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Establishing a Planned Giving Program Essay Charitable institutions play an important role in society, now more than ever, as socio-economic issues mount. The essence of charitable institutions is to facilitate the sharing or transfer of resources from those with excess to those who are wanting. The culture of giving emerged as a means of ensuring overall social welfare by pulling excess resources to segments of the population having more than they need to people without resources. Charitable institutions develop fund raising activities and schemes to encourage philanthropy as well as manage funds to translate this into programs for the targeted beneficiaries to fulfill this role effectively and continuously. The philosophy of fund raising for charitable work is that philanthropy plays an important role in democratic societies and fund raising is inevitable to philanthropy so that fund raising becomes an absolute necessity to democratic societies. (Kelly, 1998) Over the years, charitable institutions developed many fund raising processes or systems to ensure the short and long-term flow of funds necessary to support their important function. Planned giving is one long-term fund raising program that emerged. This works by providing donors with the option, other than outright giving, to defer giving to charitable institutions years after expressing the giving behavior, usually upon the death of the donor. This then focuses on assets instead of income as the measure of the capacity of donors to give. (Kelly, 1998) The rationale for this option is to facilitate the passing of assets from one generation to another through a system that allocates assets from their estates to charitable institutions upon their death according to their preference (Harrington, 2004). If people elect to pass their assets to charitable institutions then they can do so through planned giving. This also finds support in the governance system by providing incentives to philanthropy in the form of tax exemptions. II. Review of Literature A. Important Concepts and Definitions in Planned Giving Kelly (1998) conceptualized planned giving as the managed effort by charitable institutions to raise funds from gifts of assets of donors utilizing estate and financial planning processes and tools. The purpose of planned giving is to generate major gifts by offering donors with another option aside from outright giving. This fund raising scheme expands the prospect pool of donors by centering on assets, instead of income, as the determinant of the capacity to give. The sole concern of planned giving is facilitating the philanthropy of individual donors as compared to the other fund-raising efforts directed at the public. Previously, this fund raising method was known as deferred giving because financial benefits for the recipient charitable institution usually are postponed until years after the donor has set-up the gift, usually upon death resulting to the appropriation or management of the estate. The description explained planned giving in terms of the implications to charitable institutions and donors of the benefits from financial planning and incentives for planning giving. Weinstein (2002) defined planned giving, also known as charitable gift planning, as the giving of charitable contributions with some level of professional guidance. Most planned gifts have the effect of reducing the estate taxes, income taxes, and/or capital gains taxes of the donor. Charitable gift planning supports the charitable intentions of the donor while at the same time helps donors better manage their assets for their families and loved ones. Usually, planned gifts are bequests, which mean deferred actual receipt by charitable institutions. Non-profit organizations receive the bequest after the death of the donor. There are also other planned gifts, such as donations of appreciated stock, which accrue current contributions for the charitable institution. This definition focuses on planned giving as a process or system and the manner this works in supporting the fund raising activities of charitable institutions and asset management of donors. Hopkins (2005) explained that planned giving ideally concerns â€Å"long-term capital gain property† (p. 245) that is likely to increase in value. The greater the increase in value, the greater would be the charitable deduction as well as the income from tax savings. Value appreciation comprises a core concept in planned giving so that a planned gift is essentially interest in money or an item of property of the donor. Planning giving involves the transference of partial interest in property based on the concept of property as having two interests, which are income and remainder interest. The income interest from an item of property depends on the income generated by the property at the current time while the remainder interest from an item of property pertains to the projected value of the property, or the property produced by reinvestments, at some future date. As such, the remainder interest is the amount equal to the present value of the property when received at a subsequent point in time, which is higher than the income interest assuming that the property is appreciating. Measuring these two types of interest in property is through the consideration of property value, donor’s age, and the period when the income interest will exist. An income interest or a remainder interest in property could be subject to charitable donation. However, a deduction is almost never available for a charitable gift of an income interest in property. By contrast, the charitable contribution of a remainder interest in an item of property will likely give rise to a charitable deduction with compliance of all technical requirements. This provides an explanation of the manner that the system works and serves as an elaboration of the previous definitions. The explanation also provided a rationale for planned giving since remainder interest, which accrues in the future is usually always subject to charitable deductions when compared to income interest accruing at present. Hopkins (2005) further explained the two basic types of planned gifts. One is legacy or charitable giving contained under a will. This is a gift coming out of the estate of a deceased as a bequest