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A PLANNED GIVING HOW-TO MANUAL FOR NON-PROFITS
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How to Use this Manual
The primary challenge in drafting a comprehensive planned giving manual is the fact that
different constituencies have different needs. A complete manual, therefore, must be designed to
contain relevant and stimulating information for Executive Directors, Development Directors,
Boards of Directors and Planned Giving Committee Volunteers.
The purpose of this manual is to:
define planned giving in simple terms
articulate the market opportunity that exists
detail the step-by-step initiation process
provide a marketing plan
explain benefits to the donors
provide documents that will be helpful for your organization
The following sections will generally be most pertinent to the respective audience.
Executive Directors
Development Directors
Board Members
Planned Giving Volunteers
All Sections except for Appendices B, C and D
All Sections except VII and Appendices B, C and D
Sections I, II and III
Sections III, IV, V, VII, and Appendices B-E
For additional information see Section VIII - Additional Recommended Resources.
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Table of Contents
I.
Introduction: Why is everyone hopping on this bandwagon?
1
II.
Introspection: Where are you now, and most importantly, where do
you want to go?
2
III.
Making the Planned Giving Case: This sounds too good to be true.
3
IV.
Vehicle Descriptions: This one page description is all I need to know?
7
V.
Marketing Plan: What can I do today?
8
VI.
Community Foundation Planned Giving Support
11
VII.
Sample Board Resolutions
12
VIII.
Other Recommended Resources
23
IX.
Appendix A: Planned Giving Committee Job Description
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Appendix B: Case Study #1 - Comprehensive Estate Planning
27
Appendix C: Case Study #2 - Charitable Remainder Trust
30
Appendix D: Case Study #3 - Appreciated Property
32
Appendix E: Sample Pre-approach Letter
33
Appendix F: Sample Will or Codicil Language
34
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I. Introduction: Why is everyone hopping on this bandwagon?
Everyone is hopping on this bandwagon because study after study reveals planned giving
is the most cost-effective fund raising method. Moreover, during the next 20-25 years, the
United States will observe the greatest wealth transfer in our history estimated at 12-15
trillion dollars. Charities with planned giving programs are positioning themselves to receive
substantial charitable gifts during this process. Not coincidentally, the Georgia Planned Giving
Council, initially organized in 1987 with six members, currently (1999) has over 225 members.
This explosion is occurring nationwide.
The graph below illustrates the significance of planned giving.
Bequest donations rival those of foundations and corporations, yet typically receive much
less attention. Further, planned gifts such as charitable trusts and gift annuities accounted for
15.8 percent of all individual gifts in 1997. In the last 10 years, planned gifts have doubled
their share of all individual giving dollars.
As you will see, a strong planned giving program can be used to enhance current giving
as well as build long term resources for the future. Longer term resources are typically held in an
endowment or donor advised account (an informal arrangement where the principal and interest
may be used at the discretion of the board or donor) or in a foundation (a formal arrangement
where only the interest is distributed at the discretion of a separate foundation committee/board).
This manual will describe planned giving in simple terms and illustrate the benefits for
your organization as well as for your donors. It will also cover structural considerations such as
marketing strategies and board resolutions. To conclude, I will provide an overview of planned
giving support available from The Community Foundation for Greater Atlanta for local
nonprofits.
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II. Introspection: Where are you now, and most importantly,
where do you want to go?
Locate your organization s relative endowment position on Chart 1 (Stages of
Effectiveness), pg. 25. Now locate your relative planned giving position. This chart should
clearly illustrate that planned giving and endowments are not the same thing.
Stages of Endowment/Planned Giving Effectiveness
Developing
Operational
Advancing
Excelling
Endowment Evolution
No operating
endowment in place
Intend to take next
steps
Board employs fundraising mechanism to
build funds (e.g., planned
giving, capital campaigns,
outright gifts)
Board resolution to
form endowment or
foundation with specific
objectives
Planning begins; initial
gifts secured
Endowment balance is
growing; goals have
been set; investment
committee active
Greater than 25% of
operating funds derived
from endowment
Principal grows even with
large operating fund
payments; Board executes
annual drives
Planned Giving Evolution
Only planned gifts
come from out of the
blue
Intend to take
next steps
Board approves planned
giving policies and
procedures
General marketing and
specific asks generate
outright gifts and estate
club members
Board champion steps
forward with leadership
and gift; Board priority
PG committee in place;
investment strategy;
Board and community
education underway
A staff member has
specific PG responsibility to
maintain marketing and
gift consistency
PG now viewed as an
integral component of
fund development; high
community recognition
Endowments are investment funds separate from annual operating monies acting as a reserve for
your organization. Typically, only a small percentage of interest is used for current purposes
allowing the fund to grow over time. Deposits to the fund can be made in any of the following
ways: annual surplus, donor specified, outright cash, capital campaigns and planned gifts.
Planned giving is the primary method used to build endowments, although, as you will see, it
can increase current giving as well.
An example would be a bequest program. Step 1: Brochures on wills are mailed,
workshops are held and face to face asks are made encouraging donors to include your
organization in their will. This is the planned giving marketing component. Step 2: From these
efforts, bequests will be made. These are planned gifts. Step 3: The proceeds from the bequest
will be deposited into your endowment fund with only five percent of the interest used for annual
purposes. This is the endowment component. Repeat steps 1-3.
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As the Endowment/Planned Giving Effectiveness chart shows, the first step is to decide
whether to create an endowment fund (internal account) or foundation (external account). The
following table compares your options.
