Ultimate Guide: How to Designate a Beneficiary for Your 401(k) Account
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.
Beneficiary Designations
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.
The Countdown to Generational Wealth Transfer
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.
SECURE Act / Note to Clients and Friends
Don’t let legislation paralyze your planned giving marketing efforts.
Who Made the First Planned Gift?
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?
Why Getting In The Will Today Matters
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
Is It Okay To Use A Bequest For Operating Expenses?
Question My nonprofit organization currently uses all bequest proceeds for operating expenses. The family of recently deceased donor has questioned this and wants us to designate the funds for endowment. What should we do? Answer Remember that the only funds that serve as true endowment are those that are restricted by the donor. Since the donor’s will did not restrict the funds, it is impossible to have these funds go to endowment. However, they can be treated as “quasi-endowment,” “board designated endowment,” or “funds functioning as endowment,” which are funds your organization’s board will treat as endowment (only using the draw from these assets based upon your spending rule) unless the board formally acts to tap into the principal. The larger question you need to address is what is your policy on using unrestricted planned gifts and why. Many organizations are not particularly thoughtful on this point and simply use the dollars to plug holes in their operating budgets. Best practice for donor-centered organizations encourages a formal policy based on donor expectations. Most donors who make unrestricted planned gifts expect the proceeds to go to endowment. They are giving an organization a gift that represents part of their life’s work and hope that it will sustain the organization going forward. A policy that directs all or most unrestricted planned gifts to board designated endowment honors that legacy. At the same time, organizations do need some operating funds. Probably the best compromise is to set a policy stating that the first $X or X% (assume 5-10% or $5,000-$10,000) of any unrestricted planned gift is allocated to operating expenses, with the balance automatically allocated to board designated endowment. The board can always override this policy if funds from a particular planned gift are needed for operating or another purpose (or the donor/family has a clear preference that isn’t in the will). But it sets the tone that such gifts are not intended to be spent immediately. Categories: Beneficiary Designations, Bequests, Planned Giving Marketing, Marketing Planned Giving, Relationships
