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Articles From Lumsden McCormick

The Importance of Planned Gifts for Nonprofits

Even though current donations serve as vital support for your not-for-profit organization, it is imperative not to overlook planned, legacy, or deferred gifts. These types of contributions, typically arranged through wills and living trusts, often carry larger financial weight. While direct involvement from employees may not be necessary when donors establish gifts through their estate plans, it is essential for your development staff to understand the process and effectively encourage such contributions.

Understanding the Process

In addition to gifts made through wills and trusts, planned donations can also involve beneficiary designations on retirement accounts like 401(k) plans and IRAs, as well as life insurance policies. Furthermore, more complex estate planning instruments such as charitable annuities and charitable remainder trusts may be utilized.

Donors must specify your nonprofit's full name and address in a legally binding document, such as a will. While your organization's tax ID number can be helpful, it is not always required. Additionally, the legal document must describe the donation and outline any restrictions on its use by your nonprofit.

Making the Case

It is insufficient to passively wait for windfall donations; proactive pursuit of planned gifts is necessary. For instance, prominently feature information on planned giving across various platforms such as your website, newsletters, brochures, and promotional materials. Do not assume that only older, long-standing donors would be interested; many individuals may not consider making a planned gift without proper education on the matter.

Recognize that even affluent individuals may neglect proper estate planning. While they may express intentions to leave assets to your organization verbally, without written documentation, state intestacy laws can lead to unintended outcomes. Utilize subtle and sensitive messaging to emphasize the importance of formalizing these intentions.

Furthermore, highlighting the tax advantages of acting promptly can be persuasive. Given the current estate tax exemption of $13.61 million in 2024, which is set to revert to an inflation-adjusted $5 million in 2026 unless Congress intervenes, supporters whose estates may become subject to estate taxes after 2025 may be incentivized to incorporate planned gifts into their estate plans before then.

Demonstrating Impact

Many donors expect planned gifts to support special projects or programs rather than day-to-day expenses. While providing ideas for potential special uses is beneficial, it is also essential to articulate the case for contributing to your general operating fund.

Gaining a Competitive Edge

Donors are more inclined to leave gifts to well-established organizations with strong reputations. Therefore, if your nonprofit has a lengthy track record and solid standing, you likely possess an advantage. Nevertheless, it is never too early to cultivate relationships with financial and legal advisors in your community who can assist individuals with estate planning. Additionally, securing planned gifts from committed stakeholders such as board members can enhance your organization's financial stability.

Please feel free to contact us with any inquiries or concerns, both our nonprofit and individual and family wealth teams can assist your organization.

The Importance of Planned Gifts for Nonprofits

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Bob has considerable expertise in auditing and accounting of exempt organizations, specifically educational institutions, arts and entertainment organizations, and other nonprofit organizations, as well as employee benefit plans, auto dealerships, and other commercial entities, where he manages and oversees the all services to these organizations. Additionally, he has significant experience in grant compliance, audits in accordance with Government Auditing Standards and the Uniform Guidance, financial reporting, and taxation of exempt organizations. Bob is a member of the Firm’s Accounting and Auditing Technical Committee and is the chairperson of the Financial Accounting Standards Board Subcommittee. He was named partner in 2024.


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