When most people hear the words “planned giving,” their eyes glaze over.
In the over-50 population, there’s a general lack of awareness and understanding about the concept. This is too bad, because with the collective wealth of baby boomers, their planned gifts can have significant social impact.
Planned giving is the process of making a sizable charitable gift either during a donor’s life or at their death as part of their financial or estate plan.
So, what does designating a charitable gift in a will or an estate plan entail?
Well, first and foremost, it requires thinking about one’s death—an uncomfortable topic for many people and downright taboo in some cultures.
The process of making a planned gift may also conjure up complex financial and technical legal protocols. That’s why many people turn to an estate planning attorney when contemplating distribution of their assets.
An interesting phenomenon occurs when estate planning attorneys begin their discussion with clients. It seems that reminding clients they can make an impact after they’re gone really motivates charitable giving.
And people are even more interested in making a gift if they’re told that others leave gifts to charities in their wills.
Dr. Russell James is director of graduate studies in charitable financial planning at Texas Tech University. He wrote in his article “What motivates people to leave a charitable gift in a will?” that asking an individual if they would like to leave any money to charity in their will doubled the frequency of their including a gift as compared to not raising the question at all.
When the question was phrased, “Many of my clients like to leave money to charity in their will. Are there any causes you’re passionate about?” the participation rate more than tripled, he wrote.
Statistics show most individuals over 55 have thought about how they’d like to distribute their assets upon their death, but less than half have a plan that documents where their money will go. When asked why they don’t complete an estate plan to document their wishes, 47% said they “hadn’t gotten around to it” and 29% said they “don’t think they will have enough assets to leave anyone.”
There are three major hurdles to planned giving. First, individuals must be willing to think about their death. Second, they must be willing to draw up a formal plan, and third, many need to be reminded about planned gifts as an option.
The real benefits of planned giving may outweigh the inertia of doing nothing.
Most people believe that a legacy is one of the greatest gifts they can give those they leave behind. A legacy reflects what we find meaningful in life.
A planned gift to a charity is about our desire to reflect upon our life history. It’s that personal connection that motivates individuals to bequeath money to an organization that means something to them.
For example, my mother and father bequeathed money to the Michael J. Fox Foundation for Parkinson’s Research as both—one a caregiver, the other a patient—have been touched by the ravages of the disease. Parkinson’s is part of their life story, and helping to find a cure will be part of their legacy.
I have a friend who is an insurance broker. He tells me one way an individual can turn their annual giving into a considerably larger donation is to make the nonprofit the beneficiary of a life insurance policy.
The most tax-effective way to donate life insurance is to transfer an existing policy so that the charity becomes the owner and beneficiary. You’re entitled to an immediate charitable deduction for income tax purposes. If you continue to pay the premiums, each payment is also a tax deductible charitable donation.
My friend states that one of the benefits of insurance as a charitable gift vehicle is that it is private. No one needs to know but the owner of the policy.
Whether this strategy is right for you depends on your specific circumstances and your family’s financial situation.
If you would like to learn more about making a charitable gift to any organization, Senior Concerns’ pro bono legal advisors would be happy to sit down with you. Appointments can be made by calling (805) 497-0189.