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Planned Giving
Why Tell the Foundation?
As stated elsewhere, for significant gifts, many individuals prefer to give a gift anonymously during their lifetime, or not share with their chosen ministry that they have left a “planned gift” within their estate. Although this supports the idea that individuals give solely for the pure joy of giving back to God a portion of all their earthly blessings, rather than personal recognition, there are a number of reasons why sharing a “planned gift” with a Foundation Gift Coordinator may be advantageous. While a Gift Coordinator would absolutely respect the desire for anonymity if that is the donor’s wish, a confidential discussion with a Gift Coordinator may alleviate future problems when the gift is being received. There are a number of good, solid reasons why speaking with a Gift Coordinator is beneficial, as follows:
- Professional advisors – are experts in their field, but not ministry
- Do you have the correct legal name of the organization receiving the gift?
- Which organization should actually receive the gift?
- How should the gift funds be used?
- Is there an “alternate use” clause included?
- What is the approximate value of the gift?
- Should the gift be endowed or non-endowed?
Professional advisors – are experts in their field, but not ministry
You are always advised by the Gift Coordinators to enlist the services of a professional advisor, be it your accountant, financial planner, or lawyer. These individuals have expert knowledge within their chosen field of endeavour, and should ensure that all your affairs are in good order, in keeping with the accepted practises of the province in which you live. On the other hand, they usually are not experts, nor even have an understanding of the organizations, or the mission work being done by these organizations, to which you desire to leave a planned gift. The concepts of congregation, Circuit, District, and Synod may not be familiar to them, nor would they appreciate the use of specific words that for Christians have a special meaning within the ministries we support. A Gift Coordinator could assist you in explaining terms used within a Christian context, suggest appropriate phrasing, and ensure that the correct entity is being referenced within the gift wording. A Gift Coordinator would be pleased to meet with you, your financial advisor, executor, or family members, should you like assistance in outlining the mechanics of the gift or its effect upon your estate.
Do you have the correct legal name of the organization receiving the gift?
A donor will want to ensure that they have used the legal name of the organization receiving the gift, preferably with the CRA registration number, and perhaps address. Too often gifts are directed to organizations that legally do not exist. For example, “Lutheran Foundation Canada” is only a trademark name, whereas its legal name is, “Lutheran Church Canada Financial Ministries.” This difference would likely cause significant delays in rewarding the gift, plus additional lawyer costs, as a court ruling would be required. Although you and your executor may fully understand which organization is to receive the gift, after you are gone, there should be no questions regarding the identity of the intended recipient, regardless of who reads the will. Additionally, if any other beneficiary questions the recipient of the gift, the Executor may be legally liable for replacing the funds if it was later discovered that they were disbursed to the wrong organization.
Secondly, history has shown that many donors have a planned gift to more than one organization. A Gift Coordinator can provide you with all the needed information for each organization receiving a gift, rather than you having to source this information yourself, or worse still, having your professional advisor charge you time for sourcing this information on your behalf. A Gift Coordinator is a single point of reference for sourcing both this and other information you may require.
Which organization should actually receive the gift?
Donors often have a passion for a particular ministry area, be it Lutheran high schools, seminary education, media ministries, foreign mission work, local outreach, or social relief work either locally or abroad. Although a donor may be a member of the specific organization they plan to support with a gift, for some it’s not always so clear which legal, charitable entity has the responsibility for oversight, or is mandated to work in a specific area. With so much work to be done, congregations, districts and synod work together, focusing on their specific ministry areas, with a common understanding of who is responsible for what area of ministry. A Gift Coordinator can assist the donor in determining which entity or organization should receive the gift in order that it be used in the ministry area for which it was intended.
How should the gift funds be used?
If there is a specific, designated use for a gift, it is important that this designated use be in keeping with the stated mission and ministry of the organization receiving the gift. Although this seems obvious, occasionally organizations receive generous gifts that are not in keeping with their organization’s stated objectives or existing programs, and so they must ultimately decline the gift rather than take it under a false pretence. Although the donor may have been a long time supporter, accepting the gift under these awkward conditions could be potentially damaging for future gifts, and is usually avoided. If requested, a Gift Coordinator could speak with the organization on your behalf to ensure that the stated use of the gift is in keeping with the organization’s ministry goals, or simply ask them for the preferred gift wording.
Is there an “alternate use” clause included?
Any time a gift is given to a charitable organization, it is important that some leeway be given for the future use of the funds. This is done in either of two ways. The first is to simply give the gift as follows, “in support of the mission and ministry of the organization” or some such phrase, which allows the organization to use the funds as they deem appropriate. Alternately, should you want to fund a specific program or initiative, it is important to include an “alternate use” clause, which allows the funds to be used in support of a similar endeavour to that which you’ve specified, at the discretion of the organization. As they may not receive your planned gift for some years, it may be that the programs have changed to meet the changing needs. Effectively, you’ve requested them to use the funds as you desire, but the “alternate use” clause allows them the flexibility to use the funds in a similar endeavour, if your desired use is no longer advisable or feasible.
What is the approximate value of the gift?
Unlike most of the other reasons for speaking with a Gift Coordinator, this reason is purely for the benefit of the organization receiving the gift. It’s understood that for a planned gift, it’s only the “gift” which is planned, and not the time of delivery. For that matter, there may even be some question as to the value of the gift once the time comes for the organization to receive it. Nonetheless, for planning purposes organizations still prefer to know, if possible, the potential value of a future gift. Secondly, Canada Revenue has strict guidelines which outline how much of the gift must be spent in the year following its receipt, based on how the gift was received. This guideline is known as the “disbursement quota” and it is carefully monitored by CRA so that charitable organizations don’t simply build up cash, but rather spend the funds as intended by the donors. As these rules have much greater implication when a cash gift is given while someone is alive, in these cases, an organization may request that the funds be endowed rather than simply received as a cash gift. Lastly, as human beings we must acknowledge that knowing the value of a future, significant gift provides both incentive and encouragement to the volunteers actively involved in the ministry. What a blessing to know that other individuals are supporting their efforts in a significant way, and that the work they do so passionately might continue for many years.
Should the gift be endowed or non-endowed?
While an organization must take care of its annual operating and program costs, it must also save money in order to provide for its long-term future operations and programs. In order to meet both these needs, organizations encourage and depend on both endowed and non-endowed gifts. A large capital program or initiative may need immediate funding, whereas general operational costs may be partially covered by interest earned on an endowment. As Lutheran Foundation Canada has numerous endowments in place already, it may be advisable to simply add to one of these existing endowments rather than create an additional one, particularly if an existing endowment is funding the organization you also intend to support. For most endowments, the “endowed amount” (initial gift) is not used for a set time period, usually ten years, with only the generated interest being used, then after ten years both the principal and interest may be used. New endowments are only encouraged for gifts of $50,000 or greater, due to the limited investment earnings on smaller amounts, in proportion to the management costs for tracking and disbursing the earnings over the ten year period.
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