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Bequests 101

By Rachel Caldwell and Lauren Wolpin, Foundant Client Success Managers
 

For many community foundations, nonprofit organizations, and faith-based organizations, bequests are a vital part of the organization's strength and impact. Not only do bequests provide significant benefits for donors, but a bequest program can also create lasting, sustainable revenue for an organization.

Learning the different types of bequests and what type of information to track when working with donors will help maximize the benefits of the gifts for both the donor and your organization.
 

What Are Bequests

A bequest is a commitment by a donor to make a gift to a foundation at the time of the donor's death.

These planned gifts can be:

  • Made to a foundation to use at the foundation's discretion
  • Directed to a specific grantee, fiscally sponsored organization, or program
  • Given with other directions or contingencies
     

Types of Bequests

There are many types of bequests that a donor may choose to leave to an organization. Several types include:

  • Cash Donation: The most basic type of bequest is a cash donation, as directed in a donor's will.
  • Life Insurance: A donor may also choose to make a gift of life insurance to an organization. In this case, part or all of the donor's life insurance payout would be directed to the organization, either with or without directions or contingencies.
  • Charitable Gift Annuities: This type of bequest is specific to investments. A donor transfers an asset to an organization and then receives regular payments on their investment's interest for the remainder of their life. When the donor has passed, the organization retains the asset and can utilize both the principal and the interest at its discretion or based on the terms of the bequest.

In the case of a cash donation or gift of life insurance, the donor may choose to discuss these gifts with the organization prior to their death or the organization may receive an unexpected bequest after the donor has passed.


Why Tracking Bequests Is Important

Whether you know your organization is being considered for a bequest, are actively working with a donor to plan ahead for a bequest, or receive an unexpected gift after a donor's death, it's important to track these gifts with care and attention. Documenting bequests as thoroughly as possible can help avoid contested estates or wills after a donor's passing.

Whenever possible, it's important to maintain a trail of communication with a donor while they are living. Track everything from conversations to email and other digital communication, maintain records of contracts or forms, and use this paper trail to demonstrate that the donor and your organization had the same information and came to the same agreement about the bequest. When the process of soliciting or receiving a bequest falls to one person within an organization, this information can be lost.

Another reason to track planned giving is so that you can properly recognize a donor while they are living. By tracking verbal commitments related to bequests, your organization can determine whether or how to recognize a donor for their planned generosity. In many cases, a planned giving donor will make additional gifts to an organization while living, and tracking both their bequests and real-time donations allows you to properly recognize the donor for their collective contributions. This not only helps keep donors involved in your organization, but may also lead to larger gifts of appreciation.

Finally, tracking bequests allows you to plan ahead. If you are expecting a large bequest to mature in the next five to 10 years, your organization can prepare ahead of time for any additional staffing needs, resources, or facilities that may be needed to fully utilize the bequest.
 

Digitally Tracking Bequests

Whether you use Foundant's CommunitySuite or another software program, it's important to track the right information when stewarding bequests. There may be specific forms that either your organization's legal counsel or a donor's counsel may recommend completing prior to the donor's death. In addition to maintaining records of all signed forms, take time to discuss and record additional information about a planned gift.
 

Important Information to Record

  • Amount: The amount that a donor plans to give after their death may change while the donor is living. Therefore, it’s important to track the amount that was initially discussed and any changes to that amount that may arise, including the donor’s reasoning for that change if it’s shared with you. The more that can be recorded regarding these discussions, the better.
  • Contingencies: When planning to make a bequest, a donor may have a specific program or goal in mind for their gift. Spend time with the donor to understand how they would like their bequest to be used. Is the gift unrestricted? Is it directed for a program or grantee? Are there any contingencies the donor would like to place on the gift? Is the donor planning to gift a lump sum or use the gift to establish an endowment?
  • Recognition: If possible, discuss how your donor would like to be recognized for their bequest prior to their death. Again, documenting these conversations as thoroughly as possible can help quell any questions or disputes from friends and family after the donor has passed.
     

In Closing

When properly planned for and carefully tracked, bequests can offer a special financial boost to an organization. Tracking all information related to a bequest, from the first conversation to any changes along the way, can help avoid issues with the gift being contested or lost to legal challenges. Tracking bequests also allows you to properly honor a donor for their gift after they have passed and keep their legacy alive through your organization's work. By communicating with your donor, recording information, and planning ahead, your organization can maximize these unique gifts.
 

To learn more about co-authors Rachel Caldwell and Lauren Wolpin, check out their bios.

About the Author

For more than a decade, Foundant Technologies has specialized exclusively in making philanthropy easier and more impactful through intuitive technology solutions. All of our cloud-based solutions focus on grantmaker, grantseeker, scholarship provider and community foundation needs with the goal to make day-to-day tasks streamlined and help maximize the impact of the philanthropic community.

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