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What is Planned Giving?

By Jackie Jacobs

Annual gifts and membership contributions are generally made from one’s annual discretionary income.  One might refer to such outright contributions as impulse gifts.

In contrast, The term “planned gifts,” a term coined 43 years ago by Robert F. Sharpe, require more planning, negotiation and counsel.

Planned giving is a type of charitable giving that allows you to express your personal values by integrating your charitable, family and financial goals. Making a planned charitable gift usually requires the assistance of the charity’s development professional and/or a knowledgeable advisor such as an attorney, financial planner, or CPA to help structure the gift.

Planned gifts can result in immediate income, income to charity over time, or can actually serve to delay a gift for life or a period of time while the donor or others retain income and/or access to the assets used to fund the gift. Because of the current or future charitable benefits, a number of state and federal income tax, capital gains, estate and gift benefits are associated with giving in this way.

Planned giving provides the opportunity to make larger gifts than you may be able to make from your annual income to qualified non-profit organizations.  While some planned gifts provide a life-long income to you or someone you designate, others use estate and tax planning techniques to provide for charity and other heirs in ways that maximize the gift and/or minimize its impact on one’s estate. Whether you use cash, appreciated securities/stock, real estate, artwork, life insurance, a retirement plan, or other assets, the benefits of funding a planned gift can make this type of charitable giving very attractive to both donor and charity.

What are the three types of planned gifts?

  • First, outright gifts that use appreciated assets as a substitute for cash;
  • Second, gifts that return income or other financial benefits to the donor in return for the contribution;
  • Third, gifts payable upon the donor’s death.

The simplest of all planned gifts is a bequest.  Many people discuss this the first time they go to their legal advisor to create their will or estate plan.  In addition to what you may be leaving to family and friends, many choose to remember those organizations, in their will.  A bequest of a set amount or a percentage of one’s estate can be a wonderful way to help ensure that those institutions about which you care for will continue on a strong financial footing.   Remember, no matter the amount of your gift, a bequest provides you with an opportunity to let a charitable organization, synagogue or church know that they were meaningful to you during your lifetime.

Another form of a bequest employed today is leaving all or a percentage of one’s IRA assets to charity.  Many people have multiple IRA or retirement assets accounts.  Charitable beneficiaries are easily added to the account and at the time of the dissolution of your retirement account the funds can be transferred to the named charitable organizations.

What gift plans return income to donors?  Charitable gift annuities make fixed payments, starting either when the gift is made (an immediate-payment gift annuity) or at a later date (a deferred or flexible gift annuity). Some organizations maintain pooled income funds, which commingle donations, pay beneficiaries variable depending on the earnings of the fund, and generally operate like a charitable mutual fund. Charitable remainder unitrusts and annuity trusts are individually managed trusts that pay the beneficiaries either a fixed percentage of trust income or a fixed dollar amount.

Planned gifts can be made with cash, but many planned gifts are made by donating assets such as stocks, real estate, or business interests—the possibilities are endless. Planned gifts can provide valuable tax benefits and/or lifetime income for you and your spouse or other loved one. Charitable gift planning:

  • Uses a variety of financial tools and techniques for giving;
  • Requires the assistance of one or more qualified specialists;
  • Utilizes tax incentives that encourage charitable giving, when appropriate; and
  • Covers the full spectrum of generosity by individuals and institutions, and is based on powerful traditions of giving in the United States.

The techniques of charitable gift planning include both revocable and irrevocable arrangements, gifts available for use at the time they are given and gifts that may not be available until a future date and split-interest gifts intended to balance financial, personal and charitable objectives.  The tools of charitable gift planning include all types of real and personal property and tangible and intangible assets.

What are the tax benefits of planned gifts?

  • Donors can contribute appreciated property, like securities or real estate, receive a charitable deduction for the full market value of the asset, and pay no capital gains tax on the transfer;
  • Donors who establish a life-income gift receive a tax deduction for the full, fair market value of the assets contributed, minus the present value of the income interest retained; if they fund their gift with appreciated property they pay no upfront capital gains tax on the transfer;
  • Gifts payable to charity upon the donor’s death, like a bequest or a beneficiary designation in a life insurance policy or retirement account, do not generate a lifetime income tax deduction for the donor, but they are exempt from estate tax.

Donors should seek charitable gift planning advice from professionals with integrity, expertise, and experience in law, investments, property, tax, and charitable transfers in order to assure both the technical merits of the transfer and the philanthropic quality of the gift.

Need more detailed information?  Always feel free to call me at (614) 338-2365 with your planned giving questions.

Article appears as originally published in the Ohio Jewish Chronicle, July 9, 2015.

Jackie Jacobs is the Chief Executive Officer of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters. 

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