Learn how to designate a beneficiary for your 401(k) account to ensure your retirement savings are seamlessly passed on to your loved ones as per your wishes.
Bequests and Beneficiary Designations make up over 92.5% of all planned gifts. And it’s a very simple gift for your supporters to make since it does not affect their cashflow or lifestyle during their lifetime.
This is a unique time for nonprofit organizations. Generational wealth transfer is in full swing. Is your organization prepared to make changes to accommodate the sudden influx of millennial wealth? If you’re prepared, this could be a momentous time for your nonprofit.
Don’t let legislation paralyze your planned giving marketing efforts.
Most “experts” place the practice as having been birthed in the 1970s — or maybe as far back as the ’40s. So it’s safe to say the first planned gift must have been made sometime in those decades. Right?
Long-term study shows multiple benefits for charities to get in the estate plan sooner. We all know charitable estate giving is a big deal. In comparison, despite all of the media attention and conversation generated by corporate giving, annual estate giving has always been much larger. (In some years, charitable estate gifts are more than double all corporate gifts.) Of course, we all know that to receive any estate dollars, your organization must get in the will or other estate planning document. So, getting in the will eventually is clearly important. Get into the will today. But, new evidence is emerging as to why it is important not just to get in the will, but to get in the will today. The evidence comes from a large national survey called the Health and Retirement Study. This study, starting in 1992, tracks older adults (age 50+) year after year. It includes information about their current estate plans, their current charitable giving, and their post-mortem transfers. Because this study tracks changes in giving and changes in the estate plan for the same people over many years, we can now see what happens to current giving after charity is added into the estate plan. We do this by looking only at those older adults who didn’t have a charitable component in their estate plan and then later added charity into their plans. This way we are able to compare their giving before and after they added charity to the will. If you’re in their wills, you’re on their minds. So, what happens after people put charity into their will? Simply put, giving goes up. A lot. During the eight years before these people had added charity into their wills, their annual giving averaged $4,210. Two years after the will had changed to include charity, their average annual giving had doubled to $8,500. Even four years after the will had changed, their annual giving was still much higher than before averaging about $7,500. Although we can’t prove a cause-effect relationship (only that it happens at the same time), the connection makes sense. When the donor puts a charity in the will, the donor is treating the charity like a family member. That commitment naturally draws the donor closer to the cause, and makes it more likely that the donor will support in other ways. Why wait when you can benefit now? Some donors may increase their current giving by reasoning that, “Since the charity will be getting money from my estate anyway, why not give it now when I can see the impact?” Fundraisers use similar reasoning to convert a revocable estate gift to an irrevocable planned gift. The explanation goes, “You are planning to make the gift anyway, why not make it irrevocable and take an income tax deduction today through a [remainder interest deed, charitable remainder trust, charitable gift annuity, etc.]?” Want more? Get in early. Getting in the will early can help by increasing current giving and by opening conversations to convert the gift into an irrevocable planned gift. It may also help by increasing the size of the estate gift. In reviewing the over 12,000 decedents in the study, most charitable plans were added within five years of death. On average, one longer-term plan was worth four plans made in the last two years of life. In short, getting the charitable plan in the will earlier was associated with more dollars for the charity (as long as the charitable plan stayed in the will). Don’t forget about your bequest donors. So, there are a lot of good reasons to get in the plan early. But, one of those reasons is not so that the fundraiser can “count it and forget it.” The same study showed an enormous amount of end-of-life instability in the charitable component of the estate plan. If you forget about your planned bequest donors, they will certainly return the favor. Russell James, J.D., Ph.D., CFP is a professor in the Department of Personal Financial Planning at Texas Tech University. He directs the on-campus and online graduate program in Charitable Financial Planning. Contact: russell.james@ttu.edu RELATED TOOLS: Bequest Brochure Estate Planning Toolkit Categories: Beneficiary Designations, Bequests, Giving, Planned Giving Marketing, Marketing Planned Giving, Relationships
