2024's Comprehensive Guide to Legacy Giving for Nonprofits

In the nonprofit sector, understanding legacy giving is essential. This form of giving plays a crucial role in sustaining nonprofit operations and enabling them to plan for the future.

Planned giving is a win-win situation for both donors and nonprofit organizations, providing financial benefits and tax breaks for the donors while securing a stable source of funding for the nonprofits.

In this article, we will delve deep into the importance of legacy giving, its types, and its different benefits to both donors and nonprofits.

Let’s get started.

The potential of legacy giving to bring in substantial funds makes it an attractive fundraising option for nonprofits. Many nonprofits even have dedicated legacy giving pages on their websites, outlining the process and benefits of such donations.

Data and statistics underline the profound impact of legacy giving in the nonprofit sector. According to a report by Giving USA, as of their 2019 study, planned giving accounted for $30 billion of giving over the previous four years.

This data underscores the immense potential of legacy giving, not just as a fundraising method, but as a fundamental pillar of financial security and sustainability for nonprofits.

As such, understanding, promoting, and managing legacy gifts effectively should be an essential priority for all nonprofits.

Definition of Legacy Giving

Legacy giving, also known as planned giving, is a type of philanthropy where individuals choose to contribute a major gift to a nonprofit organization during their lifetime or as part of their final will or estate plan.

Legacy giving is a powerful and personal way to make a significant financial contribution that extends a donor's support beyond their lifetime, helping to ensure the continuation of the organization's mission.

The emotional significance to the donor lies in the knowledge that they are leaving an enduring legacy to a cause they deeply care about. For nonprofits, these gifts often form a substantial part of their funding, providing financial stability and supporting long-term planning.

Legacy gifts are often larger than regular donations, primarily because they are typically given after the donor's passing. They are a key part of a person's final will or estate plan, which means that they come from the donor's accumulated assets over their lifetime and not just from their annual disposable income. These gifts can include valuable assets such as property, stocks, life insurance policies, or retirement funds.

As we've explained, legacy giving is a powerful way for donors to extend their commitment to a cause beyond their lifetime and leave lasting support to an organization they care about.

This section breaks down the different types of legacy giving and what they mean for both donors and nonprofits.

Charitable Bequests

Charitable bequests are a common form of legacy giving where a donor makes a provision in their will to leave a specific amount of money or a particular asset to a nonprofit organization.

Possible assets include stocks and bonds, where the donor leaves the nonprofit organization shares in a company or government bonds that can be sold or held for income. The donor might also choose to leave a portion of their retirement accounts, such as a 401k or IRA, or even valuable items like artwork or jewelry.

These diverse options provide flexibility for donors, allowing them to tailor their legacy gifts in a way that aligns with their financial situations, estate plans, and philanthropic goals.

This type of legacy gift allows donors to support causes they deeply care about beyond their lifetime. Charitable bequests can significantly impact nonprofits, providing them with substantial financial support to carry out their mission. Furthermore, this legacy giving can offer tax benefits to the donor's estate, reducing the tax liability.

Below, you can see an example of a planned giving program from the Chicago Opera Theater. They’ve given this giving society a creative title, the Encore Society, matching their performing arts theme.
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Estate Donations

Estate donations are another form of legacy giving in which donors give part or all of their estate to a nonprofit organization as part of their final will or estate plan. These donations can include assets such as real estate properties, stocks, bonds, and other financial assets.

Similar to charitable bequests, estate donations can offer potential tax benefits, reducing or even eliminating estate taxes, depending on the size and nature of the gift.

Other Forms Related to Planned Giving

Besides charitable bequests and estate donations, there are numerous other forms related to planned giving. These include:

• Gifts of Life Insurance: A donor can name a nonprofit organization as the beneficiary of their life insurance policy or transfer the ownership of the policy to the organization. This allows the donor to make a sizable future gift at a relatively low cost during their lifetime.
• Retirement Assets: Donors can designate a nonprofit organization as a beneficiary of their retirement assets, such as IRAs or 401(k) plans. This can be a tax-efficient way to give, as the organization can receive the full amount of the retirement assets without any tax deductions.
• Charitable Gift Annuities: A charitable gift annuity is a legal contract between a donor and a nonprofit organization. The donor makes a sizable gift to the organization, and in return, they receive a fixed income stream for life.

Each of these forms offers unique benefits to both the donor and the nonprofit organization, making legacy giving a flexible and impactful way of supporting charitable causes.

Legacy giving is not a one-way street. It's a reciprocal arrangement where both the donor and the nonprofit organization derive substantial benefits.

As we delve deeper into this topic, let's explore this relationship and understand how legacy giving can benefit everyone involved.

For the Donors

Legacy giving allows donors to extend their philanthropic impact beyond their lifetime, offering unique benefits.

Tax advantages: Depending on the type of gift and the donor's circumstances, these can include income tax deductions, reduction of estate taxes, and avoidance of capital gains taxes. This makes legacy giving a financially astute strategy for estate planning.

