You want to leave a legacy that supports a cause you believe in. But you don’t want to simply sign a check today or leave a lump sum in your will. You’re looking for an option that might be more sustainable, providing support over a longer term. The answer could be planned giving, a category of philanthropy that includes foundations, endowments, scholarships and charitable gift annuities.
Create a private foundation
While corporate foundations are created by organizations or institutions, a private foundation is set up by an individual. Essentially, you provide the seed funds, with income or earnings used to support one or more nonprofits. You might direct the foundation during your lifetime, then have your heirs direct it after you’re gone — helping to pass your philanthropic mindset to the next generation. In this way, the total gifts made by the foundation can surpass your upfront gift.
Private foundations may have a corporate or trust form. With the corporate form, a board runs the foundation and determines who receives donations. With a trust form, there is no board, and you or your heirs may direct donations.
Fund an endowment
A nonprofit can create an endowment to hold donations it receives. Funds can then be distributed to pay for programs and needs. Educational institutions, hospitals and museums often establish endowments to help cover the cost of new structures, renovations, exhibits, research and other initiatives. You may be able to specifically direct how your gift be used. Otherwise, it may go into the endowment’s general fund and could be used for any purpose.
As with foundations, money contributed to an endowment may act as principal, with only the interest being distributed. On the other hand, you may be able to direct that a certain portion of your gift be distributed annually until it’s gone. In both cases, endowments allow you to continue supporting a favorite nonprofit long after you’re gone.
Establish a scholarship
A scholarship, of course, lets you financially support someone pursuing post-high school education. Most nonprofit educational institutions have a development office you can work with to establish a scholarship at that school. You can also establish a scholarship program through some community organizations, and these scholarships are not usually tied to a specific school.
When you create a scholarship, you typically determine how much it will be worth and how often it will be granted. For instance, you might contribute $25,000 to have a $1,000 scholarship each year for 25 years. Or you could stipulate a donation that will pay for three $5,000 scholarships per year for a set number of years.
As the donor, you also say who qualifies and how the scholarship should be used. For example, you might base qualifications around financial need, merit, or a specific skill, interest or major. And you could specify that funds be used for tuition or other expenses, such as studying abroad.
Fund a charitable gift annuity
A charitable gift annuity is similar to a charitable remainder trust, but it’s set up by the nonprofit instead of the donor. The donor contributes funds to the annuity, providing the nonprofit with an income stream. Any funds left in the annuity when the donor passes away go to the nonprofit.
One benefit of charitable gift annuities versus charitable remainder trusts is that the nonprofit manages all the costs and tasks involved in establishing and managing the funds. You simply provide the principal.
Plan and prepare
There are other ways to support the causes dear to you — from volunteering your time and expertise, to donating material goods to investing in companies in a field related to your area of interest, such as green energy.
Whatever path you choose, it’s important to think through the implications of your decision in relation to your current financial picture, your tax situation and your estate. And, if you’re planning to make a large gift to a nonprofit, make sure they can and will use the funds as you expect — or consult with them on how your intended donation could best be used to support their mission.
The experts at Hancock Whitney can help you outline a plan and work with your legal and tax advisors to help ensure your gift fits your own financial plan while doing the good you intend.
The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.
This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.
Hancock Whitney Bank offers other investment products, which may include asset management accounts, as part of its Wealth Management Services. Hancock Whitney Bank is a wholly owned subsidiary of Hancock Whitney Corporation.
Investment and Insurance Products:
| NO BANK GUARANTEE | NOT A DEPOSIT | MAY LOSE VALUE | NOT FDIC INSURED |
| NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | |||
Equal Housing Lender. All loans and accounts subject to credit approval. Terms and conditions apply.