Endowment vs. Foundation
Endowment
Foundation
Set up costs
Negligible
Professional fees $5-10,000
Accessibility
Both principal and interest
Only specified interest
Administration
Low
Medium to High
Oversight
Traditional Board
Separate Board of Directors
Attractiveness to Donors
Low to Medium
High
Minimum Dollar
Recommendations
Any amount
$500,000+ to warrant
additional costs
Useful Life
Temporary
Perpetual
Note: Neither a foundation nor an endowment will represent a panacea solution. The table above is a brief outline
for your review; however, an attorney should be consulted before any final decisions are made.
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III. Making the Planned Giving Case: This sounds too good to be true.
What is planned giving?
Planned giving is a process using tax and financial planning methods that allow a donor
to achieve both their financial and their philanthropic objectives in the most efficient way
possible. Planned giving donors typically cite one of the following four reasons for making
a gift; (1) philanthropic intent, (2) tax advantages, (3) trust and relationship of
solicitor/advisor or (4) some combination of (1), (2) and (3). This manual concentrates
primarily on planned giving from the financial planning perspective. Ninety-five percent of the
time, this is not the donor s primary motivation. I strongly recommend you spend more time
during your solicitations articulating the mission of your organization rather than the donor s
balance sheet. With that said, why is the focus on marketing and tax advantages? Because you,
a nonprofit professional, can sell your case better than anyone and have observed the relationship
factor (solicitor/donor) first-hand. This manual is intended to shed some light on the financial
advantages of planned giving.
If a donor asks you, What is the best way for me to give? -- the planned giving process
will provide the answer. Said another way, planned giving methods can lower the cost of giving
to as little as five or ten cents on the dollar. As the following chart illustrates, if you are only
asking for cash contributions you are asking for the smallest, most expensive piece of the pie.
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Myth 1: Our donors know this stuff.
Fact 1: Most do not. But if they do, continue to motivate and facilitate.
How many people out of ten feel it is important to have a basic will? Probably nine out
of ten. How many people out of ten actually have a will when they die? Three out of ten. By
motivating your donors to draft their wills, you will help them get their plans in order and your
organization could benefit as well. Bequests are the cornerstones of every planned giving
program with an average gift of $65,000 (NCPG Characteristics of Selected CRTs Established
in 1992, pg. 5, 1994).
Myth 2: Planned giving is too complicated.
Fact 2: You only have to know the questions.
People frequently come up to me with a pained expression and ask, What if they ask me
a question? Unless you are an estate attorney, estate accountant, life underwriter, investment
advisor and financial planner rolled into one person, you will not be able to answer every
question. More importantly, you should not answer any questions even if you think you can
(some advisors refer to planned giving as financial brain surgery).
The first step is to put together a planned giving committee (see Appendix A). Once this
committee is in place you will have expert resources you can turn to as questions arise. All you
have to do is learn the right questions. Consider the following examples.
1. Many families have an idea of the proportion of their estate they wish to distribute to
the following sources: family/children, the IRS and charitable interests. Would you be willing to
have a confidential visit with (volunteer or planned giving committee member) to make sure
your current planning will meet your specific goals?
2. Some charitable gifts cost much more than is necessary. Would you like to visit with
someone who can help you make your charitable gift in the most economical way possible?
3. Would you like to visit with someone who can show you how to make a gift and
possibly increase your income?
4. If you are considering the sale of an asset that has increased in value, (stocks, bonds,
land, mutual funds or a business), some charitable gifts provide a way that you can sell this type
of asset without the payment of any tax on the appreciation. Would you be willing to visit with
someone who can show you how you can sell appreciated assets, keep the full value for yourself
and your family and also benefit our organization?
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Myth 3: Planned giving should be separated from resource development.
Fact 3: It should be fully integrated into the development process.
This is self-explanatory. Your best prospects for planned giving are committed
volunteers and donors. If you can help them help themselves and at the same time benefit your
nonprofit, everyone wins.
Myth 4: Planned giving will cannibalize current giving.
Fact 4: Planned giving enhances current giving and opens up new opportunities.
This represents the greatest fear of all non-profits: If they make a planned gift, we
might lose our current giving. In nearly all cases, the opposite actually occurs. A current gift
has to be renewed each and every year where a planned gift is the ultimate long-term gift. Many
studies indicate that, after a planned gift is made, current giving goes up because the donor
now has a long-term vested interest in the organization. A donor views a planned gift as a
consummation of their relationship with a non-profit organization.
During the gift negotiation process, it should be made quite clear to the donor that this is
not an either/or proposition. Be sure to articulate your organization s objectives (whether long
term or short term) so that the donor understands your needs.
Further, many planned gifts can generate significant current gifts such as gift annuities,
appreciated property and charitable lead trusts. (see below)
How can planned giving help our nonprofit and our donors?
A. Planned Giving Continuum
1. Comprehensive Charitable Estate Planning (see Appendix B)
This process takes a holistic view of family financial philosophies. There are only three
possible beneficiaries of any person s estate -- family, IRS and charity. This process allows
the donor to allocate their estate among these three beneficiaries according to their goals. Many
wealthy individuals will relate to these two quotes:
You should leave your heirs enough that they could do anything, but not so much they
could do nothing.
Warren Buffett
If you re not careful, you could put your kids in a situation where they will never have
the pleasure of bringing home a paycheck.
T. Boone Pickens
After the advisors take care of his/her kids, the donor must now choose between the IRS
and charity. The IRS, through tax-deductions, encourages donors to choose philanthropy
because of the positive impact it has for communities.
2. Charitable Remainder Trust (see Appendix C)
The popular charitable trust is frequently used by people with highly appreciated assets
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(e.g., family businesses, stock, mutual funds, real estate, etc.). Typically, they must choose one
of three options:
keep the assets until they die
sell the assets and reinvest for higher income
give it away.
