Planned Giving 101
Written by Matthew Myers J.D., LL.M. | Planned Giving Representative
Lawyer at Sweeny, Wingate & Barrow P.A.
If you have read the Bible or heard it proclaimed, you know that it has much to say about both giving and inheritance. For example, as Jesus said in Matthew 6:19- 21: “Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.”
As a mere mortal and a lawyer at that, I could not possibly add to such a powerful truth. However, for those who already desire to follow Jesus’ teaching, with this article I do hope to provide a brief summary of some of the other practical benefits of what is known as “planned giving,” which is giving that is intended to take effect at some point in the future or over a period of time. Common examples of planned giving include a bequest in a will, establishing a charitable trust, or donating a remainder interest in property.
1. First and foremost, any type of giving, whether deferred or immediate, gives the donor the ability to fill needs and support causes that are meaningful to the donor and, through the donee’s use of the gift, to help shape and care for the world in a way that the donor would like to see manifested. Moreover, for the donor, giving often brings the intangible mental benefit of realizing our purpose within creation. “For we are God’s handiwork, created in Christ Jesus to do good works, which God prepared in advance for us to do” (Ephesians 2:10). Needless to say, we each owe a tremendous debt to the innumerable sacrifices of those who came before us, and we each have the opportunity to join in that sacred call ourselves by our giving.
2. Perhaps the next most often cited benefit of planned giving is that it allows donors to structure giving in a way that maximizes tax efficiency. For example, rather than giving a bequest at death, which does not allow for an income tax deduction to the donor, a lifetime gift of a remainder interest or establishing a charitable trust with a right to income from the trust for life may allow the donor to claim an income tax deduction at the time of the gift. In addition, charitable gifts during life or at death may allow the donor to eliminate or lessen the impact of federal and state estate taxes if the donor would otherwise be subject to such estate taxes. Donors should take note that charitable tax planning is a complicated matter and that the assistance of a qualified professional is critical to avoid mistakes and missed opportunities.
3. Planned giving can help donors provide larger gifts than they otherwise would through annual direct giving, and not merely because of potential tax efficiencies. For example, a donor can give a remainder interest in property and reserve a “life estate” for themselves to continue enjoying the full use and benefit of the property for the donor’s remaining life. Similarly, donors can transfer property to a charitable trust and receive annual distributions from the trust, either for the life of one or more persons or a fixed number of years, with the remainder going to one or more charities (known as a charitable remainder trust). Alternately, the trust can pay one or more charities for a number of years and then leave the remainder to such other beneficiaries as the donor desires (known as a charitable lead trust). And, of course, a bequest in a donor’s will does not require the donor to part with any present interest at all.
4. Because planned giving allows for larger gifts, it can help achieve recognition for the donors and/or the purpose of the gift if desired. For example, an organization may recognize donors at certain levels of giving, or the donor may wish to memorialize a loved one by establishing a specific fund with the organization. Moreover, although Jesus also warns us not to give for the wrong reasons as recorded in Matthew 6:2, I would submit that recognition can be altruistically motivated when the intent is to encourage others to support a particular cause or educate people about a particular need. Of course, one may certainly donate anonymously with planned giving and, in fact, planned giving can actually help accomplish anonymity with regard to larger gifts (and much more safely than a suitcase stuffed with large bills).
5. Planned giving also allows the donor to establish a family legacy of giving through the family’s participation in the gifts, whether directly or indirectly. At a minimum, the donor’s family will see the value placed on charitable giving by the donor, which will in turn increase the likelihood the family members will adopt a sacrificial mindset as well. Further, a donor may even designate family members to oversee (either immediately or as successors) certain types of giving vehicles such as charitable trusts, foundations, or donor-advised funds.
6. Alternately, for donors who have limited family, planned giving can connect the donor with organizations and professionals that can assist the donor with financial management over assets that also benefit the donor as well as any spouse or dependents that may rely on the donor. Planned giving may even help establish relationships that can assist with personal and medical needs or to ensure the care of a beloved pet if the donor is no longer able to do so.
7. Last but not least in the eyes of estate planners such as myself, planned giving allows donors the opportunity to review their entire estate plans to ensure that the overall plan is sound and that charitable and non-charitable beneficiaries alike are provided for as the donor intends. Careful planning may even have the effect of reducing the likelihood of estate litigation that would undermine the donor’s estate plan and waste assets.
In summary, there are many practical reasons for giving and planned giving in particular. If you would like to explore your options further, I would encourage you to review additional information provided by Fortify Foundation and to contact them or a qualified estate planner.
Matthew J. Myers