Create a lasting impact: Legacy giving empowers donors with the opportunity to create a lasting impact. This creates an enduring legacy, etching their values and commitment into the future.

Sense of fulfillment: Legacy giving can also offer donors a sense of fulfillment and satisfaction. By planning a significant future gift, donors know they will make a substantial difference in an area they care deeply about, which can provide immense personal satisfaction and peace of mind.

For the Nonprofits

Nonprofits, too, reap significant benefits from legacy gifts.

Predictable income: One of the primary advantages is a predictable source of future income. Legacy gifts, particularly bequests, are often sizable and can substantially boost a nonprofit's finances. This financial security can allow organizations to confidently plan long-term projects, knowing they have funding in the pipeline.

Long-term planing: Legacy gifts also play a critical role in building and sustaining long-term projects or initiatives. Unlike regular donations, which often go toward immediate needs, legacy gifts can be used for strategic, long-term planning, allowing nonprofits to undertake ambitious projects that require substantial funding over time.

Having understood the benefits of legacy giving for both donors and nonprofits, it is important to consider how a nonprofit can successfully promote this form of giving.

This next section will explore strategies nonprofits can utilize to encourage their supporters to consider making a legacy gift. It will provide a comprehensive guide to help nonprofits effectively communicate the impact and benefits of legacy giving to potential donors.

Targeting the Right Audience

Identifying the right audience for legacy giving is crucial for nonprofits.

This begins with conducting comprehensive audience research. This process often entails delving into donor databases, observing patterns, and identifying individuals who are passionate about the nonprofit's mission and capable of long-term giving.

An effective strategy can include segmenting donors based on their giving history, engagement level, and financial capacity. Nonprofits should focus on individuals who consistently demonstrate support, indicating a strong connection to the organization. Moreover, demographics such as age, wealth status, and estate planning status can also provide useful indicators for legacy giving potential.

Crafting a Compelling Message

Once the target audience is identified, the next step for nonprofits is to craft a compelling message that resonates with this group. The message should clearly articulate the importance of legacy giving within the context of the nonprofit's mission and goals. It should underline the long-term impact of a legacy gift and how it aligns with the donor's values and philanthropic aspirations.

Personal stories and examples can be powerful tools in this regard, as they illustrate the real-world impact of legacy gifts. The goal is to inspire donors to see legacy giving as a continuation of their existing commitment to the organization and its cause.

Consider the hypothetical example of Ms. Sarah Johnson. She was a lifelong patron of the local animal shelter, showing unwavering support for their mission of providing care and finding homes for abandoned pets.

Over the years, she regularly donated and even volunteered her time to the organization. As she grew older, she decided to extend her impact beyond her lifetime by naming the shelter as a beneficiary in her will. Her significant bequest allowed the shelter to establish a new veterinary clinic, substantially boosting their capacity to care for and rehome animals. This compelling example underscores how legacy gifts can have profound, lasting impacts, serving as a testament to the donor's values and dedication even after their lifetime.

View the Anti-Cruelty Society in Chicago's Planned Giving page to see how a similar story could easily take place.

Offering Transparency and Trustworthiness

Transparency and trustworthiness form the bedrock of any successful legacy-giving program. Nonprofits should strive to be open about their operations, financial status, and how donations are utilized.

Regular communications, detailed annual reports, and easy access to financial information are ways to demonstrate transparency.

Creating a dedicated webpage for legacy giving on a nonprofit's website can significantly enhance transparency and support effective communication of legacy giving information. This page should provide comprehensive, easily digestible resources and explanations about legacy giving, demystifying the process for potential donors.

The webpage can include details about the types of legacy gifts accepted by the organization, the potential tax benefits for donors, and step-by-step guides on how to make such gifts. FAQs can address common concerns and misconceptions about legacy giving, ensuring potential donors have all the information they need to make an informed decision.

Furthermore, the legacy giving webpage could feature testimonials or case studies of donors who have made legacy gifts, highlighting the positive impact their contributions have had. It could also provide updates on how legacy gifts are being used, reinforcing the organization's commitment to transparency and demonstrating to potential donors the long-term impact their gift could have.

View a great example of a Planned Giving web page from Fighting Blindness here.

Trustworthiness, on the other hand, is cultivated over time. It involves consistently delivering on promises, demonstrating sound financial management, and showing tangible impact from donations.

When nonprofits build relationships with donors, they trust that their legacy gift will be used responsibly and effectively to advance the cause they care about.

Legacy giving is a crucial part of nonprofit fundraising, offering substantial benefits for both donors and nonprofits.

For donors, it provides an opportunity to extend their philanthropic impact beyond their lifetime, allowing them to create a lasting legacy. It can also offer significant tax benefits, making it a beneficial strategy for estate planning.

As we've explored in this guide, legacy giving plays a vital role in sustaining the work of nonprofits and ensuring they can continue to make a positive impact in the communities they serve.

For more insightful tips and strategies on legacy giving and other aspects of nonprofit operations, we invite you to visit our blog. We regularly share valuable content designed to empower nonprofits to maximize their impact.