In many cases, the best financial planning option is to use a charitable trust to accomplish
the following objectives: increase retirement cash flow, receive a current income tax deduction,
decrease or eliminate estate taxes, increase their heirs inheritance and make a substantial gift to
their favorite charities... WIN-WIN-WIN! Nationwide, approximately 2,000 charitable
trusts were set up in 1992 alone with an average gift of nearly $700,000 (NCPG
Characteristics of Charitable Remainder Trusts in 1992). If you do not ask for these gifts, your
competitors will.
Myth 5: Only widows are prospects for planned gifts.
Fact 5: Any committed donor or volunteer is a prospect.
Both the aforementioned charitable trust and the following appreciated property method
sufficiently dispel this myth.
3. Current gifts of appreciated property (see Appendix D)
How would your donors like to give once... save twice ? Would they like a minimum
$1.50 match from the IRS for every dollar in appreciated property they contribute? Both
of these benefits have been available since 1969, yet donors still do not fully understand how it
works. Integrate this tax-wise method of giving into your brochures, major gift proposals,
newsletters and pledge cards.
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IV. Vehicle Descriptions - This one page description is all I need to
know?
This can be used as sample brochure copy.
Current Gift of Appreciated Stock or Real Estate: The Smart way to give
Do you own assets that have substantially increased in value over the years? Donated assets
such as stocks, bonds, mutual funds or real estate may provide you with an income tax deduction
based on the fair market value of the gift and eliminate all capital gains taxes. This would allow
you to make a substantially greater gift (typically between 45-70 percent) than you otherwise
would have thought possible for the same out of pocket cost.
Bequest: The Simple way to leave a substantial gift
A bequest to My Favorite Charity is as simple as adding an amendment to your will stating, I
give ($ or %) of my estate to My Favorite Charity of Any town, USA. This is the most
common planned gift and it may provide you with valuable estate tax savings.
Life Insurance: A large gift with a small cost
One of the simplest ways to make a significant contribution is to give a life insurance policy to
My Favorite Charity. You may do this in a number of ways; give a policy you no longer need,
take out a new policy or name My Favorite Charity as a beneficiary of an existing policy. This
may provide you with income and estate tax savings.
Charitable Trust: Substantial benefits to the donor
Do you own low yielding assets like real estate or securities that have appreciated in value? Is
your objective to sell those assets and reinvest in higher income vehicles? A charitable trust
might be your answer. The trust may help you to: eliminate capital gains taxes, reduce or
eliminate estate taxes, improve your lifetime cash flow, and when coupled with an asset
replacement trust, can give your heirs the same amount you gave to My Favorite Charity.
Charitable Gift Annuity: A Guaranteed income stream for life
A charitable annuity allows you to contribute assets to My Favorite Charity and receive a
charitable deduction. In turn, we will provide you with a guaranteed income stream for life (the
pay out will be contingent upon personal factors of the donor). This vehicle can ease the worries
of outliving your resources and provide a high rate of return coupled with numerous tax
advantages.
Please consult your tax, financial or legal advisor concerning any gift arrangements you are considering.
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V. Marketing Plan - What can you do today?
Myth 6: Planned giving will solve all of our problems.
Fact 6: Planned gifts can generate current dollars and fill the pipeline .
Don t fall into the trap of Myth 6. Planned giving is a long, slow process that represents
an additional tool in your fundraising toolbox. Planned giving is most productive when you
focus on outright gifts (e.g., appreciated property), while at the same time asking for bequests
and other deferred gifts that will eventually mature.
Many people have such a short-term attitude they cannot think that far into the future. In
fact, most planned giving experts recommend a minimum three to five year budget commitment.
Yes, it will probably take twenty years before the pipeline starts paying consistently large
dividends, but if you wait another five years to start a program, your organization will not see the
money for twenty-five years. Just think, how far ahead would you be today if someone had
the foresight to start a planned giving program twenty years ago? Better yet, drive down the
street and ask colleges and universities or the Salvation Army how their pipelines are working
for them!
A. Next steps
1. Develop your case for endowment
2. Form a planned giving committee with some board champions and financial
planning professionals (see Appendix A)
3. Approve: (1) PG Policies and Procedures and Endowment Resolutions
(2) Gift Vehicles
(3) Recognition Society (i.e., Heritage Club, Legacy Society, etc.)
and Annual Event
4. Solicit two or three prospects - ask the right questions
5. Develop and present the proposals with the help of your planned giving
committee
6. Educate your donors and volunteers at every opportunity
Use the Chinese water torture method: a slow, constant educational effort.
(1) Workshops for prospective donors
(2) Workshops for professionals
(3) Board presentations
(4) Planned giving mailings and articles
(5) Clinics on wills and estate planning
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Target Market Matrix
Age of the Donor
60+
Wealth
High
Moderate
40-60 years old
40 and younger
Low
High
Moderate
Low
High
Moderate
Low
Planned Gifts
Charitable Lead Trust, Charitable Remainder Trust, Gift
Annuity, Bequest, Current Appreciated Gift
Charitable Remainder Trust, Bequest, Gift Annuity, Current
Appreciated Gift, Gift Annuity
Bequest, Gift Annuity
Charitable Remainder Trust, Bequest, Current Appreciated Gift
Charitable Remainder Trust, Life Insurance, Current
Appreciated Gift, Bequest
Bequest, Life Insurance
Current Appreciated Gift, Bequest, Charitable Remainder Trust
Current Appreciated Gift, Life Insurance, Bequest
Bequest, Life Insurance
B. What do your donors want to learn more about?
Before we can answer that question, we first need to understand what they already know. In a
study conducted by Prince and Associates in 1993, 214 donors who donated $50,000 or more to
a single nonprofit within the last two years were asked to identify vehicles with which they were
either moderately or highly familiar.
