BDQ #5: What Is Planned Giving?

Written by Craig Wruck | Aug 14, 2023 8:00:00 AM

Sometimes there are really obvious and very simple answers. Everyone knows what planned giving is, right? Not so fast. A quick web search reveals a slippery slope into a morass of ambiguity.

“Planned giving involves providing a future gift to charity through your financial and estate plans,” declares one charity’s website. A financial services company broadens the definition, but only a bit: “planned giving refers to any arrangement that will result in a future contribution to charity.” Strictly speaking, a pledge for an outright gift fits both of these definitions, but such a pledge is not a planned gift.

These definitions insist that planned giving does not happen now but occurs at some time in the future. While it’s true that charitable bequests that do not make distributions until the death of the donor account for the vast majority of planned gifts, what about a Qualified Charitable Distribution, a current gift of a paid-up life insurance policy, or an outright gift of appreciated securities? These are current gifts requiring careful planning.

Wikipedia’s definition eliminates the “future” limitation, “planned giving is an area of fundraising that refers to several specific gift types that can be funded with cash, equity, or property,” but evades exactly which types of gifts are planned gifts. When we asked ChatGPT, well don’t get me started…

Let’s be candid: we’ve created a good deal of this confusion ourselves. “Deferred giving” seemed narrow and evolved into “planned giving” to capture a broader range of gift opportunities. “Gift planning” sounded more universal, acknowledging that the donor’s financial interests are a legitimate consideration and that it’s not solely about fundraising. And don’t forget “philanthropic planning.” Are we doomed to concede as many different definitions as there are readers of this article? Justice Potter Stewart famously said, “I know it when I see it.” Of course, he was offering a definition of obscenity, but perhaps the definition of planned giving is destined to be just as vague.

Let us propose the following definitions:

Planned Giving usually describes a fundraising strategy that offers opportunities to integrate a proposed charitable contribution into a donor’s overall financial or estate planning. Planned giving can involve a variety of assets, such as cash, securities, real estate, life insurance, or retirement accounts. Importantly, planned gifts can be current or future gifts, made during the donor’s lifetime or after death, and can include opportunities for life income or not.
Gift Planning is a generally broader term encompassing the activities involved in creating and completing a charitable contribution, which can include tax and financial strategies, clarification of charitable objectives, and the legal and administrative work required to document and carry out the donor’s wishes. Gift planning is more than just calculating a charitable deduction, preparing financial projections, and drafting wills, trusts and other documents. Gift planning includes the ongoing work required to ensure the donor’s charitable dreams are carried out and that the gift is optimized for both the donor and charity.
Deferred Giving is an obscure and somewhat obsolete term describing certain specific charitable gifts where the charity’s eventual use of the gift is postponed until sometime in the future. It’s usually applied to charitable gift annuities and charitable remainder trusts and, sometimes, charitable bequests. The term “deferred giving” doesn’t really resonate with most donors and is probably best reserved as a bit of insider jargon that we use among ourselves.

Whether you choose to call it planned giving, gift planning, or even deferred giving, two important characteristics of our work are optimism and a belief in the future. These are the essential elements that give meaning to planned giving. It is our privilege to work with generous donors and the organizations that serve our communities to help create opportunities for donors to join in building a better future.

The BDQ (Big Dumb Question)

We’ve all been there: at some point during a presentation someone says, “This may be a dumb question, but…” and the presenter (hopefully in a gracious tone of voice) says, “There’s no such thing as a dumb question,” before providing the obvious answer. But sometimes, just to yourself, you have to admit you were wondering about the same thing.

That’s the idea behind this occasional series we’re calling “The Big Dumb Question” (or BDQ). Our aim is to provide easy to understand answers to basic gift planning questions – the kinds of questions you may be reluctant to ask. We’ve got a list of topics in mind (see below).