General Questions & Answers

Is a bequest the same as planned giving?

A bequest is a type of planned giving, and is the easiest planned gift one can make. It’s also the most popular planned gift, and it costs nothing during the donor’s lifetime. A bequest can be included in a will or revocable trust.

Why is planned giving important to a nonprofit?

Planned giving is important to a nonprofit because planned gifts provide future funding (which is not tied to annual gifts) for the organization. A planned giving program is also a sign of legitimacy and signals to the world that the organization is serious about achieving its goals and carrying out its mission.

What is the difference between planned giving and legacy giving?

The terms “planned giving” and “legacy giving” mean the same thing. A planned gift or legacy gift is any major gift, made in lifetime or at death as part of a donor’s overall financial and/or estate planning. Planned or legacy gifts include gifts of equity, life insurance, real estate, personal property, or cash.

What are the 7 steps of preparing a will?

1. List all your assets.
2. Choose beneficiaries and decide who gets what.
3. Choose guardians for minor children/adults who need care.
4. Choose an executor who will ensure your wishes are carried out.
5. Draft your will using an online will service, our will-planning kit, or with the help of an attorney.
6. Make your will official – this is typically done by signing the will in the presence of two witnesses, who also sign.
7. Keep it updated. Be sure to regularly check in and make updates for life changes, including births or deaths, adoptions, business or real estate sales, divorces, or marriages, etc.

What are the four basic types of wills?

1. Simple will: Distributes your assets, allows you to choose any guardians. Best for basic needs.
2. Testamentary trust: This type of will places some assets into a trust for beneficiaries and names a trustee. Conditions may be placed upon the inheritance. Best for those with underage beneficiaries.
3. Joint will: Two testators, typically a married couple, sign a joint will and create a shared estate plan. Best for those seeking lower costs and simplicity when making a will.
4. Living Will: Allows you to make decisions about health care in the event you become incapacitated. Allows you to choose a representative to make decisions for you.

Who are the best planned giving prospects?

Your best planned giving prospects are existing donors who regularly make annual gifts of at least $10 each year. Other top prospects include current and former board members; current and former committee members; volunteers; and staff.

What are the three types of philanthropy?

1. Relief: Seeks to alleviate an immediate need or suffering.
2. Improvement: Seeks to bring about progress
3. Social Reform: Seeks to solve social problems.

What is philanthropy vs charity?

The aim of charity is to provide immediate relief to improve a situation or solve a problem. It is often driven by emotion. Philanthropy is focused on finding long-term solutions to ongoing challenges and problems.

Why is a trust better than a will?

It depends on the situation. Trusts are generally better for large, complicated estates. A trust is private and protects an estate from prying eyes. Trusts can also be resolved more quickly than wills. A will must go through several months of probate and its details are viewable by the public. A trust can also be used to protect assets and individuals; can be used to set conditions on an inheritance; and can offer extra tax advantages to a large estate.  

What to consider before making a will?

1. Who will draft (write) your will? Will you hire an estate attorney, draft it yourself, use an online service?
2. Who will witness your will?
3. Who do you want to be the executor?
4. Who will get what? Don’t consider just assets; include family heirlooms.
5. Do you want to leave any money to charity?
6. Is there a tax-advantaged way to create your will and protect your heirs?

Can you be a philanthropist without donating money?

While the term “philanthropist” is generally understood to mean someone who donates money to a charity, one can also be a philanthropist by giving of one’s time or expertise to help solve a problem or improve a situation.

Who is world’s No 1 philanthropist?

The world’s No. 1 philanthropist is either Bill Gates or Warren Buffett. Both have given billions to charity.

How do you calculate endowment income?

An endowment is a fund that has been set aside more or less permanently for the support of a nonprofit organization, with restrictions on how much may be spent, in order to preserve the fund. If those restrictions are imposed by donors, the fund is a “true” endowment. If the restrictions are imposed by the board of the organization itself, and are therefore subject to change, the fund is a “quasi” endowment. If the restrictions apply only for a set number of years, the fund is a “term” endowment.

In the past, the restrictions on spending usually took the form of a requirement that the “historical” value of the fund not be impaired. In that context, the word “income” would refer to current yields and/or realized gains that the organization would be permitted to spend.

More recently, and in particular in states that have enacted some version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), an organization will adopt spending policies that are intended to preserve the fund, but without specific reference to current returns on investment. Typically these policies will be framed in terms of spending rates expressed as a percentage of the fund corpus, often in the range of three to five percent. The spending rate might be referred to as endowment “income.”

Section 4(d) of the Uniform Act indicates that a spending rate greater than seven percent is presumptively “imprudent.”

What is the 10-year return on endowments?