The graph below illustrates their responses.
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This graph depicts the vehicles that fundraisers presented within the last 12 months.
The next graph shows the vehicles that these philanthropists would like to learn more about.
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VI. Community Foundation Planned Giving Support
If your organization has an endowment fund with The Community Foundation, you have access
to the following planned giving services:
1. Phone consultations
2. Access to planned giving software for proposals (PG Calc)
3. Gift design assistance from our Planned Giving Officer (Bryan Clontz)
4. Periodic training and development courses on planned giving topics through the Nonprofit
Resource Center
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VII. Sample Board Resolutions
CAUTION: These specimen documents are intended to be used as guides. Your organization
should design documents that are consistent with your board s objectives. As with any legally
binding contract, always retain legal counsel and suggest that your donor do the same.
ENDOWMENT RESOLUTION
Endowment Gift to the My Favorite Charity of Anytown, USA
The My Favorite Charity hereafter referred to as MFC - of Anytown Endowment provides
permanently restricted and temporarily restricted funds to produce income and appreciation for
uses in the best interests of the MFC of Anytown. The Board of Directors recognizes the
importance of maintaining these funds without invasion except under the most necessary of
circumstances and with the approval described in this Article of the Bylaws.
Permanently Restricted Funds
a. Core Book Value. Funds given to the Corporation as an endowment for the MFC of
Anytown are permanently restricted funds. To establish a base, the core book value of
funds in the Endowment as of February 15, 1996 is the core value of the permanently
restricted funds of the Endowment.
(1) Restricted funds in this category include those subject to special restrictions placed on
them by the donor with the approval of the Board of Directors of the MFC of
Anytown, and these specially restricted funds shall be increased or decreased in value
as of each December 31st by the change in the market value of assets (in annual total
return) comprising that part of the core value of the principal of the Endowment.
(2) The XYZ Scholarship Fund of $5,000, established January 1, 1991, is in
this category with expenditures to be approved by the Board of Directors to assist
youth in pursuing advanced education. Consistent with Subsection (1) above, the
principal value is thus considered permanently restricted, and income on that amount
of principal of the endowment is available for scholarships as the Board directs.
b. Additions to Permanently Restricted Funds. Donors may designate as permanently
restricted funds of the Endowment any assets they give to the Corporation for the MFC of
Anytown. These additions increase the core value of the Endowment. Gifts to the
Endowment from any source will be presumed to be additions to the permanently, rather
than temporarily, restricted funds. These gifts may include memorial gifts when
designated as funding for the Endowment.
c. Pledging of Permanently Restricted Funds. Permanently restricted funds may be
pledged as collateral on a vote of two-thirds of the entire membership of the Board of
Directors. Only non-permanently restricted funds will be pledged if they are
sufficient to meet the need, using permanently restricted funds for pledges only when
additional pledging of assets is required for the benefit of the MFC of Anytown.
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d. Expenditures of Permanently Restricted Funds. Permanently restricted funds may be
used for expenditures for structures and equipment for MFC of Anytown on the vote of
75 per cent of the entire Board of Directors of MFC of Anytown Area, and for operations
only on a 90 per cent vote of the entire Board of Directors.
Temporarily Restricted Funds
a. Temporarily Restricted Funds. As part of the Endowment, these funds include the net
appreciation (capital gains, realized and unrealized) of the permanently restricted
endowment funds, based on fair market value of assets, and gifts for MFC of Anytown
which the donor designates for specific expenditures for structures or equipment or for
specific future operations. This category includes memorial gifts when so designated.
b. Pledging of Temporarily Restricted Funds. These funds may be used for collateral for
loans on a vote of two-thirds of the entire Board of Directors.
c. Expenditures of Temporarily Restricted Funds. Temporarily restricted funds are the
first source for expenditures for structures and equipment and, when operational funds
are not sufficient, for maintenance of permanent facilities and equipment. The Board of
Directors may approve the expenditure of temporarily restricted funds
(1) on a 75 per cent approval of the entire Board of Directors for structures and
equipment, including maintenance of either when operational funds are not
sufficient,
(2) on a 90 per cent approval of the entire Board of Directors for operations, and,
(3) by a majority, to re-categorize temporarily restricted funds to permanently
restricted
funds.
Expenditure of Income from Permanently and Temporarily Restricted Funds.
Interest and dividend income from investment of permanently and temporarily restricted
funds may be used for:
a. Expenses of management of the Endowment.
b. By vote of the majority of the entire Board of Directors, projected net income
from permanently and temporarily restricted funds up to five per cent of core
value may be used as revenue in the annual budget.
Additions to Temporarily Restricted Assets from Income
As of each December 31st, net income in the Endowment that exceeds that allocated in the
approved Budget for the upcoming year will be transferred to principal and considered
temporarily restricted funds.
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Endowment Management
The Financial Management Committee shall oversee the investment of the Endowment. This
Committee shall develop and revise when appropriate the management objectives for the
Endowment to accomplish the following:
a. Preserve and develop the real (inflation-adjusted) purchasing power with
consistent (in real terms) stream of earnings, in line with spending needs. The
net income may be applied annually to operations in the budget as well as to
other purposes approved by the Board of Directors.
b. Attain a real total return on the equities part of the assets in the endowment
that exceeds the Standard & Poor s (S&P) 500 stock average over the longterm (rolling five-year averages).
The Committee shall provide the Board reports of the projected funds available for the next
year s budget and for revisions of the budget, and, semi-annually, on the state of the Endowment.
ENDOWMENT FUND INVESTMENT POLICY
The Executive Committee hereby adopts the investment policy for the MFC of Anytown, USA.
