While many types of contributions slow in tough economic times, fundraising experts say giving through bequests and beneficiary designations grows during a recession. In fact, these types of gifts have always been the cornerstone of any planned giving program - 90% of all planned gifts
are bequests or beneficiary proceeds. Why are they so popular?
There are several reasons:
- Bequest/beneficiary designation giving is a gift of assets rather than income, which allows even moderate donors to become major donors.
- Charitable bequests and beneficiary designations allow the donor to retain full use of the asset throughout his or her lifetime.
- Bequests and beneficiary designations allow the donor flexibility to change the arrangement if needs or goals change.
- These gifts can be directed to a particular cause or purpose.
- Under current law, there is no upper limit on the estate tax deduction for charitable bequests.
- Most people don't change a charitable designation once it's in their will.
We are currently in a time when gifts upon death are becoming more and more significant. Research indicates at least $41 trillion in wealth will transfer from the "greatest generation" to baby boomers by 2052 -the largest intergenerational transfer of wealth ever seen. Much of this transfer will include gifts to charities.
Americans are extremely generous people. In fact, according to Giving USA charitable giving broke through the $300 billion mark in 2007, with a total of $306.39 billion contributed by individuals, foundations and corporations. Individuals contributed the lion's share of all donor dollars - more than $229 billion. Adding to the individual total is another $23 billion in bequests, bringing the total of individual giving in 2007 to $252 billion plus - 82.3%
of total giving.
But only those with a planned giving program today, will benefit from the wealth transfer tomorrow. To receive bequest gifts 20 years from now, we must cultivate and seek those gifts now. The most common answer people give for not making a gift? Nobody asked!
A bequest is when someone gives assets, such as stocks, bonds and personal property, through a will or living trust. Any potential donor who has a will, regardless of age or size of estate, or the amount of their gift, can make a charitable bequest. The value of the gift is removed from the donor's estate, which reduces the amount owed in estate taxes. The gift may be designated as:
- A percentage of the donor's estate,
- A specific dollar amount or description of
property, - The residual of the donor's estate, or
- The contingent upon a certain event happening.
In addition to bequests, one of the easiest ways to leave a gift to charity is to designate the charity as the beneficiary of an IRA, tax sheltered annuity, or 401(k) or 403(b) plan ("qualified" assets). Beneficiary proceeds directed to charity are not subject to income and estate taxes, typically referred to as "double tax", providing significant tax advantages to the givers and their families. When a donor names the charity as beneficiary of specific assets, he or she enjoys some flexibility and simplicity in giving, including the ability to:
- Change this designation throughout life,
- Designate all or a portion of the asset, or
- Designate the charity as beneficiary without the help of an attorney.