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Charitable Giving and Planned Gift Programs: Ten Points to Remember

This article was edited and reviewed by FindLaw Attorney Writers | Last reviewed March 26, 2008

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Every well-run charitable organization is at any point in time in the midst of some phase of a capital campaign. Board members and other volunteers assisting in the identification and cultivation of prospective donors are the critical participants in the process. Because a significant portion of the campaign goal will be raised through planned gifts of one form or another, the following ten points should be understood by all involved in the fundraising effort.

1. Be aware that many prospective donors want to maintain control over the family.s capital.

2. Asking for large cash gifts from some individuals can generate a negative reaction.

3. Lifetime gifts of appreciated stock can be best for both parties.

Example: Assume Donor owns XYZ Co. stock with cost basis of $10,000 and FMV of $100,000 and wishes to benefit Charity.

If Donor sells and pays capital gains taxes of $18,000 ($90,000 x 20%), Donor only has $82,000 left to give to Charity. An $82,000 charitable deduction is worth about $32,000 in top 39.6% tax bracket, so Donor only saves about $14,000 in taxes. And Charity only gets $82,000.

However, if Donor gives stock to Charity, Donor avoids the capital gains tax and gets a full $100,000 charitable deduction that produces tax savings of almost $40,000. And Charity gets the full $100,000.

4. Donor-advised funds are for donors wishing to maintain control over grants.

5. Charitable remainder trusts are for donors wishing to retain the income.

6. Gift annuities are better than charitable remainder trusts in many situations.

7. Charitable lead trusts are for donors wishing to keep the capital in the family.

8. Private foundations allow donors to keep control over the capital and the grants.

9. Use of IRAs and pension benefits at death for charitable giving is very taxwise.

10. Bequests and testamentary provisions are the lifeblood of a planned giving program.

For further information, see our Charitable Giving and Tax-exempt Organizations practice.

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