The Investment Committee will administer the Endowment Fund portfolio of the MFC of
Anytown, USA in accordance with the policy as adopted and amended from time to time. The
policy shall be reviewed at least annually by the Investment Committee and revised as necessary
by a majority vote of the Investment Committee. The Endowment Fund portfolio will be
managed by the Investment Committee, which may select outside investment managers to be
approved by the Executive Committee at their discretion.
1. OBJECTIVES
The assets of the Endowment Fund are to be invested with the care, skill and diligence
that a prudent person acting in the capacity of investing in endowment funds would undertake.
The primary objective will be to provide a total return on the assets including income,
appreciation, and protection of principal.
2. POLICIES
1. The Investment Committee will use the above objectives in making investment
decisions to accomplish the goals set forth above. The prudent person rule shall be
the governing policy in making investments. This policy is not intended to restrict or
impede the efforts of the Investment Committee to attain the Endowment Fund
objectives nor is it intended to exclude the Investment Committee from taking
advantage of appropriate opportunities as they arise. The Investment Committee
shall have discretion and flexibility to implement the objectives and policies herein
set forth.
2. The Investment Committee shall establish and maintain an asset allocation to reflect
and be consistent with the objectives and policies herein set forth.
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3. The Investment Committee is prohibited from investing in private placements, letter
stock, futures transactions, arbitrage and other uncovered options and is prohibited
from engaging in short sales, margin transactions or other similar specialized
investment activities.
3. ASSET ALLOCATION
1. The Investment Committee shall determine the asset allocation strategy to be utilized
in investing the assets of the Endowment Fund. The overall allocation of assets shall
be reviewed quarterly and the Investment Committee will determine changes in the
percentage of allocation among the classifications of investments. The allocation of
assets may be divided into percentages to be allocated to equities, fixed income
securities and cash equivalents.
2. Because security market conditions may vary greatly throughout a market cycle, the
Investment Committee may change the asset mix of the Endowment Fund within the
above ranges as long as the same meets the overall objectives and is within the policy
guidelines herein set forth. If the Investment Committee believes that certain
opportunities justify allocations beyond the limits described above, it must obtain
approval of the Executive Committee before making the investment change.
3. It is acknowledged that there may be funds in liquid assets including a money market
account held for investment that are not included in the above percentage allocations.
4. INVESTMENT DEFINITIONS
1. Equities: All equity investments will be made within the guidelines of quality,
marketability and diversification mandated by the objectives and policies set forth
herein. The Investment Committee will set quality standards for equity investments
from time to time. Equity investments may be made from the New York, American
and Regional Stock Exchanges and from the National Over the Counter markets.
Investments in securities of foreign companies trading in ADRs is permitted. The
Investment Committee shall be responsible for the security, selection and
diversification of its investments, but shall be limited to a maximum commitment of
the Endowment Fund market value for an individual security of 10% and for a
particular industry of 20%. The Investment Committee will have full discretion over
the turnover and allocation of equity holdings among selected securities and industry
groups within the limits described above.
2. Fixed Income: Investments in fixed income securities will be made to pursue
opportunities presented by changes in interest rates, credit ratings and maturity
premiums. The Investment Committee may select from appropriately liquid preferred
stocks, corporate debt securities, and/or obligations of the U.S. Government and its
agencies and issues convertible to equities.
These investments will be subject to the following limitations:
(1) Investments of securities of a single issue (with the exception of U. S.
Government and its agencies) shall not exceed 10% of the market value of the
Endowment Fund.
(2) Only corporate debt issues that meet or exceed an investment grade standard
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of A or higher from Standard & Poor s and /or from Moody s may be
purchased.
(3) Preferred stocks must be rated A or better by Moody s and/or Standard &
Poor s at the time of purchase.
3. Cash and Equivalents: The Investment Committee may invest in commercial paper,
repurchase agreements, treasury bills, certificates of deposits and money market funds
to provide income, liquidity for payments and preservation of the Fund s principal
value. All such assets must represent maturities of one year or less at the time of
purchase. Commercial paper assets must be rate A-1 or P-1 by Standard & Poor s
and/or Moody s respectively. Certificates of deposits will be limited to federally
insured certificates of a maximum of $100,000 of any one issue. The Investment
Committee shall not purchase short term financial instruments considered to contain
speculative characteristics. The Investment Committee shall not invest more than
10% of the Fund s market value in the obligations of a single issuer with the
exception of the U.S. Government and its agencies. Non-invested cash reserves
should be kept to minimum levels.
4. Other Assets: The Investment Committee shall not purchase assets other than those
recited above without the approval of a majority of the Investment Committee.
5. Communications: The Investment Committee shall give the Executive Committee a
copy of the asset allocation plan and each change thereto, and a quarterly account
review detailing investment performance, strategy and fund value. The report shall
reflect compliance with the objectives, policies and asset allocations set forth herein.
The Investment Committee may contract for an independent investment performance
analysis from a third party and authorize payment as compensation for such an
analysis.
The above Endowment Fund Investment policy was adopted by the Executive Committee on the
7th day of April, 1992.
Chairman: ___________________________
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MY FAVORITE CHARITY OF ANYTOWN USA, INC.
ENDOWMENT FUND
ASSET ALLOCATION
FOR THE PERIOD COMMENCING THE ____________ DAY OF ______, 19______.
1. Equities: ___________% to _______________%
2. Fixed Income Securities _______% to ________%
3. Cash Equivalents: _________% to __________%
The market value of the Endowment Fund as of the _______ day of ________, 19____ is
$__________.
