Embarking on the journey to launch a planned giving program is analogous to setting sail into the philanthropic seas. To navigate these waters effectively, nonprofits must map a well-crafted strategic plan. This plan acts as a compass, directing the nonprofit toward achieving its long-term goals. However, before exploring the specifics of planned giving, nonprofits need to confirm their core vision and mission to ensure their planned giving programs align seamlessly with their principal goals. This alignment helps to solidify the program becoming an integral part of the nonprofit's broader strategy, thereby contributing extensively to its sustained impact.

Strategic planning may start as a conversation amongst board members; however, it's important that a larger group of stakeholders, including current donors, volunteers, and community members, are also engaged to provide valuable insights. These insights will assist nonprofits in understanding their constituents' needs and preferences, enabling the development of a more tailored and effective planned giving strategy.

Strategic planning also involves assessing the nonprofit's internal capabilities, including the skills and resources that are vital to sustain a planned giving program. It is important to note that all strategic plans need regular monitoring and revisions to ensure continuous improvements to ever evolving circumstances.

To minimize potential liability for the nonprofit, policies and procedures should address all stages in the gifting life cycle. The gift acceptance policy should be the biggest section and precisely outline what is an acceptable gift and what type of gift needs further evaluation. For example, while a gift of cash and marketable securities is generally free from legal issues, gifts of land and non-fungible tokens (NFTs) can cause all kind of headaches.

For those gifts that need further review, the gift acceptance policy should create a decision tree for accepting or denying a gift. Such a process might include creating a gifting committee that is responsible for making these decisions based on the organizational risk and the organization's overall capability for accepting the gift.

Diversification is a hallmark of a resilient planned giving program. Some key planned giving instruments include, but are not limited to, bequests, charitable gift annuities, charitable remainder trusts, donor-advised funds, retirement plans and life insurance policies.

a. Bequest by will or living/revocable trust: Bequests, or gifts left to a nonprofit after a donor has passed away, make up most of the planned gifts. Bequests allow the donor to retain complete control over their assets during lifetime with a transfer occurring at death to their favorite nonprofits via their Will or Living/Revocable Trust. Bequests can be structured as a specific dollar amount, in-kind, a percentage or all of the donor's estate, or what is referred to as the residuary of a donor's estate. It is important for a nonprofit's website to include a tab on how to properly name the charity in a donor's will or living/revocable trust. Providing sample language is even more helpful.

b. Charitable Gift Annuity: A charitable annuity is a private agreement between a donor and a nonprofit that involves transferring cash or other property to the nonprofit in exchange for an annual income stream payable annually, quarterly or on a monthly basis until the pay period ends. The term can be for a fixed number of years or for the life of the Donor. Donors are eligible for a partial tax deduction at the time of their original gift.

c. Charitable Remainder Trust: A charitable remainder trust is an irrevocable trust that pays income to the beneficiary over the life of the beneficiary or a period of years (not to exceed 20 years). After the trust term ends (whether at the death of a beneficiary or at the expiration of a fixed term of years), the remainder is distributed to the designated charities. If the donor contributes assets with significant built-in gain, when the charitable remainder trust sells the assets, it pays no capital gains at that time and can reinvest the proceeds into a diversified portfolio with a more predictable income stream. If a life term is used, the untimely death of a beneficiary can be protected against through insurance.

d. Donor-Advised Fund: A donor-advised fund (DAF) is a popular tool for charitable giving. DAFs can provide donors a simplified procedure for making charitable gifts without the added costs of a private foundation. While private foundations can be structured to give donors more control over the investment and use of funds, they are subject to minimum distribution rules, annual accounting and tax filings and excise tax penalties for several areas of mismanagement. Contributors to DAFs are free from these costs and burdens since the sponsoring organization (e.g., The Chicago Community Trust, Fidelity Charitable, or Schwab Charitable) controls the donated funds. In addition, donors can generally deduct a larger portion of their contributions to DAFs as the adjusted gross income percentage limit for gifts to DAFs is higher than gifts to private foundations.

e. Beneficiary designations of retirement assets: A retirement plan, like an IRA or a 401(k), can potentially be subject to two layers of tax upon the donor's death before the assets are received by a beneficiary. For example, the proceeds from an IRA may get charged with a 40% federal estate tax if the assets pass to a nonspouse, along with an income tax (e.g., 30%). Accordingly, naming a charity as a beneficiary can be a more tax-efficient and simpler way for a donor to include their favorite charity in their estate plan as completing a beneficiary change form is all that is needed to effectuate this gift at death (be mindful that certain retirement plans require spousal consent if the spouse is not named as a primary beneficiary). A charity that is named as the beneficiary does not pay income or estate taxes on the distribution.

f. Beneficiary designations of life insurance: An existing life insurance policy can be another asset to donate especially where the original need for the policy no longer exists (e.g., the kids are all grown up). Including a charity by completing a beneficiary change form provides little work for the donors to effectuate. However, be sure to review your state's insurable interest rules to see if charities can be so named.

Visibility and clear communication are critical for the success of a planned giving program. Nonprofit leaders work to craft effective marketing campaigns directed towards the donor market, providing content that promotes the nonprofit's vision and mission. This is typically accomplished in updates to a monthly newsletter or other organizational publication focused on planned giving.

A dedicated planned giving page on the nonprofit's website provides potential donors with both information on the planned giving process and helps to cultivate a personal relationship with the donor. For example, The Chicago Community Trust has on its website a "Philanthropy & Giving" option which is customized for both "Donors" and "Professional Advisors" depending on the link selected. For example, attorneys use these websites to confirm the name of the charity for purposes of drafting a charitable bequest or to set up a donor advised fund. This streamlined process only encourages generous giving.

In conclusion, the philanthropic seas are evolving, and with a meaningful percentage of charitable contributions accredited to planned giving programs, nonprofits must steer their ship strategically. By applying the advice outlined in this article to building a planned giving program, nonprofits will be better situated to reap the benefits of generous donors, making a meaningful impact on future generations.