Planned Giving: An Introduction
 

What is planned giving?  Simply, planned giving is yet another means by which individuals can give all or part of their assets to a nonprofit organization.  An effective planned giving program serves as a vehicle that allows persons of every age and income to think and plan for the future.  Once limited to a small number of nonprofit organizations, planned giving is now a standard component of fundraising efforts at most universities, charities, arts organizations, and other nonprofit organizations.

Different organizations have varying planned giving programs, but most dynamic programs share one fundamental trait, choices.  A bequest is a simple way of giving to an organization, but it isn't and shouldn't be the only way of establishing a donor's legacy.  Other mechanisms include, among others, pooled life income funds, gift annuities, and charitable trusts.  By providing options, a sound planned giving program can cater to just about anyone. 

In addition to tax benefits for donors and the procurement of much-needed funds for organizations, planned giving programs allow individuals and arts organizations to form stronger bonds.  Planned giving programs also encourage people, irrespective of age, to think about their future.

Legacy Gifts that Transfer Use or Ownership After the Donor’s Death

The clearest and most common example of a legacy gift that transfers ownership of assets after the donor’s death is a bequest in a will. A bequest is a simple and straightforward way for a supporter of Opera San José to leave a legacy to Opera San José and in so doing to demonstrate their support for years to come. The bequest is a promise of a future gift. Typically, the gift is represented by specific assets, such as cash, real estate, artwork, securities, or life insurance proceeds. No matter what assets are specified in a bequest, the actual transfer of ownership of the assets occurs after the donor’s death.

Donors who leave a legacy gift in the form of a bequest may choose to specify the way that their gift is to be used. For instance, a donor may specify that his or her bequest be earmarked for the organization’s cash reserves. Another donor may want a bequest to be used by the recipient organization for a specific purpose, such as a fellowship in the resident company. Such stipulations are commonly used to reflect the interests and wishes of the individual donor.

Bequests are attractive to donors because of their strength and simplicity. Once a bequest is made, the recipient organization is assured of receiving the designated assets at some future time. However, an organization cannot know when gifts designated in bequests will come and cannot plan its yearly budget with these gifts in mind. So, while a bequest is an excellent way to convey a legacy gift to an organization, there also are other ways of making a legacy gift in which certain assets can begin to help the organization before the donor’s death.

 Legacy Gifts that Transfer Use or Ownership While the Donor Is Alive

There are numerous ways to make legacy gifts that generate income for the organization while the donor is still alive. Each approach is dependent on many variables, including the kind and amount of assets the donor may have, the donor’s tax situation, the donor’s family situation and other personal considerations.

To illustrate, consider the following hypothetical example:

A long-time supporter of Opera San José is financially secure and wants to find a means of supporting Opera San José before and after his death. Among his assets is an income-producing property. The individual decides to make a bequest so that upon his death ownership of the property will transfer to Opera San José. In the meantime, however, he wants the income from the property to go to Opera San José. Such an arrangement meets his personal objectives and can be worked out in a way that is mutually advantageous -- tax advantages to the donor and financial stability to Opera San José as recipient.

The strength and appeal of such an arrangement is that it allows donors to make an immediate impact on the financial well-being of the organization that they wish to support -- in this example, Opera San José. Further, they can witness and enjoy the benefit that their contribution brings to the organization while they are still living.

Whether the planned gift is of the first category or the second, there can be many issues and questions that must be addressed by the donor during the planning process. Anyone considering making a planned gift to Opera San José or any charitable non-profit organization should consult their financial advisor to explore the options available to them and to select the approach that best serves their personal situation and objectives.

Benefits to Recipient Nonprofit Organizations

A legacy gift made to a nonprofit organization like Opera San José can be an immense boost to that organization’s fiscal health and stability. Whether the legacy gift is deferred (assets transfer after the donor’s death) or immediate (assets or use of assets transfer while the donor is still living), the gift provides the recipient organization with a valuable source of income. This income strengthens the organization’s financial condition by helping it to meet its operating costs, build its cash reserves, or fund its future growth.

In addition to providing much needed funds, legacy gifts provide important evidence of community support. This support sends a powerful message to other sources of funding (individuals, corporations, foundations, government agencies) that the recipient organization is doing a good job, fulfilling its mission, and is deserving of consideration for financial funding. Legacy gifts thereby often have a snowballing effect in helping the organization secure additional funding.

Benefits to Individual Donors
Individuals who make legacy gifts can and often do gain tax advantages in the form of reduced estate and/or capital gains taxes. The details of specific tax advantages depend on the particulars of the individual’s unique financial situation. As in most financial planning matters, one must consult with a financial specialist to explore the tax benefits that would accompany a particular gift.

The benefit of making a legacy gift goes beyond the fiscal realm, however. A legacy gift, made through a careful planned giving program, establishes a uniquely intimate partnership between the donor and the recipient organization. For example, a legacy gift to Opera San José strengthens and deepens the bond between the donor and Opera San José in a special way. A legacy gift indicates that the donor values the company’s mission, is deeply concerned about its long-term well-being, and is taking action to ensure its continuation. Naturally, this stronger bond often results in the donor taking a greater interest in the organization and becoming more involved in its activities.

A corollary benefit to the donor who is considering making a legacy gift is that the planned giving program encourages the donor to examine his or her financial situation and to make plans for the future. A sound planned giving program encourages young and old alike to assess their personal financial situation and to actively include support of nonprofit organizations like Opera San José in their plans.

In summary, planned giving offers significant benefits to recipient organizations and to donors. Anyone considering making a planned gift to Opera San José, or to any charitable nonprofit organization, should consult a financial advisor to explore the available options and to select the best approach. 

For information on planned giving for Opera San José, please call Kelly Hudson  at 408-437-4464.

Please visit Financial Donations to learn about other ways you can help support Opera San José.