The present allocation of the Endowment Fund Assets of the ________ day of ________,
19____ is:
1. Equities:__________%
2. Fixed Income Securities: _________%
3. Cash Equivalents: _______________%
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PLANNED GIVING POLICIES AND PROCEDURES
Purpose and Scope
As an organization of donors and as a not-for-profit organization incorporated under the laws of
Anytown, USA, MFC of Anytown is committed to serving the interest of planned giving donors
by:
1. Maintaining confidentiality throughout the entire planned giving process. Pertinent
information will be shared only to the extent that is necessary with professional
counsel and/or designated MFC of Anytown s staff and officers.
2. Encouraging donors to seek independent professional counsel to represent their
interests.
3. Resolving any potential conflicts of interest by always placing the interest of the
donor before that of MFC. No agreement shall be made between MFC of Anytown
and any entity on any matter that would knowingly jeopardize the donor s interest.
Professional Relationships
MFC will seek qualified professional counsel in the exploration and execution of all planned
giving agreements.
Internal Relationships
The MFC Board and Finance Committee shall have jurisdiction with regard to the approval of
policies, vehicles and procedures relating to the organization s planned giving program.
The President/CPO/Executive Director will approve all planned gifts for which the MFC of
Anytown has been named a trustee prior to execution. Furthermore, all specimen agreements
relating to planned gifts and agreements which vary in format from these specimen agreements
are also subject to presidential approval.
All known planned gifts and solicitations, planned gift negotiations and contacts with the
professional counsel will be reported to the Director of Development/Planned Giving. The
Director of Development/Planned Giving must report all substantive information to the
President/CPO/Executive Director.
Conditions of Acceptance
MFC of Anytown reserves the right to decline the acceptance of any gift which does not further
our mission or goals. Furthermore, any gifts that would create an administrative burden or
excessive expenses would also be a candidate for declination.
Any gift deemed to be unique in nature must be approved by an ad hoc Gift Acceptance
19
Committee. The Chair of the Finance Committee or their designated appointee will appoint this
Committee.
Federal tax law does not permit donors to dictate or restrict investment decisions with regard to
the maintenance of irrevocable gifts. Establishment and governance of all planned gifts shall be
in direct accordance with and subject to the IRS tax code, revenue rulings of the United States
Government and the laws of Any State.
GIFT ADMINISTRATION - PLANNED GIFTS
Confidential Information
All information obtained from or about donors/prospects shall be held in strictest confidence by
MFC. Neither the name, amount nor conditions of any gift shall be published without the
approval of the donor and/or beneficiary. Employees of MFC of Anytown who violate this
policy are subject to dismissal.
Trust Administration
Donors will be encouraged to use banks and/or other corporate fiduciaries as trustees for
charitable trusts. However, if specifically requested by the donor, MFC will act as a trustee or
will appoint a trustee for a charitable trust which names MFC as a primary charitable
remainderman on the terms set forth in this policy.
Trustee Responsibilities
When the MFC of Anytown is named the trustee of a charitable trust, the Chief Financial Officer
and the Finance Committee will be responsible for the operation of the trust. MFC may appoint
an administrator or custodian for such duties as accounting, statements, tax letters, etc.
Transmittal of information and revenues to donors will be made through the office of
Development; administrators therefore should forward all communications to the Director of
Development for transmittal.
Investment Policy
Unless otherwise directed by the donor or designated by MFC s Board of Directors, all planned
gifts will represent unrestricted monies.
MFC of Any town will have total discretion over the investments of a trust, including the
appointment of investment advisors, when acting as sole trustee.
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Requirements for Planned Gift Establishment and MFC Administration
Charitable Trusts
The percentage payout to a donor of a charitable annuity trust will be from a minimum of 5% to
a maximum of 10% of the trust s original value. For a charitable unitrust, the percentage payout
will apply to the value of the trust as appraised each year.
There shall be no more than two beneficiaries and at a least $50,000 must be contributed over a
period not to exceed five years. Furthermore, income beneficiaries must be at least 50 years of
age at the time of the establishment of the trust.
Lead Trusts
A charitable lead trust is designed to pay income to MFC for a predetermined period of time. At
the end of this term, the principal is paid to a non-charitable beneficiary. The lead trust may
either pay a fixed payment (annuity) or fixed percentage (unitrust) of the trust assets determined
each year.
Charitable Bequests
MFC encourages charitable bequests either through wills or revocable living trusts. Bequests
can be in the form of:
A stated dollar amount or specific property,
a percentage of the estate,
or a residual of the estate.
A bequest may be restricted or unrestricted in form. See Choices Available to Donors section.
The following language would be appropriate for a bequest:
I give (% or $ amount) of my gross estate to MFC of Anytown, a non-profit institution located
on Address, Any County, Any State.
Life Insurance
MFC encourages gifts of paid up or new insurance policies. An acceptance committee will
review the specifications of all policies to determine the value of the gift.
Gifts of a Retained Life Interest
Individuals may retain lifetime use of a personal residence or farm for themselves or a named
beneficiary, deeding the remainder interest to MFC of Anytown. The donor receives a tax
deduction based upon the remainder interest of their gift. MFC receives the property at the death
of the donor or named beneficiary.
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The property must be free of debt and the donor is obligated to maintain the property and pay all
taxes, insurance and general upkeep.
Real Estate Gifts
Under certain circumstances, real estate gifts may be used to fund current, life income or other
gift arrangements.
All gifts of real estate will be subject to an appraisal by an independent and professional agent.
In addition, the MFC of Anytown reserves the right to require an environmental appraisal of any
potential real estate gift. The appraisal must, whenever possible, show documented valuation of
comparable properties located in the same region. It must also be the result of a personal
visitation and internal inspection of the property by the appraiser. A formal appraisal should
contain photographs of the property, tax map number, assessed value, current asking price, legal
description of the property including historical and environmental characteristics and
restrictions, zoning district and complete information regarding all mortgages, liens, litigation or
title disputes.
