10 types of planned gifts your nonprofit should know

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Many organizations today understand the value of planned giving and make it a key part of their fundraising plans. For example, you’re likely already familiar with bequests. The most popular way for donors to make planned gifts is to leave charitable bequests in a will.

‍However, bequests are far from the only planned giving option you and your donors can consider. 

There are many different types of planned gifts, from simple bequests to complex trusts to modern forms of non-cash giving. Learn about them, understand how they work, and use them to better customize your solicitations and appeal to donors’ needs and giving motivations. With these gifts, you can fuel long-term growth and stability while deepening relationships with your most loyal supporters.

What are the primary types of planned gifts?

Planned charitable contributions fall into three main categories:

• Deferred gifts of cash or other assets
• Gifts that pay an income to donors
• Gifts that protect donors’ assets

Additionally, many types of non-cash gifts are commonly incorporated into planned gift arrangements, so it pays to understand them, as well. We’ll explore all three categories plus popular non-cash gifts below.

Why should nonprofits understand the types of planned gifts?

Each gift type has different requirements and advantages depending on a donor’s financial circumstances, meaning they’ll appeal to different segments of your donor base. By understanding these distinctions, you can have more fruitful, tailored conversations and create more opportunities to secure support for your mission.

Deferred planned gifts

These types of planned gifts are ‘deferred’ because a nonprofit only receives them after the donor passes away. Deferred planned gifts are among the simplest to give, usually only requiring the donor to officially name the nonprofit as a beneficiary in the relevant documentation.

Bequests

Bequests are one of the simplest, most impactful, and most popular ways to make a planned gift. As of 2024, they make up approximately 8% of all charitable giving in the US, totaling $42.68 billion. What’s more, they’re effective giving methods across all age groups. In the 2024 FreeWill Planned Giving Report, we found these breakdowns of average bequest size by age:

• 18-24: $34,798
• 25-44: $33,039
• 45-64: $39,280
• 65-84: $55,806
• 85+: $59,480

Demographic trends make bequest gifts particularly smart for nonprofits. Younger generations increasingly create bequests when asked, and while their gifts are relatively smaller than those of older cohorts, establishing lifelong relationships with generous supporters pays dividends.

Here’s a breakdown comparing the number of new bequests created on the FreeWill platform in 2023 by age group:

Older donors historically have a much greater capacity and propensity to commit large planned gifts. Additionally, increasing amounts of wealth will be passed to younger generations in the coming years as part of the “Great Wealth Transfer.” Charities have more valuable opportunities to secure additional support for their work than ever before.

So how do bequests work? To make a charitable bequest, a donor has to allocate a portion of their estate to a nonprofit in their legal will. They are usually allocated in three ways:

• A specific amount of cash (e.g., $10,000);
• A percentage of the donor’s total estate (e.g., 10% of an estate of $1 million would be $100,000 to charity); or
• The remaining value of the estate after all other bequests have been paid.

Bequests are a highly accessible giving option for all your supporters, as they don't cost donors anything during their lifetime. Since they draw from a total estate rather than cash on hand or other liquid assets, donors are also often more generous with bequests. Plus, bequests can be a helpful planning tool for donors concerned with potential estate tax obligations for their heirs.

FreeWill’s intuitive bequest tool has helped raise over $10 billion for nonprofits through planned gifts. Our free platform allows your supporters to quickly create wills and bequests—in fact, we’re the largest provider of online estate planning in the U.S. Learn more about our platform and how it helps nonprofits like yours simplify every aspect of bequest fundraising.

Or, if you’re new to planned giving, brush up on the essentials with our complete guide:

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Retirement plans & life insurance beneficiary designations

Here’s another very easy way for donors to ensure a portion of their total assets will be disbursed to their favorite cause after their passing.

Donors can name a nonprofit as the beneficiary of their life insurance policies or unused retirement assets. These retirement assets can include individual retirement accounts (IRAs), 401(k)s, 403(b)s, and pensions. 

Because these gifts are often much larger than what a donor could or would give in cash during their lifetimes, they can drive significant impact for nonprofits.

These types of planned gifts are a good option for donors who have paid-up policies or retirement accounts that they won’t use. If a donor has a large estate, gifting retirement accounts and life insurance policies can help their heirs avoid income and estate taxes.

