Planned Giving 101: The Basics of Leaving a Legacy Through Charitable Gifts

Planned giving, also known as legacy giving, is one of the most meaningful ways to support the causes you care about while planning for your financial future. Unlike spontaneous donations, planned giving involves thoughtful consideration of how you can make a long-term impact through your estate or financial plans. This introductory guide will walk you through the essentials of planned giving, its benefits, and how to get started.

What Is Planned Giving?

Planned giving refers to the process of including charitable donations in your long-term financial or estate plan. These gifts are often executed after your lifetime but can also provide benefits during your life. Common types of planned giving include bequests in a will, beneficiary designations on retirement accounts or life insurance policies, and charitable trusts.

Planned giving is not just for the wealthy or retirees—it’s a powerful tool for anyone who wants to leave a lasting legacy.

Why Planned Giving Matters

Planned giving allows you to align your wealth with your values, ensuring your resources benefit the causes closest to your heart. It provides charities with much-needed financial security and enables donors to contribute more significantly than they might through regular donations.

For donors, planned giving offers financial and emotional rewards:

• Tax Benefits: Reduce estate, income, and capital gains taxes.
• Peace of Mind: Know that your legacy will support important causes.
• Flexibility: You can adjust your plan as your circumstances change.

For charities, planned gifts provide a foundation for long-term planning and sustainability.

Types of Planned Giving

1. Bequests

Bequests are one of the simplest and most common forms of planned giving. They involve naming a charity in your will or trust to receive a specific amount, percentage, or asset. For example, you could leave 10% of your estate to an animal shelter or designate your home to a local food bank.

2. Beneficiary Designations

You can name a charity as the beneficiary of retirement accounts (like an IRA or 401(k)), life insurance policies, or investment accounts. This option bypasses probate and ensures the charity receives the funds directly.

3. Charitable Trusts

Charitable trusts, such as Charitable Remainder Trusts (CRTs) or Charitable Lead Trusts (CLTs), provide income to either the donor or the charity while preserving assets for heirs. Trusts can be structured to meet both philanthropic and financial goals.

4. Gifts of Appreciated Assets

Donating appreciated assets, such as stocks, real estate, or artwork, can avoid capital gains taxes while allowing you to claim a deduction for the full market value. This strategy is ideal for individuals holding assets they no longer need.

5. Endowments

An endowment is a fund established within a charity that provides ongoing support. The principal amount remains invested, and the interest or income is used to fund programs.

6. Life Insurance Gifts

You can donate an existing life insurance policy or take out a new one with the charity as the beneficiary and/or owner. This option is cost-effective and can result in a significant gift.

Benefits of Planned Giving

For Donors

1. Tax Savings: Planned gifts often reduce estate taxes, provide income tax deductions, and avoid capital gains taxes on appreciated assets.
2. Leave a Legacy: Planned giving ensures your values live on through meaningful contributions to causes you care about.
3. Financial Flexibility: Many planned giving options, such as revocable bequests, allow you to adjust your plan during your lifetime.
4. Peace of Mind: Knowing your gift will make a lasting impact brings emotional fulfillment.

For Charities

1. Long-Term Stability: Planned gifts allow charities to invest in strategic growth and sustainability.
2. Program Expansion: These gifts often fund large-scale initiatives or create endowments.
3. Predictable Funding: Charities can plan for the future with confidence knowing they have incoming legacy gifts.

How to Get Started

Step 1: Reflect on Your Values

What causes or organizations are most important to you? Whether it’s education, healthcare, environmental conservation, or the arts, identifying your values will guide your giving strategy.

Step 2: Choose the Right Giving Option

Consider your financial situation, goals, and preferred method of giving. For example, if you want to avoid capital gains taxes on appreciated stock, a direct donation might be ideal. If you prefer ongoing income, a charitable trust could be a better fit.

Step 3: Consult With Advisors

Planned giving involves both financial and legal considerations. Work with an estate planning attorney, tax advisor, or financial planner to ensure your gift is structured correctly and maximizes tax benefits.

Step 4: Engage With Charities

Reach out to the organizations you want to support. Many charities have planned giving specialists who can guide you through the process and help you structure your gift to align with their needs and your goals.

Step 5: Document Your Plans

Include your planned gifts in your will, trust, or beneficiary forms. Keep records of your intentions and share your plans with your family to avoid misunderstandings.

The Importance of Planned Giving

Planned giving is a powerful way to ensure your legacy reflects your values while making a lasting impact on the world. It’s not just a financial decision—it’s a commitment to the causes that matter most to you. By taking the time to plan your gifts thoughtfully, you can make a meaningful contribution that benefits both charities and future generations.

Planned giving offers a unique opportunity to combine your philanthropic goals with smart financial planning. Whether you’re just starting to think about your legacy or ready to take the next step, planned giving is a rewarding way to create a brighter future.

Ready to Explore Planned Giving?

Learn more at the Buried in Work Planned Giving Hub.