What is legacy giving and how to get started with it

Legacy giving has a reputation for being complex and includes technical tax steps, which may keep some nonprofit organizations from getting started with a planned giving program. Fortunately, when approached with the right strategy, legacy giving is far from scary and can become one of your nonprofit’s most reliable revenue sources and an additional way for your donors to show support. 

Of course, it’s still normal to have questions about legacy giving, even starting with what to call it. You may have heard of legacy giving by its many different names—planned giving, deferred giving, estate giving, and so on. In this article, we’ll dive into this topic and other common questions nonprofits have about legacy giving.

Before you can decide if now’s the time to start a legacy giving program at your nonprofit, it’s important to understand this giving method. Let’s start by exploring what legacy giving is and what starting a planned giving program can mean for your nonprofit. 

What is legacy giving?

Legacy giving refers to donations that supporters plan to give to your nonprofit after their passing. Legacy giving is also commonly referred to as planned giving because donors often plan these gifts years before they are distributed to the designated parties. 

For many donors, legacy giving will consist of monetary donations, but some donors will give real estate or choose to set up a charitable annuity or trust rather than make a direct donation. While the specifics of each gift and how it is distributed will vary depending on your nonprofit and legacy donors, these gifts have the potential to supply your nonprofit with meaningful funds for years to come and honor the donor’s legacy. 

Why is legacy giving important? 

Legacy giving can benefit both nonprofits and donors. Donors who choose to participate in legacy giving can experience positives, such as:

• The ability to cement their legacy. Legacy giving ensures donors will be remembered for their generosity and commitment to your nonprofit’s purpose long after their passing. This can be especially important to mid-level donors who lack the funds to make a major gift during their lives but can create the impact they want through a legacy gift.  
• Tax breaks. Many wealthy donors join a legacy giving program both out of their commitment to their favorite nonprofit and the numerous tax benefits that participating can bring their families. 
• Control over their donation’s use. With legacy giving, donors can add stipulations in their wills for how their gift will be used. This can help donors rest assured that their legacy will be preserved the way they would have wanted. 

For nonprofits, legacy giving is an important revenue source because it:

• Adds an additional revenue source for organizations to secure their fiscal stability.
• Builds an endowment to provide an ongoing source of income each year in perpetuity.
• Strengthens other “asks” and deepens the connection with donors.
• Broadens your donor base by providing another way to give.

Many donors don’t have the capacity to give major gifts on an annual basis, but they can make a major gift by using other types of assets, like art and life insurance policies, and more through estate gifts and endowments. By promoting legacy gifts you are broadening the base of donors that can give to you in ways other than cash or securities.

What are the types of legacy giving? 

If you want to provide your donors with an opportunity to make an impact, while also creating a sustainable revenue source for your organization, starting a legacy giving program is the way to go—and it doesn’t have to be overwhelming.

Let’s break down the different types of legacy giving so your nonprofit can get comfortable with the more complex side of this giving method:

• Bequests. Bequests are the most popular, simplest type of legacy giving. In their wills, donors will name what they want to give to your nonprofit, whether it’s a specific amount of funds, stocks, a piece of art, or even a percentage of the value of their estate. Keep in mind that while your nonprofit can encourage donors to create a will, you cannot participate in creating it. 
• Life insurance. When taking out a life insurance policy, donors can name a nonprofit as one of its beneficiaries. Donors who currently have life insurance policies they don’t need anymore can also participate in legacy giving by donating their policy’s accumulated value to your nonprofit. 
• IRAs. Some of your donors may be interested in joining a tax-deferred retirement plan. They can use this as a method to participate in your legacy giving program by either naming your nonprofit a beneficiary or as a recipient of the percentage of the proceeds. 
• Charitable gift annuities. Large nonprofits may set up charitable gift annuities for their donors. With this method, donors make a large gift during their lifetime, and in exchange, the nonprofit provides them with a fixed income for the rest of their life. When the donor passes, the nonprofit receives the remaining funds. 
• Retained life estates. Instead of making a monetary donation, donors can give nonprofits a piece of property they own while still retaining the right to use it during their lifetime. After the donor passes, the nonprofit can choose to keep or sell the property. 

There are even more ways to make a legacy gift than just these options. Talk to your donors about what giving method makes sense for them, and meet with your nonprofit’s lawyer to work out all the nitty-gritty details. 

Spread the word about legacy giving

Most of your donors likely won't know what legacy giving is. Begin marketing your planned giving program and educate donors on the many ways they can contribute a legacy gift.