Additionally, while not deferred gifts, qualified charitable distributions (QCDs) from IRAs can be directed to nonprofits as donations. Supporters can name your organization as the recipient of required but unneeded annual IRA distributions. 

QCDs can be hugely beneficial for nonprofits, and they’re a growing opportunity. IRAs hold an estimated $14.3 trillion. As the large Baby Boomer generation ages (and thousands reach retirement age every day), there’s never been a better time to educate your donors on the tax advantages of QCDs.

Want to begin identifying and soliciting QCD gifts? We’ve got a tool for that.

The types of planned gifts that pay income

Life income gifts require a long relationship between the donor and nonprofit organization, and they’re typically favored by wealthy donors seeking to make a difference while optimizing their financial plans and tax bills.

These types of planned gifts are more complex than bequests, but in general they work like this: Nonprofits receive a large donation, invest the funds, and pay the donor an income for the rest of their life.

Let’s take a closer look at the most common forms of income-generating planned gifts.

Charitable gift annuities

With charitable gift annuities, donors give an irrevocable gift of cash or securities to a nonprofit in exchange for a fixed income payment for a set term or for life. 

The donor can take an immediate tax deduction while the nonprofit invests and grows the funds, as it would with an endowment gift. When the donor passes or the annuity’s term is up, the nonprofit keeps the leftover funds. Some donors choose to defer their annuity payments until they retire, resulting in higher payments.

Charitable gift annuities are a smart giving option for donors who want to make a large gift while still protecting their income. 

These donors may want to ensure the future of their or their children’s retirement funds. Or they may have already retired and want to enjoy a yearly income while still making a significant impact on a cause they care about.

Charitable remainder annuity trusts

With a charitable remainder annuity trust, the donor contributes cash or appreciated securities. They then receive a fixed income based on a percentage of the initial assets used to fund the trust.

The nonprofit can invest the funds, while the donor can avoid capital gains or estate taxes. At the end of the annuity trust’s term, the remaining balance goes to the nonprofit. These contracts usually give a donor an income for a term of up to 20 years or for life.

Annuity trusts are best for donors who want to make a major gift while still ensuring that they’ll generate income from their donated assets.

Charitable remainder unitrusts

A charitable remainder unitrust is a little more flexible than an annuity trust. 

It pays the donor a fixed percentage of the fair market value of the trust’s assets and is revalued annually. If the value of the assets increases, the payments increase. But if they decrease, so do the payments. Like annuity trusts, the remaining balance goes to the nonprofit, and the terms are usually set for up to 20 years or for life.

This type of planned gift is good for donors who want to protect their income against inflation. Unitrusts are also beneficial for donors who need more flexibility, as they can fund them with almost any asset, such as stock or real estate.

Pooled income funds

Nonprofits sometimes create and maintain pooled income funds—a type of charitable trust that functions similarly to a mutual fund. 

These funds pool together many donor contributions for investing purposes. The nonprofit pays these donors an income based on their share of the fund and the performance of the investments. Nonprofits only see money from these funds when a participating donor passes away. At that point, they receive the donor’s share.

Donors who contribute to a pooled income fund can see an immediate income tax deduction and avoid capital gains tax on any appreciated assets they contribute. These funds are a good fit for donors interested in the stock market and comfortable with a certain level of risk and variable income.

The types of planned gifts that protect a donor’s assets

Some donors don’t want to give up their assets completely when making a gift. In these circumstances, there are a couple of ways for them to save their assets for themselves or their heirs while still having a significant impact.

Charitable lead trusts

Lead trusts are functionally the opposite of a charitable remainder trust. When donors make a gift through a charitable lead trust, the nonprofit secures a fixed income stream for a specific term length or the donor’s lifetime. When the term ends, the assets return to the donor or their beneficiaries instead of the nonprofit. 

Lead trusts are an excellent way for nonprofits to diversify their funding channels and ensure they have a set amount of revenue coming in each year.

These planned gifts are best for wealthy donors with significant estates, as charitable lead trusts can reduce estate taxes, while still transferring wealth to heirs.

Retained life estates

With retained life estates, a donor transfers a property deed or title to a nonprofit while retaining the right to use the property. Unlike a charitable lead trust where the assets return to the donor, retained life estates belong to the nonprofit after the set term is up. At that point, the nonprofit can sell or keep the property for its own use.

