Did you know that roughly $84 trillion in assets is expected to be donated, spent, and inherited in the coming decades as the large Baby Boomer generation ages?

The high ROI of planned gifts and their accessibility to wider groups of donors has always made them a smart investment of your time and development resources. But this “Great Wealth Transfer” is what makes planned giving an even more significant opportunity for nonprofits right now.

To tap into the power of planned giving, you’ll need not only a process for running your program (that’s the easy part with today’s tools) but also the ability to confidently speak about planned gifts and all of your donors’ options. Training your team and developing their communication skills will be essential.

While you should leave explicit financial or estate planning advice to the professionals, there are other steps you should still take. You should instead focus on explaining the different types of gifts that your nonprofit can accept and what their positive impacts would be on your mission. 

Categories of Planned Gifts

It can be helpful to group planned gifts into three general categories: 

• Gifts for the future
• Gifts that pay donors back
• Other tax-savvy gifts

These categories are broad enough to include other forms of non-cash giving that nonprofits often manage similarly to or as part of their planned giving programs. They’re also framed in appealing ways that emphasize the benefits donors receive from them. Try using this language on your Ways to Give page or planned giving microsite—here’s an example from the National Museum of Wildlife Art.

Gifts for the Future

Also referred to as deferred planned gifts, this is the most popular category because it contains the easiest and most accessible forms of planned giving. They include:

• Bequests. With a bequest, a donor adds a stipulation to their will that your nonprofit receives either a set dollar amount or percentage of their estate when they pass away.
• Beneficiary designations. A donor can name your nonprofit as a beneficiary of a life insurance policy.
• Retirement accounts. A donor can also gift any retirement funds that they won’t use to your nonprofit.

These gifts don’t impact a donor’s day-to-day cash flow and/or draw from assets that a donor might not intend to use in the future. This makes them relatively easy asks once you’ve built a relationship, introduced your planned giving program, and discussed the impact that planned gifts can have on your mission.

Gifts that Pay Donors Back

This category of planned gifts involves financial arrangements that are generally more complex than straightforward bequests and gifted accounts, and they’re preferred by major donors. 

These are among the most common types of planned gifts that provide donors with regular return payments:

• Charitable gift annuities. With an annuity, a donor gifts your nonprofit with an irrevocable gift of cash or securities. In exchange, they receive a fixed income payment according to the terms of the annuity, and your nonprofit saves and invests the funds. When the agreement’s terms are up, your nonprofit receives the leftover funds. 
• Charitable remainder annuity trusts. Charitable remainder trusts work similarly to charitable annuities but are structured through trusts that donors establish specifically for giving to one or more charities. An initial contribution is invested and grown, and both the donor and nonprofit receive fixed payments for a specified period.
• Charitable remainder unitrusts. Another variant of the financial arrangements above, a unitrust differs in that its payments depend on the current fair market value of the trust’s assets. Like with annuities, the nonprofit receives the remaining funds at the end of the term. The donor also receives a helpful inflation buffer for their income payments and can continue contributing to the unitrust once it’s established.
• Pooled-income funds. A type of charitable trust that functions similarly to a mutual fund, nonprofits themselves create pooled-income funds to manage batches of large donations. The funds are managed and invested, and donors receive variable income payments based on the fund’s performance and their share of it. The nonprofit receives a donor’s shares when they pass away.

These types of planned gifts bring a wide range of tax benefits, like immediate income tax deductions and avoidance of capital gains and estate taxes, but they’re complicated. Giving motivations for these gifts can also be complex since donors might be more or less interested in any combination of benefits—tax breaks, receiving fixed payments, the flexibility to contribute a variety of types of assets—in addition to the impact they’ll have on your work.

If your nonprofit wants to offer these options, you’ll need to work closely with the donor to understand their wealth and estate planning goals. By understanding the general forms that these agreements can take, you can then get the ball rolling by offering options for the donor to discuss with their financial planner. 

Other Tax-Savvy Gifts

Other forms of giving don’t fit cleanly into either of the categories above but are still great opportunities for nonprofits to diversify their giving programs. They include:

• Charitable lead trusts. Think of these as the opposites of charitable remainder trusts—a donor contributed to a charitable trust, the nonprofit receives a fixed income stream, and the remaining funds after the terms of the agreement go back to the donor or their heirs. The primary benefit of this giving method is to reduce estate taxes while still ensuring that wealth can be passed to a donor’s heirs. For nonprofits, it’s an extremely helpful way to diversify and stabilize their revenue streams.
• Retained life estates. With this type of gift, a donor transfers a property deed or title to a nonprofit of their choice but retains the right to use the property. When the term is up, the nonprofit receives the property in full and can sell or keep it. Retained life estates give donors a philanthropic way to simplify their estate settlement plans while reducing estate taxes.
• Other non-cash gifts. Outside of charitable financial arrangements and deferred gifts of assets, donors can donate a wide range of assets at any time. Common examples include:
• Qualified Charitable Distributions from IRAs, direct transfers that count towards a donor’s required minimum distributions, reduce income taxes, and function as recurring donations.
• Securities and crypto. Donors can also donate gifts of stock or cryptocurrency directly to nonprofit organizations through their brokerages or crypto-specific platforms.
• Donor-Advised Funds (DAFs), highly flexible funds used to save and invest money specifically for charitable purposes, represent a significant and growing opportunity for nonprofits—learn more with FreeWill’s complete guide to DAFs.

This can be a diverse group of gifts, so you’ll need to get to know donors, their philanthropic goals, and motivations before suggesting one. Some, like DAF or stock giving, can become regular parts of your development operations, while others will likely be less common and can be worked out on a case-by-case basis.

About the Author

Patrick Schmitt

Patrick Schmitt, Co-CEO of FreeWill, and fellow FreeWill co-CEO Jenny Xia founded at Stanford University’s Graduate School of Business in 2016. FreeWill’s charitable giving platform makes it easier for nonprofit fundraising teams to unlock transformational gifts, and to date has generated over $6.6 billion in new gift commitments for thousands of nonprofit organizations. Patrick hosts FreeWill’s popular webinar series, educating thousands of nonprofit fundraising professionals each month about planned and non-cash giving strategies.

Before FreeWill, Patrick was the Head of Innovation at Change.org, where he helped grow the organization to 100 million users in four years. Prior to that, he ran email marketing for President Obama and served as Campaign Director for MoveOn.org.