Checklist: Engaging your board of directors in planned giving
Now that the year-end dust has settled after a busy first couple months of the new year, your organization’s attention may turn to getting serious about fundraising, and especially making sure your planned giving strategies are well underway. It is not unusual for planned giving conversations to start six months or more before a gift is inked. And, of course, the fourth quarter is when many of your donors want to wrap things up with charitable remainder trusts, large endowment gifts, and even bequests. If you do the math, that means you have to start now!
Now is also the time to start involving your board members in fundraising efforts if fundraising is part of your 2023 board engagement plan. Remind your board members that your organization can accept many types of assets into its endowment or reserve fund at the community foundation. No doubt you’ve shared this information with your board members at several points over the years, but planned giving is not top of mind for your directors and a reminder at least annually is always wise.
Here’s a checklist you can share with your board of directors to help them spot situations where your organization and the community foundation can work together to secure a meaningful gift.
Cash
Cash is always a welcome gift to your organization, even if not the most tax-efficient. For taxpayers who itemize, dollars are deductible up to 60% of adjusted gross income and excess deductions can be carried over and deducted for five years. Related, a donor-advised fund or a designated fund at the community foundation can help a donor maximize an up-front charitable tax deduction, with the dollars flowing to your organization and other charities over a period of years.
Highly-appreciated stocks and other investments
Giving publicly-traded stocks and bonds is a tax-effective way for a donor to support your organization's endowment or reserve fund at the community foundation because capital gains tax can be avoided on the appreciation and the gift is deductible at fair market value.
Qualified plans
Whether via a Qualified Charitable Distribution ("QCD") by a donor who is over 70 1/2 years old, or through a bequest via a beneficiary designation, a qualified retirement plan can be an effective asset for charitable giving. Gifts of retirement plan assets through a QCD or bequest are not subject to income tax. The assets are also removed from the donor's estate for estate tax purposes.
Alternative assets
Real estate, closely-held business interests, collectibles, and other nontraditional "alternative" assets frequently can deliver strong tax benefits when given to a public charity such as your organization's fund at the community foundation. The proceeds from the sale will support your organization according to the terms of your organization's endowment or reserve fund. Sometimes, a donor may use a donor-advised fund at the community foundation to ensure that the proceeds from such a sale can support several organizations, including yours. This technique can unlock gifts from donors who want to support multiple charities with the gift of a single alternative asset.
In summary, encourage your board members not to underestimate the range of property your organization can receive when you collaborate with the community foundation to accept a wide variety of gifts, administer their sale, and disburse charitable dollars toward your mission according to a donor’s wishes.
The trust factor: Building donor confidence in your mission
At the core of any fundraising program, especially those programs designed to build your endowment or reserve fund at the community foundation, is the all-important factor of trust. Unfortunately, recent studies have shown that donor trust in nonprofit organizations may be waning. But that doesn’t mean your organization has to be part of this trend.
Here are three suggestions for boosting donor trust in your organization’s ability to deliver on its mission over the long-term.
Get donors involved now
As you and your team encourage donors to include your organization in their estate plans, consider also helping your donors make meaningful contributions during their lifetimes. Donor engagement is one of the best ways to build trust and confidence in the effectiveness of the services your organization provides to the community. Lifetime gifts–leading up to a planned gift–help legacy donors see the results of their gifts. Donors can also get involved as volunteers, board members, or even as observers at a site visit to your organization.
Invite the next generation
Donors who are planning to leave a planned gift to your endowment at the community foundation by definition are already taking steps to establish a legacy. Many of these donors will likely welcome the opportunity to involve their children and grandchildren with your organization. Consider encouraging your legacy donors to invite other family members to your organization’s briefings, annual events, and fundraisers. Your team's relationships across generations will go a long way to establishing trust with a legacy donor’s family.
Show gratitude and celebrate results
As the year progresses, find creative ways to keep your donors informed about your mission and your team’s accomplishments. Get up to speed on how donors make decisions. Donors want to give to the aspects of your programs that are important to them, and they want to understand how their gifts are making a difference. Build trust with donors by starting every conversation with thanking them for their gifts to date and showing them what those gifts have achieved.
Gifts of alternative assets: Avoid valuation slip ups
Giving highly-appreciated assets to a public charity, such as your endowment or reserve fund at the community foundation, is a great way for your donors to support your mission. But time and again, we are reminded of the critical importance of following the IRS’s rules for documenting these gifts and securing the charitable deduction when those gifts take the form of highly-appreciated, non-marketable assets such as real estate, closely-held stock, and artwork, all of which are sometimes referred to as “alternative assets.”
Many planned giving professionals are still talking about the news of a Tax Court decision late last year to disallow a $600,000 charitable tax deduction because the taxpayer failed to secure a proper appraisal. Filing a proper Form 8283 seems like a no-brainer because it is mentioned constantly in charitable giving literature. Unfortunately, some taxpayers are still not getting the message. That was the case with a gift of artwork in Heinrich C. Schweizer v. Commissioner, a cautionary tale of what can go wrong–and how expensive it can be–when a donor (in this case, a donor who even worked at Sotheby’s), fails to follow the tax rules and obtain a qualified appraisal.
Please reach out to the community foundation when you are talking with donors about gifts of alternative assets. We will be happy to help you work with the donor and the donor’s tax advisors to ensure that a gift of an alternative asset to your organization’s endowment or reserve fund at the community foundation is properly documented and reported so that the donor can benefit from a tax deduction as well as from the satisfaction of knowing that your organization’s mission is stronger thanks to the gift.
This newsletter is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.