or devise. Planned giving in the form of a legacy works through the inclusion of a charitable institution as a beneficiary of the estate of the donor with entitlement following the death of the donor. As such, this perpetuates the philanthropy of individual even in death. The amount assigned to the charitable institution comprises a tax exemption that decreases the estate tax. The other is a gift made during a donor’s lifetime, using a trust or other agreement. An example is charitable gift annuity that commences when a donor gives a charitable institution a certain amount of money that the institution can use, similar to a premium paid for insurance, but with the condition that a beneficiary receive payment of a certain amount every year. The amount given by the donor is subject to tax exemption. After the payment of annuity ceases such as with the death of the beneficiary, the charitable institutions gains the amount paid and all other interest accruing from its appropriation. This explains the options available to donors, with options supporting the charitable intentions of donors and providing them with convenient options for financial planning. B. Basic Steps in Establishing Planned Giving Program for a Non-Profit Organization Establishing planned giving program for a non-profit organization should involve some basic preparatory steps similar to a business plan in profit organizations. The first step is preparation. This involves an assessment of the capability of the organization to manage a planned giving program to determine areas requiring improvements to accommodate the program. Another must do is obtaining the feedback from the board over the development of the planned giving program since the board’s support determines a successful program. This step also involves a feasibility study to determine whether the intended program meets two criteria. One is whether the leaders and members of the organization together with donors believe in continuing its existence in the long-term and the other is whether donors express their belief in the longevity of the organization through significant gifts. (Barett Ware, 2002) In satisfying these criteria there is a higher probability of success. Second step is planning. This step covers the identification of goals and specific objectives of the program, the changes in organizational structure including the creation of committees and sub-committees and assignment of leadership positions and tasks, the plan for staffing such as part time or full time, the budget to cover all aspects of the program, and the timetable for the phases of the planned giving program. (Dove, Spears Herbert, 2002) These areas should receive focus to cover all planned program to support viability. The third step involves the identification of the program’s core and specific features. The idea of planned giving is to provide givers with various options on the ways through which they prefer to actualize their charitable intentions and manage their assets in the process. This means the need to identify the particular planned giving options that the non-profit organization would make available to its donors together with the details of how these works. (Ashton, 2004) This is for the benefit of the staff who would be directly dealing with donors and for the benefit of donors wanting to learn more about giving options offered by its preferred charitable institution. The fourth step is policymaking. Guidelines and protocols are inevitable in actualizing the planned giving program. Policies should cover issues such as legal advice, confidentiality of information, conflict in interest and authority in negotiations. Guidelines should also thoroughly explain procedures in executing and accepting planned gifts, valuation of donations, according of credit for planned gifts, investing managing and administering of planned gifts, and limitations and terms of planned gifts. Lastly, the policies should also establish the functions and roles of the committees and administrators. (Barett Ware, 2002) The fifth step is promoting the planned giving program to individual potential donors as well as the community in general. There are a number of ways for non-profit organizations to promote their planned giving programs including the handouts or leaflets, newsletters and other widely distributed publications, hosted events, seminars, and personal testimonials or referrals. The important thing is to introduce the program to people as a means of developing interest in planned giving and reaching out to existing donors who could be interested in different options. (Reiss, 2000) The sixth step is prospecting. This involves a two-fold consideration. On one hand, this involves the determination of the likely uptake of the program by considering potential donors including the involvement in planned giving by members of the board themselves. This results to identification of anticipated long-term fund raising position of the organization. On the other hand, this also involves the determination of the impact of the program including the possible issues and problems to support contingency planning. (Rosso, 2003) C. Establishing Goals and Objectives for Planned Giving Program Goals comprise statements of the position or outcome that the organization wants to gain while objectives set out the manner of achieving this position or outcome (Lewis, 2006). Establishing the goals and objectives of the planned giving program also goes through a series of interconnected cyclical processes. The first process is communication and clarification of issues, problems, challenges or opportunities that provide a context for establishing the program. These support the determination of goals. If a challenge is giving options then the goal would be diversified giving options for donors and the objective is the development of a planned giving program. (Lauer, 1997) The second process is evaluation of alternative solutions to express needs and requirements into goals and objectives through measures of success that would also constitute the criteria for evaluating the extent of fulfillment of the goals and objectives. (Lauer, 1997) The third process is articulation by drawing the participation of all stakeholders in providing perspectives over the areas for improvement and drawing consensus on actions (Lauer, 1997).