Bequests

Bequest Elevator Pitch

It’s a gift through your will or trust. It just takes a simple designation and it will not affect your cash flow during your lifetime. It’s easy to revoke if your situation changes.

General Description of a Bequest

A bequest – a gift made through a will or trust – can be the easiest gift to make because it costs nothing during a donor’s lifetime. Plus, it’s revocable, so updates or changes are easy when circumstances change. Wills or living trusts can be amended to include a bequest to a nonprofit with a simple codicil. A nonprofit can provide a sample bequest and codicil language to review with the donor’s professional advisor. The main advantage of bequests is that they are easy to understand and there is no additional administration or legal responsibility.

Details on Bequests

• A will is an important legal document and it is therefore wise for donors to consult a qualified attorney. The expense of creating a well-written document will prevent unnecessary estate administration expenses. Plus, donors will have peace of mind knowing that their plan is solid and does what they want.
• Having an attorney guide donors in writing a will ensures compliance with all applicable state and federal requirements to give them peace of mind about the validity of their estate plan. Sometimes people are reluctant to spend the money for a will and believe that they can take care of the legal language by following online guides. This is where the LegacyPlanner comes in.
• Every state prescribes what are known as “will formalities” to ensure the validity of a will. These formalities typically require that the will be in writing and that both the testator and witnesses sign. Additionally, the will must be notarized with self-proving affidavits (this avoids requiring witnesses to come to court to prove the authenticity of the signatures on the will when the testator dies).
• Charitable bequests are made through a will: a legal document specifying how an individual’s property is to be distributed after death. Some people use a revocable (or “living”) trust as their estate document instead of a will. A distribution from a revocable trust works the same as a bequest under a will to deliver a gift to the nonprofit, and it produces the same tax consequences.
• A bequest can give a nonprofit a specific dollar amount or asset (a “specific bequest”) or a percentage of the net estate. It can also be payable to the organization if, for example, a spouse or child predeceases the donor.
• If the organization’s commonly used name is different from its legal name or similar to that of another organization, provide the legal name and sample bequest wording (see Resources) to avoid confusion.

Benefits and Challenges for the Nonprofit

Benefits

• The main advantage of bequests is that they are easy to understand and there is no additional administration or legal responsibility for the nonprofit.
• Bequests can be combined with lifetime gifts for immediate impact or made “irrevocable” by signing a binding pledge if, for example, the donor wants name recognition now.
• A nonprofit can promote bequests as the gift that costs nothing during lifetime.

Challenges

• Bequests are revocable and are not payable until death. Therefore, counting bequests toward fundraising goals can be a challenge. The goal of a bequest program is to be included in an individual’s estate plan. The more bequest expectancies that a nonprofit has on file, the more certain its financial future. People seldom remove charities from their estate plans.
• If individuals do not have a will or estate plan, they may worry about the cost of hiring a professional to assist them. Reassure them that planning is well worth the time and expense.

Donor Benefits

• Donors have the comfort of knowing that they can amend or revoke a charitable bequest if their circumstances or family needs change.
• Donors create certainty about their philanthropic passions and ease the burden of estate administration for their family and heirs when they create a will and include charity.
• Assets will remain in their control during their lifetime.
• Gifts can be directed to a particular purpose, program, or goal.
• Under current tax law, there is no upper limit on the estate tax deduction for the donor’s charitable bequests.

Typical Donor Profile

• Anyone committed to ensuring the future viability and strength of the nonprofit.
• Individuals who find long-term planning more important than an immediate income tax deduction.
• Donors looking for a flexible gift commitment that doesn’t affect current cash flow.
• Donors who have given to the nonprofit for more than 5 consecutive years.
• Donors who have made a major gift to the nonprofit in the past. If the nonprofit  has a large donor base, fundraisers may want to look back 10 years for prospective bequest donors.