Question My nonprofit organization currently uses all bequest proceeds for operating expenses. The family of a recently deceased donor has questioned this and wants us to designate the funds for endowment (what is an endowment). What should we do? Answer It’s important to remember that only funds explicitly restricted by the donor can serve as a true endowment (importance by Deb Ashton). If a donor’s will does not specify a restriction, these funds are technically unrestricted and can be used at the nonprofit’s discretion. However, that doesn’t mean organizations should spend them without careful consideration. One approach is to treat them as “quasi-endowment” or “board-designated endowment,” meaning the board voluntarily decides to invest the funds rather than spend them outright. This way, the principal remains intact, and the nonprofit can utilize annual drawdowns based on a responsible spending policy. The larger question your nonprofit must address is: What is your policy on unrestricted planned gifts, and does it align with donor expectations? Best Practices for Bequest Usage Many organizations don’t give much thought to unrestricted planned gifts and simply use them to fill gaps in their operating budgets. However, best practice suggests having a formal policy in place—one that respects the donor’s likely intent while ensuring financial sustainability. Most donors assume their bequests will help sustain the organization long-term, not just cover short-term expenses. A strong donor-centered policy could involve: Directing all or a majority of unrestricted planned gifts to a board-designated endowment. This approach ensures long-term financial health and aligns with donor expectations. Learn more about board-designated endowment funds. For legal considerations, see McGuireWoods. Allocating a small portion (for example, 5-10% or $5,000-$10,000) of each unrestricted planned gift for operating expenses. This provides immediate support while preserving the principal for future needs. Giving the board the flexibility to override this policy if needed for urgent financial priorities or to honor a donor’s family’s preference. Flexibility ensures that the organization can adapt to unforeseen circumstances while maintaining donor trust. By setting a clear policy, you send a powerful message to donors: Their legacy matters, and their gifts will be used wisely. The Bigger Picture: Why This Matters for Planned Giving Success By Viken Mikaelian Planned gifts, especially bequests, are often the largest contributions a nonprofit will ever receive. These gifts represent a donor’s lifelong commitment to your mission, and how you handle them directly impacts future giving. The problem? Many nonprofits treat planned gifts like short-term revenue instead of the strategic, long-term investments they were meant to be. The Donor’s Perspective Most donors assume that when they leave a bequest, their gift will provide lasting support—not just disappear into next year’s budget. If nonprofits spend these funds too quickly, it can discourage future legacy donors who want to know their gift will have a long-term impact. This is why nonprofits with clear bequest policies attract more planned gifts. Donors feel confident knowing their gift will be handled responsibly, and nonprofits benefit from a growing endowment that provides financial stability. Discover the benefits of planned giving for both donors and organizations. What Nonprofits Should Do If your organization doesn’t have a policy for unrestricted bequests, now is the time to create one. A simple, donor-friendly approach might include: Allocating a small portion (5-10%) to operating expenses and directing the rest to a board-designated endowment. This balances immediate needs with long-term sustainability. Communicating your bequest policy transparently to donors, so they know how their gift will be used. Transparency builds trust and encourages more planned gifts. Educating fundraisers and board members on the importance of endowment-building through planned gifts. An informed team can effectively convey the value of planned giving to potential donors. Explore how to launch a planned giving program. It’s a Strategic Move Planned giving is evolving, and nonprofits that take a strategic approach to bequest management will attract more legacy donors. A well-structured bequest policy signals trust, responsibility, and long-term vision—the exact qualities that inspire donors to include your nonprofit in their estate plans. Next Steps Does your nonprofit have a clear policy for unrestricted bequests? If not, now is the time to create one. A strong planned giving strategy can increase donor confidence and secure more legacy gifts for your organization’s future. Need help crafting a planned giving strategy? Contact us today. FAQ Accordion Frequently Asked Questions Can unrestricted bequests be used for an endowment? Yes, if the board designates them as such. Even though the donor did not restrict the funds, nonprofits can voluntarily allocate them to a board-designated endowment. How should nonprofits handle unrestricted planned gifts? A best practice is to have a policy that directs a portion to operating expenses (5-10%) and invests the remainder in long-term sustainability. Do most donors expect their planned gifts to go to operating expenses? No. Most assume their gifts will contribute to the long-term health of the organization, making an endowment allocation a stronger donor-centered approach. Can a nonprofit override its bequest policy? Yes. Policies should include flexibility so that the board can make exceptions when needed, especially if a donor’s family expresses a preference. What percentage of a bequest should go to operations? Many nonprofits follow a model where 5-10% of unrestricted planned gifts go to operating expenses, while the remainder is directed to a board-designated endowment. How can nonprofits encourage more planned gifts? Nonprofits can increase planned gifts by educating donors about their impact, offering donor recognition programs, and maintaining transparency about how these gifts are used. What are the benefits of having a board-designated endowment? A board-designated endowment provides long-term financial stability, helps build donor trust, and allows nonprofits to generate income while preserving the principal. Should nonprofits inform donors about how their bequests will be used? Yes, transparency is key. Clearly communicating the nonprofit’s policy on unrestricted bequests ensures donor confidence and can increase the likelihood of receiving future legacy gifts.
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