Obviously investment returns vary from year to year. Most endowment fund managers will seek a return of at least five percent per year, but in any particular year returns might be much lower or even negative. A 2023 survey of endowment funds at fifty colleges and universities with endowment funds of a billion or more dollars showed ten-year returns ranging from six percent to nearly twelve percent.

What is the 20 rule on endowment policies?

 In a state that has enacted the most recent version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), the organization may seek a court order to release restrictions on a “true” endowment fund that has been in place more than twenty years.

What is considered a large endowment?

Colleges and universities typically have large endowments. The largest range from $9.3 billion (Cornell University) to $50.9 billion (Harvard University).

What are the disadvantages of an endowment policy?

GiftPlanning.org PPA

What is the gifting phase in financial planning?

The gifting phase is when an investor changes priorities from minimizing income taxes to minimizing estate tax burdens on their heirs. The gifting phase can help an investor shape their legacy through generous, tax-advantaged gifts to nonprofit organizations.

What is charitable gift planning?

Charitable gift planning is the act of planning your financial support for your favorite charities. It is usually included when creating an estate plan, or as part of an overall financial plan that seeks to minimize income or estate taxes.  

What is the most common type of planned gift?

A bequest is the most common type of planned gift because it is easy to give and receive. It also does not affect one’s cash flow or circumstances during his or her lifetime.

How do you create a planned giving program?

You can create a simple but effective planned giving program in just seven steps:

1. Understand the basics of planned giving
2. Get your board on board
3. Build an advisory committee
4. Develop gift acceptance policies
5. Create a legacy society
6. Launch a planned giving website
7. Produce and utilize marketing materials

For more details, visit How to Launch a Planned Giving Program

Can my parents give me $100,000?

Yes, but depending on the circumstances you may need to pay taxes on it. The U.S. tax code allows each parent to gift $15,000 per year to a child, plus an additional $11.6 million dollars over their lifetime (including through an estate plan) with no federal tax implications. 

What is the role of a gift planning officer?

A gift planning officer identifies and researches prospective donors, contacts the prospect, and prepares proposals and closes gifts. A gift planning officer also maintains relationships with current donors and maintains gift records and reports.

• What is the major gift prospect strategy?

What is the major gift life cycle?

The major gift fundraising cycle consists of four phases: 1) identification 2) cultivation 3) solicitation 4) stewardship

What is the difference between a planned gift and a major gift?

Major gifts include planned gifts (all planned gifts are major gifts). However, major gifts are generally much larger than a typical planned gift. A major gifts program also seeks recurring gifts, whereas planned gifts are usually made just once. Planned giving focuses on future generations and are delayed, whereas major gifts are generally used to solve immediate challenges. 

What is an example of legacy planning?

An example of legacy planning is working with an estate lawyer or financial planner to bequeath your assets through a will or trust to loved ones and one or more charities.

What is a legacy planner?

A legacy planner can refer to a tool that can help you create a will online. A legacy planner is also someone, such as a planned gifts officer, who helps you plan a charitable legacy as part of your estate plan.

How much should you donate to charity?

There is no set answer to this question, because everyone’s financial situation and philanthropic goals are different. But in general, give within your means and make charitable giving part of your financial budget. Many donors start by giving 1 percent of their annual income, and then adjusting that amount higher or lower as needed.

Wills and Estate Planning

What is a “five or five” provision in an irrevocable trust?

How big is the estate planning industry?

In the United States, the market size revenue of the estate planning industry was about $221.4 billion in 2023. The U.S. estate planning industry grew at about 3% per year between 2018 and 2023.

Why do estate plans fail?

The most common cause for an estate plan to fail is that it was not updated to account for a life change, such as a divorce, marriage, birth, death, addition of stepchildren, or tax-law change. Another reason estate plans fail is that living trusts are created, but never funded. Other common failures include powers of attorney or advance medical directives: Although these documents may have been completed, the estate executor or other survivors 1) do not know where the documents are kept and/or2) were not informed of their existence. Finally, estate plans that were not properly executed or witnessed can fail.  

What age do most people make a will? 

Although anyone over the age of 18 should have a will, most people mistakenly wait until much later in life — often around the time they retire.

What percentage of Americans have a living trust?

About 18 percent of Americans have a living trust.

How big is the trust administration market?

As of 2022, the trust administration market was around $ 9660.58 million.

What are the largest trust companies in the US?

Among the largest trust companies in the U.S. are:

• US Bank
• State Street Bank and Trust Co.
• JPMorgan Chase Bank
• The Bank of New York
• Citibank NA

What is the largest trust fund in the government?

The Old-Age and Survivors Insurance (OASI) trust, which helps to fund Social Security program.

What will happen when Social Security runs out?

If social security runs out, retirees will receive a reduced benefit of about 77 percent of their full benefit.