This type of planned gift is a good fit for donors who want to simplify their estate settlement process and reduce estate taxes. Like most planned gifts, they can also receive an income tax deduction for the property's value.

Other non-cash gifts

Other types of non-cash gifts are growing increasingly common as both one-time donations and as parts of planned gift arrangements between donors and nonprofits.

Non-cash giving offers donors an added level of flexibility and unique tax benefits. Plus, as most wealth is not held in cash, accepting non-cash gifts and suggesting them to prospects allows you to secure more support and fuel growth for your mission. Research suggests that organizations that prioritize non-cash gifts grow six times faster than those that don’t.

Appreciated assets

Donations of appreciated assets most commonly consist of stock, cryptocurrency, and property. 

The processes for donating and accepting various types of assets vary, although none are particularly complex (with the exception perhaps of property).

For example, you can accept stock gifts by establishing a brokerage account and simply providing your donors with the relevant information to direct their own brokerages to coordinate the transaction. This method has a few shortcomings, but thankfully, modern alternatives provide an even easier process with tools like FreeWill.

The process for donating cryptocurrency can be similarly simplified with modern processing tools. This is a growing opportunity for nonprofits to connect with diverse audiences that should not be overlooked.

High-value in-kind gifts of property, cars, and more are also options that your donors may wish to incorporate into their planned gifts. Your best route for navigating these gifts will be to consult your organization’s legal and financial professionals.

For all gifts of appreciated assets, your organization should have concrete gift acceptance policies in place. This will make it easier to facilitate your non-cash giving program and help frontline fundraisers feel more confident when discussing these gifts. Check out these crypto-specific policy updates for examples to adapt.

To learn more about non-cash giving, please explore our how-to guides:

• How to accept stock donations: What nonprofits need to know
• How to accept crypto donations: Complete nonprofit guide

Grants from donor-advised funds (DAFs)

Grants from donor-advised funds (DAFs) represent one of the single fastest-growing areas of philanthropy in recent years. These ‘philanthropic savings accounts’ hold vast amounts of wealth—in 2022, they held $85.53 billion in donor contributions and paid out $52.16 billion in grants (NP Trust’s 2023 DAF Report).

Nonprofits increasingly prioritize DAFs as they become the giving vehicle of choice for many high-impact donors. Consider these findings from FreeWill’s most recent DAF report:

• In 2023, surveyed organizations saw increases in both the number and total value of DAF gifts received, a second consecutive year of growth.
• 58% of organizations actively solicit or promote DAFs, up from 46% the year before.
• 76% of organizations see DAFs as strategically important.
• 62% of organizations think the DAFs simplify the processes of soliciting and accepting complex gifts.

Note that last point—DAFs can be an incredibly helpful option for your planned gift and major gift prospects. By contributing cash and liquidated assets to these accounts, donors create handy reserves of philanthropic funds within easy reach for any type of giving arrangement you might suggest and discuss with them.

Many donors also use their DAFs to establish recurring gifts to their favorite nonprofits—develop these relationships and watch your mission thrive.

To learn more about DAFs, please explore our complete guide—DAFs 101: Introduction and how-to guide for nonprofits

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Getting started with new legacy giving options

The world of planned giving extends far beyond bequests alone. Familiarizing your organization with the primary types of planned gifts will enable you to better speak to them with donors and make it possible to identify ideal prospects over time.

The single best step you can take to support your planned giving efforts is to create an easier, more intentional donor experience. Use modern giving tools and take an organized approach. Communicate clearly, back up your discussions with knowledge and research, and meet prospects where they are by understanding their motivations, interests, and options.

We also recommend creating donor profiles that compile key philanthropic, wealth, and motivational markers that indicate a prospect may be interested in a particular type of planned gift. 

From there, you’ll have a solid starting point from which to grow your planned giving program. Add planned giving and non-cash options to your nonprofit's Ways to Give page, and create a dedicated Planned Giving Microsite to serve as your program's digital home to educate donors on all your planned giving options.

To learn more, get in touch with FreeWill to discover if your nonprofit has already been named as a beneficiary in a donor’s will, and keep learning about planned gifts with these resources:

• Planned giving: A complete guide to planned giving programs
• The benefits of planned giving for nonprofits and donors
• How to start a planned giving program: Step-by-step guide
• How to find planned giving prospects: 4 steps