MFC and the donor should have separate and independent appraisals.
Professional Remuneration
MFC of Anytown recognizes the right of fair and just remuneration for professional services.
Real estate brokers are entitled to a commission for any property gifts that they help to negotiate.
All professional commissions will be part of the gift negotiation process. MFC will consider
payment of brokerage commission if the gift merits such a commitment of resources. Otherwise,
donors may be expected to incur these costs addition to other costs and fees. Note: Costs and
fees associated with gifts of real estate are tax deductible to the donor.
Any real estate broker or other professional who is responsible for leading a donor to MFC shall
be given primary consideration to become the agent responsible for the sale. This will also be
the preferred method for providing all ancillary professional fees (e.g., stockbrokers, insurance
agents, et al.).
Any fees associated with the administration of a trust or for the payment of investment advisors
may be paid out of the trust and charged to the principal.
Additional Planned Giving Options
MFC of Anytown seeks to satisfy the charitable giving needs of all our donors and is willing to
explore any alternative planned giving options that will satisfy those needs. Alternative planned
gifts that would require administrative and financial obligations on the part of MFC must be
approved by the Finance Committee and Legal Counsel.
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Choices Available to the Donor
Donors have three choices regarding the distribution of the principal and/or income from a
planned gift.
1. Donor may leave the gift unrestricted to MFC. The organization would then have the
flexibility to allocate additional resources where they will have the most impact on
our nation s youth and/or the general well being of the organization.
2. Donor may use the additional income to endow their current annual gift. This would
allow the donor to continue their giving in perpetuity.
3. Donor may choose to use the gift to endow a specific program or service (e.g., art
appreciation or job skills training) for MFC.
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VIII. Other Recommended Resources
Planned Giving
Calculation Software
1. PG Calc ($2,000 fee with $500 annual service charge)
129 Mount Auburn Street
Cambridge, MA 02138
(617) 497-4970
2. Crescendo ($2,000 fee with $500 annual service charge)
Comdel, Inc.
1601 Carmen Drive
Camarillo, CA 93010
(800) 858-9154
3. Blackbaud s Paragon ($3,500-5,000)
4401 Belle Oaks Drive
Charleston, SC 29405
(800) 443-9441
Planned Giving
Brochures
1. Robert Sharpe and Co.
5050 Poplar Avenue, Suite 700
Memphis, TN 38157
(800) 238-3253
2. The Stelter Company
11159 Aurora Avenue
Des Moines, IA 50322
(800) 331-6881
3. Sinclair, Townes and Associates
1750 Candler Building
127 Peachtree Street NE
Atlanta, GA 30303
(404) 688-4047
4. Winton Smith & Associates
2670 Union Extension Suite 1200
Memphis, TN 38112
(800) 727-1040
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Training/Associations
1. National Committee on Planned Giving (Georgia Affiliate)
(404) 688-5525
2. National Society of Fund Raising Executives
Call your local chapter for information.
3. National Planned Giving Institute
519 Richmond Road
Williamsburg, VA 23185
(800) 249-0179
Planned Giving
Publications
1. Planned Giving Today
2315 NW 198th Street
Seattle, WA 98177
(800) KALL-PGT (Subscription is $195/Year)
2. The Art of Planned Giving (Book)
Douglas E. White: John Wiley & Sons
25
Appendix A: Planned Giving Committee Job Description
An ideal planned giving committee would consist of the following:
(1) 4-6 Board Champions committed to the planned giving vision (i.e., they should each make a
gift themselves).
(2) 4-6 Financial professionals (an estate attorney, a Certified Financial Planner, a Chartered
Life Underwriter and a Certified Public Accountant each with charitable planning expertise) -look first to current volunteers or board members with a belief in your cause.
Note: Choose the most respected estate planning professionals in each of these disciplines.
Most will be willing to serve on your committee for the indirect referral opportunities and
substantial PR. You should be able to recruit 4-6 professionals in less than three hours. After
you recruit the big name, ask him/her to recruit the other pieces of the puzzle from the
professionals with whom they frequently work.
Responsibilities:
The board solicitors are responsible for prospect identification and peer solicitation. They
should also be able to help with workshop planning.
The financial professionals are responsible for case and proposal design, marketing guidance,
articles, workshops and solicitation calls with board champions.
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Appendix B: Comprehensive Estate Planning Process
This planned giving technique is predicated on one basic premise - you can only leave your
estate to three beneficiaries: (1) your heirs, (2) the IRS or (3) charity. When combined, this
represents your lasting legacy.
Actual Case Study #1- Heidi and John Smith
Heidi and John Smith have a sizable estate that they must allocate according to their goals. Their
current estate distribution (76% Heirs - 24% Tax - and 0% Charity) does not accomplish their
objectives. They, like Warren Buffet and T. Boone Pickens (see earlier quotes), feel that $1
million dollars to each child is the amount they deem appropriate. Further, they would like to
replace taxes whenever possible with charity. Their advisors recommended that they purchase
an insurance policy for their children, as well as a number of specialized trusts to create a new
distribution scenario (71% Heirs - <1% Tax - and 71% Charity). They were elated with the
results.
Everyone is a philanthropist! With estate taxes reaching 55%, you can either give to
the IRS or choose to give to charities you feel will have a significant impact. The VoluntaryInvoluntary Philanthropist concept is illustrated by Alwin Ernst (founding partner of the current
Ernst & Young) and John Rockefeller, Sr.
Mr. Ernst, through lack of planning, lost 56% of estate ($7.1 million) in taxes. This
contribution will finance the interest on the federal debt for 40 seconds. Conversely, Mr.
Rockefeller only lost 3% of estate in taxes and gave the rest to charity. Which individual do you
feel has a created a more profound legacy?
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C O N S U M P T IO N
C H A R IT Y
H E IR S
IR S
LEGACY
Current Beneficiaries of Wealth:
Heidi and John Smith
HEIRS
TAX
CHARITY
Goals: Leave their children $1,000,000 each and
replace taxes whenever possible with charity
28
NEW Beneficiaries of Wealth:
Heidi and John Smith
100% + INS
HEIRS
TAX
CHARITY
Social Capital:
The concept of social capital clearly reveals that you
have a choice - and the power - to direct how assets
you will not be allowed to keep will ultimately be
distributed and used.
Involuntary Philanthropist
Estate
Tax
% Lost
Voluntary Philanthropist
Alwin Ernst
John Rockefeller, Sr.
$12,642,431
$7,124,112
56%
$557,905,182
$17,124,988
3%
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Appendix C: Charitable Remainder Trust
A donor can indeed do well by doing good. The following case study illustrates the benefits of a
Charitable Remainder Trust.
Actual Case Study #2 - Mr. and Mrs. Myers
Mr. and Mrs. Myers are nearing retirement and have accumulated a large amount of appreciated
property (e.g., company stock, family business, real estate, retirement plans). Unfortunately, this
property is only paying a dividend of 1.1% of the market value. Assumptions: Estate tax 55%
and income tax for federal and state 40%.
They have the following goals: (1) increase their retirement income, (2) reduce their current
income and future estate tax burden, (3) leave a substantial amount to their heirs and (4) provide
a significant gift to MFC.
To accomplish these goals, Mr. and Mrs. Myers can either sell the property and reinvest in
higher income investments or give the property away using a charitable remainder trust. The
following flow chart and graph show the benefits of using a charitable remainder trust vs. selling
and reinvesting.
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Insurance
Tax Deduction
Lifetime Income
Charitable
Trust
Charities
Steps
Benefits
1.
2.
3,
4.
1.
2.
3.
4.
Donate assets to the Charitable Trust
Trust generally sells assets to diversify
(Optional) Buy life insurance to replace assets
Trust terminates at death and distributes proceeds
to selected charities
Series 1- Sale and Reinvest
IRS
Immediate income tax deduction
No capital gains tax, reinvest for lifetime income
Heirs receive benefit gift/income/estate tax free
No estate taxes on principal, children receive
insurance proceeds
Series 2- Charitable Remainder Trust
FAMILY HEIRS
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CHARITY
Appendix D: Outright Gift of Appreciated Property
Sample Article
Benefits of Planned Giving
Planned giving utilizes tax strategies and financial planning techniques to provide the maximum
benefit to your financial plan as well as MFC. Said another way, planned giving can
dramatically increase the efficiency of giving by lowering your real cost to 40, 20 or even 10
cents on the dollar! One popular strategy is described below: giving appreciated property.
Give Once...Save Twice!
Our country has seen a dramatic increase in the value of property over the last decade, and just
recently we witnessed the stock market eclipse the 10000 point barrier.
Suppose Mr. & Mrs. Donor wish to contribute the same amount as last year, however, they
would like to increase the efficiency of their giving. We constructed the following chart for their
review (cost/share is $10; current value/share is $50). Note: Assume a combined federal and
state tax bracket of 36%, and a combined capital gains rate of 25%.
Total Value
Income Tax Savings
Capital Gains Tax Savings
Cash Gift
$1,750.00
$ 630.00
$
0.00
Stock Gift
$2,500.00
$ 900.00
$ 500.00
Real Cost of Gift
$1,120
$1,100
So, by using stock or other appreciated property (e.g., mutual funds, bonds or real estate), this
donor increased their gift by 45% without any additional out-of-pocket cost.
A question I am frequently asked is, This investment has performed very well for me, why
should I give it away?
The solution is to use the cash you were prepared to give to MFC to repurchase the amount of
shares that were donated. The result is a new higher cost basis, so you would only incur a capital
gain on the future appreciation, eliminating your past capital gains liability.
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Appendix E: Pre-Approach Letter
Letter to: Prospects
Dear,
I am currently serving as the Planned Giving Chair for MFC of Anytown, USA. Serving in this
capacity, I hope to meet with all of our board members prior to their 1996 gift both to introduce
myself and to discuss the numerous merits of planned giving.
The planned giving process incorporates tax and financial planning strategies that allow the
donor to efficiently achieve both their financial and philanthropic objectives. Said another way,
where cash is the least efficient method of giving, planned giving alternatives seek the most
efficient solutions by lowering the real cost of giving to as low as five cents on the dollar.
Volunteer or Executive Director and I would welcome the opportunity to meet with you either
April 11-12 or May 23-24 to further describe these innovative concepts.
I will call you April 4 to set a mutually convenient time.
Sincerely,
Planned Giving Chair
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Appendix F: Sample Will or Codicil Language
Form for a bequest of a fixed dollar amount:
I give and bequeath to MFC of Anytown, a Georgia charitable organization, having its principal
office at Address/City/State, the sum of ____ Dollars ($).
Form for a bequest of percentage of your estate:
I give and bequeath to MFC of Anytown, a Georgia charitable organization, having its principal
office at Address/City/State, ______ Percent (%) of my estate.
Form for a bequest of the residue of your estate:
I give and bequeath to MFC of Anytown, a Georgia charitable organization, having its principal
office at Address/City/State, all the rest, residue and remainder of my estate.
MFC of Anytown suggests that donors always consult with their attorneys or other financial
advisors when considering a bequest or other form of planned giving.
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