What is a Legacy Gift? And Should Your Nonprofit Consider a Legacy Giving Program?
There are many ways to obtain funds for your nonprofit. And while we can talk about how to retain donors, how to attract new donors, and more all day (seriously, we can!), we want to take this moment to think outside the box.
So, we’re tackling legacy giving for nonprofits. We’ll tell you more about what it is and what your nonprofit should consider before you start a legacy gift program.
Read on for more!
What is a Legacy Gift?
A legacy gift, also known as a “planned gift,” is a donation to a nonprofit by means of a will. Donors work with a financial planner to leave the gift in their will so they can leave a legacy based on their values.
Although many people believe that a legacy gift can only take place in the event of the donor’s death, that’s not always the case.
Legacy gifts can start as recurring donations made annually while the donor is alive. Upon their death, the gift can continue through means of the legacy gift.
A legacy gift can also be offered in many different forms. Often, these planned gifts are monetary. However, they can also be material goods, real estate, or even stock gifts.
Why Are Legacy Gifts for Nonprofits Important?
The value of a legacy gift is felt by both nonprofits and the donor.
Donor Benefits of Leaving a Legacy Gift:
For a donor, a planned gift allows them to leave their mark on the world. For many people, that’s incredibly important to them, especially if they’ve lived their lives trying to leave the world better than they found it. Through a legacy gift for a nonprofit, their name lives on and is honored for their contribution.
It’s also beneficial for the families of the deceased, as they’ll receive many tax breaks if a portion of the deceased’s wealth is left to a nonprofit.
While many donors can only offer what’s considered mid-level donations throughout their life, a legacy gift offers them the opportunity to leave a larger gift.
Nonprofit Benefits of Starting a Legacy Gift Program:
Through a legacy gift program, nonprofits can count as an additional revenue stream for their organization. According to Giving USA, in 2018, 9% of all nonprofit donations came from bequests which is a type of legacy gift.
Plus, creating a legacy gift program opens the door to an entirely new audience! And diversifying both your audiences and your revenue streams creates more stability when it comes to funds for your organization.
What Are 3 Popular Types of Legacy Gifts?
Although many nonprofits may view legacy donations as a “naming X amount of dollars to go toward Y organization” in a will, that’s not always the case.
There are many different types of legacy gifts (including the one we just mentioned). Here are 3 popular ways nonprofits can receive a legacy donation:
1. Bequests
Of the popular types of legacy gifts, bequests are often the most popular. They are a straightforward and impactful way for donors to contribute to a nonprofit posthumously.
For a donor to make a charitable bequest, they need to designate an amount of their estate to a nonprofit in their will. Typically, they do this in one of three ways:
- The donor leaves an amount of cash,
- The donor leaves a percentage of the overall value of the estate
- The donor leaves the remaining portion of their estate to a nonprofit after all other bequests have been handled.
Many donors opt for this type of legacy giving because they don’t cost anything during the donor’s lifetime.
2. IRAs
For donors who are looking to receive tax breaks, they may opt for an IRA legacy gift. Similar to donating stocks for nonprofits, donors can name your nonprofit as a beneficiary or a recipient to their IRA accounts. They can also determine whether your organization will receive all or part of the amount.
3. Life Insurance and Retirement Plans
Just like someone can name their family members as beneficiaries in a life insurance policy, a donor can name a nonprofit a beneficiary, too.
These legacy gifts often have major impacts on nonprofits because the overall amount is usually larger than what a donor can contribute during their lifetime.
Many nonprofits see this kind of legacy giving from donors who have retirement accounts or life insurance policies that they won’t use all of. And opting to include a legacy donation of this nature allows the donor’s family members to avoid certain income and estate taxes.
Should Your Nonprofit Consider a Legacy Giving Pipeline?
While a legacy giving pipeline can be beneficial for many nonprofits, it may not be the answer for all.
There are a couple of things you need to consider before creating a legacy giving pipeline for your organization.
1. Will the Cause Need Support in the Future?
The fact of the matter is that legacy gifts are often pledges, first. Your nonprofit may not see the funds until years down the road. So, it’s important to discuss whether or not the cause you’re serving will still have a need.
This is one of the major underlying factors in whether or not someone chooses to name your organization in their will.
If your cause will need support far into the future, then be sure to include that in your legacy giving pipeline marketing messaging.
2. Does Your Organization Have the Right Nurtured Audience?
Creating a legacy giving program for your nonprofit takes a different marketing approach than raising standard funds.
So you’ll need to nurture your right audience way in advance so they become donors first. As they build trust in your organization over time, they’ll be more likely to think of your nonprofit as they prepare their estates.
With both of those in place, your nonprofit can start considering a legacy gift program! But creating one takes its own set of knowledge and expertise.
Just like learning how to write grants, starting a legacy program requires a certain skill set that needs honing.
And we have the perfect training for you! You can learn how to start a legacy gift program without a budget.