantial tax advantages. For example, charitable remainder trusts are tax-exempt. And when a donor donates real estate, they obtain a tax deduction equivalent to the property's worth and avoid paying capital gains taxes.
Some organizations consider QCDs, or Qualified Charitable Distributions, to be planned gifts. Donors over 70 1/2 years old can use QCDs to make tax-free IRA distributions while satisfying their RMD.
3. Planned donating Donors can select how their contributions are utilized.
One of the primary advantages of planned gifts is that donors have greater discretion over the destination of their funds than with typical annual donations. Typically, planned donations are part of a legal agreement, such as a donor's will. This implies the donor can specify how or where they would like their charitable contribution to be used (within certain limitations depending on the organization receiving it).
This is another excellent incentive for nonprofit organizations to sustain donor stewardship. When donors revise their wills, gift officers can inform them where their donations will have the greatest impact and leave a lasting legacy.