We’re back, delving into our second of two blogs about what we see as this year’s trends in planned giving.
Last week was more of a thematic overview. Today, we’re digging into three planned gifts that offer the most potential to provide the greatest returns—to your nonprofit and your donors.
CHARITABLE GIFT ANNUITIES (CGAs)
Gifts that give back
CGAs are Stelter’s “Best Planned Gift of 2024”—two years running. With three rate increases in the last 18 months, they’re shaping up to be another bona fide win for donors this year.
Why?
- New, higher payouts mean donors get more in return. CGA rates went up Jan. 1, the highest they’ve been in 16 years.
- Reliable, lifetime payments. The amount donors receive each year will not change, regardless of the state of the economy. Based on their age at the time of their gift, the annuity amount will not fluctuate based on market values.
- With flexibility in funding. Donors can choose to fund their annuity with more traditional assets like cash or appreciated property. If they are 70½ or older, however, they can now give through their IRA by making a one-time election to a CGA of up to $53,000.
- Tax benefits too. Donors qualify for a charitable deduction for a portion of the value of the gift and secure partially income-tax-free payments.
- They’re simple to set up. No trust arrangement is necessary, so donors save on attorney’s fees and the potential cost of hiring a third party.
Resources
- A customizable letter to promote the new rates and benefits to donors.
- A video to see how the ACGA sets rates and the basic assumptions that go into the rates.
DONOR ADVISED FUNDS (DAFs)
Charitable savings accounts
You likely already get it. Our donors are on very different giving journeys than they were 15-20 years ago.
Digital swept in like a storm and upended that journey, not only in how today’s donors get information but also how, when and why they make their decision to give. With a click, they can pick and choose what they read and hear about your nonprofit—the good and (unfortunately, sometimes) the bad.
It’s the age of self-directed donors, friends. And largely why DAFs are on the rise. In fact, they’ve increased every year since 2009 and more than doubled from 2018 to 2022.
Why?
- They’re a versatile giving vehicle. Donors can give when, what, how, and where is most favorable for them.
- That streamlines receipts to track. With DAFs, donors maintain receipts from their DAF contributions only.
Script to Emphasize Simplicity: “You likely make donations to many charities, and keeping track of all those receipts for taxes can be a hassle. A donor advised fund simplifies that by providing one central space that streamlines your donations and receipts.”
- Providing tax benefits. Donors can take an immediate tax deduction but wait until later to decide which charities should get their donation.
- And a family’s legacy of giving. For donors looking for a way to give that involves their family and establishes a family legacy, DAFs fit the bill.
Heads Up
A few precautionary notes about DAFs so donors can make up their minds with all the information:
- Once assets are deposited into a fund, the sponsoring organization of the DAF has legal control over them.
- Donors can only make gift recommendations from their DAF. (But, if the donor chooses a charity that’s recognized by the IRS as a U.S. charitable organization, the sponsoring organization will usually use the donor’s choice.)
- Contributions to a DAF are irrevocable.
- DAF sponsors assess fees on the DAF balance to cover costs associated with managing and administering the DAF.
Donor Watch
According to attorney and author Claire Axelrad, a national voice on philanthropy, DAF donors tend to possess these six common characteristics. They typically:
- Prioritize giving
- Desire to make an impact today
- Make larger-than-average gifts
- Have a high rate of volunteerism
- Think long-term
- Want to involve family members in giving decisions
BONUS! In the vein of more self-directed giving, another top gift for older donors may be a qualified charitable distribution through their IRA. (If your donors have an IRA and are 70½ and older, they can make a one-time election of up to $53,000 to fund a charitable gift annuity, as mentioned earlier. Stelter routinely hears from clients that this new opportunity has generated a lot of donor interest and has helped incentivize giving.)
APPRECIATED STOCK
According to Dan Greenhaus, Solus’ chief economist and strategist, stock prices should continue to appreciate in 2024. In our world, that makes them a solid gift option for your nonprofit and your donors. What’s in it, specifically, for nonprofits? About $100 billion as an untapped funding source.
Why?
- Donors gain an opportunity to right their portfolio ship. Donors may realize that the gains and losses of their investment portfolio necessitate a portfolio rebalance to maximize performance and optimize for risk. Donating stock can help put their portfolios back into balance.
- And reap the rewards. Donating securities held for a year or more potentially offers a double tax benefit—a full fair market value tax deduction and elimination of capital gains taxes. Depending on your income, the capital gains tax rate can be as high as 20%. This tax savings allows your donation to go further.
- Plus, feel like a million bucks. Because donating appreciated stock minimizes capital gains tax and may be eligible for an immediate income tax deduction, donors maximize their gift-giving potential.
CGAs, DAFs and appreciated stock—these are the gifts with great potential as we head into 2024. Have you seen the same interest in these gifts among your donors? Let us know in the comment section below.
Last Week’s Blog:
