Definitions and Principal Distinctions

Planned Giving refers to a variety of ways that gifts can be made to non-profit organizations as part of a donor’s overall financial and estate plan. The core characteristic of planned giving is its timing: the benefits are almost always realized by a non-profit organization at a donor’s death either through a bequest, beneficiary designation, or the balance in a CGA.  In addition, planned giving programs are typically focused on older donors who never married or don’t have children.

Conversely, Charitable Gift Planning, the preferred term by Heaton Smith, offers a more comprehensive approach. It encompasses the entire spectrum of a charitable gift’s purpose, design, and timing of impact. This includes both current and deferred gifts – a blended gift – and considers various factors affecting both the donor and the non-profit organization. Put simply, Charitable Gift Planning adopts a holistic perspective, which include the immediate and long-term impacts on the donors, their estates, their heirs, and the institutions they support.

Strategic Emphasis

Planned Giving is typically long-term in nature and is therefore often integrated into a donor’s retirement planning or estate planning. Afterall, most donors need most, if not all, of their assets during life to sustain their lifestyle.  Therefore, planned gifts are usually made by individuals who want to leave a legacy or make a significant impact after their lifetime. Common planned giving instruments include bequests, charitable gift annuities, beneficiary designations in retirement accounts, and to a lesser extent, charitable remainder trusts.

Based on the many Planned Giving program assessments that Heaton Smith has completed over the past several years, Planned Giving programs are often reactive to Planned Giving marketing responses or donor inquiries.  Planned Giving is siloed, and very little collaboration amongst major, principal, and planned gift officers occur on a regular basis, if at all.  

Charitable Gift Planning involves a more pro-active and strategic approach. Consideration of a donor’s goals for heirs, income needs, assets, tax planning needs, and the impact and timing on the non-profit organization – now and later – drives donor discussions and discissions.  Central to a Charitable Gift Planning program is cross-functional skills employed by major, principal, and gift planning officers and collaboration amongst team members.  This type of giving is often more flexible and can be adjusted based on the donor’s changing financial circumstances or the immediate needs of the charity.

We are fond of telling clients and prospects alike that Planned Giving meets the needs of some donors while Charitable Gift Planning meets the needs of all donors.   

Tax Considerations

Planned Giving can sometimes provide current tax benefits to donors or to their estates upon death. By allocating a portion of their estate to a non-profit, donors can reduce the taxable value of their estate.  Moreover, donors can reduce ordinary income tax liability on retirement accounts by making a legacy gift through an IRA or other qualified retirement accounts. 

Charitable Gift Planning, while also offering tax benefits for estate gifts, focuses on the tax deductions for current or blended charitable gifts. This is particularly relevant for donors who make gifts of non-cash assets or who fund charitable trusts, or a combination thereof.  Appreciation on capital assets is considered in addition to the donor’s long-term need/use of those assets. Gift officers work with donors to strategically structure gifts in a way that maximizes tax advantages in the short term while providing further tax benefits through an estate gift. 

Impact and Legacy

Planned Giving is almost always associated with a lasting and deferred legacy. It is a way for donors to ensure that their philanthropic goals continue to be met long after they are gone while they retain control of their assets during life.  Estate gifts have been the backbone of endowments and long-term funding strategies for non-profits for decades.

Charitable Gift Planning allows donors to create an immediate impact on non-profit organizations and those they serve. An example would be a donor that names an endowed fund during life and gives the annual spend – or a percentage of the annual spend – until the fund is fully endowed at death.  The recipient organization treats those annual gifts as pass-through gifts awarded to scholarship recipients.  The result is that donors witness the fruits of their generosity during life and can adjust their giving strategies to meet their evolving financial and estate planning needs as well as the needs of the non-profit organization. 

Charitable Gift Planning empowers donors to make an immediate and future impact on non-profit organizations and those they serve. As an example, a donor might establish an endowed fund while alive and contribute a portion or the entirety of the fund’s annual expenditure until it is fully endowed upon their death. The non-profit organization then allocates the annual contributions as direct awards to scholarship recipients. This arrangement allows donors to witness the fruits of their generosity during life, and they can adjust their giving strategies to meet evolving financial and estate planning needs as well as the needs of the non-profit organization. 

Donor Engagement

Planned Giving often requires a deeper engagement with the non-profit and may involve a planned giving officer and legal and financial advisors to structure an appropriate gift. Long-term engagement is critical for donors who disclose their estate gifts to charitable beneficiaries.  Afterall, these donors have elevated the nonprofit, or a group of nonprofits, to the status a family in their estate plans.  That is a big deal! 

By comparison, Charitable Gift Planning is more dynamic and often requires various levels of engagement. From simple cash donations to more complex arrangements like gifts of stock, real estate gifts, QCDs, funding complex charitable trusts, or donor-advised funds, this type of giving allows for a range of involvement depending on a donor’s preference.  Charitable Gift Planning almost always requires a donor’s CPA to provide tax advice, and/or a trusts and estates attorney to draft documents, and an investment advisor to provide input regarding appreciated stock, etc.

Perhaps most importantly, non-profit organizations that utilize a Charitable Gift Planning approach prioritize donor portfolio management and engagement. This model involves a collaborative effort with data science team members and gift officers to identify and tier Gift Planning prospects. These prospects are then assigned to gift officer portfolios (those not previously in one) and a tailored engagement strategy is developed and implemented for each individual prospect.  This proactive, personalized, and strategic approach often leads to enhanced outcomes for both non-profit organizations and their donors.