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By chris

I know what you might be wondering…is this going to be a wordy, complex discussion of a very legal-heavy topic? The answer is no!

We will be covering that topic that has yet to be named, but this post aims to explain some of those complexities in a manner that is digestible for a layman. There are academic papers for the intricacies of planned giving ethics. This post is for people who are newly and/or casually involved with planned giving and need an introduction to ethical questions associated with such programs.

Remember, simply because we’re discussing ethics, that does not mean that ethical ambiguity is some gray storm cloud hanging over planned giving. You’ll rarely have any ethical questions when running your program. It is just good to be aware of what you could encounter, even if it remains entirely hypothetical in your situation.

Before moving on to the two questions that will be guiding this discussion, let’s define terms.

Definition of Planned Giving

Planned giving can be defined as the act of allocating funds and/or assets to be donations at a later date — most often at death. Commonly granted through wills or trusts, planned gifts can be strictly cash, property, life insurance policies, and much more.

Read additional details about planned giving’s definition here!

Definition of Ethics

This definition could quickly devolve into a close reading of an immense term, so we’re going to defer to our good friend, Merriam-Webster, this time.

— rules of behavior based on ideas about what is morally good and bad

— an area of study that deals with ideas about what is good and bad behavior; a branch of philosophy dealing with what is morally right or wrong

— a belief that something is very important

For our purposes, we’ll be zeroing in on that first point. Hypothetically, if you were to encounter an ethical dilemma when acquiring a planned gift, you are likely to instinctively be able to recognize that something is off.

Don’t dismiss your gut feeling. Respectfully pursue what you’re questioning and handle the situation accordingly, depending on what you uncover.

There’s legal, illegal, and questionable. Questionable counts for something. Don’t ignore it.

Much of what makes charity so enticing is that it feels good. It is nice to know that your actions are helping the world in some way. Whether you collect recyclables during a can drive or buy a table at a fundraising dinner, your work is making a difference.

Good deeds are good all around. Planned gifts don’t deserve to be muddled by moral ambiguity.

Ready to start the questions?

#1: Are there any ethical issues surrounding the planned giving tax breaks?

Short answer: yes. Short answer: no.

This is all entirely situational.

The tax breaks for planned gifts are benefits, but they should not be the sole reason why someone is making the donation in the first place.

The deciding factors in making a planned gift should be ordered as follows:

  1. The desire to make a charitable contribution
  2. Any other number of factors, including the benefit of some tax advantages

Avoid gifts from someone entering a planned giving situation by way of looking for tax loopholes. A donor can benefit from the planned giving tax advantages without purposefully manipulating the system.

The good news is that almost anyone you encounter will not be trying to run a workaround of government laws. You just need to be aware of the possibility, in case it were ever to happen.

#2: Do donors ever offer more than they are realistically capable of donating?

Yes, some donors might.

This ethical quandary is more of a best-intentions-gone-awry scenario.

Imagine a situation wherein a donor comes to you thrilled to make arrangements for a planned gift. We’ll call the donor Bob.

Bob is a longtime advocate of your organization and one of your most loyal donors, and he is ready to make a legacy gift.

It is great news all around; then you realize that the donation he wants to make is not realistic given the current status of his finances and assets. You’ll have to tactfully turn Bob’s plans in a more fiscally sound direction.

Do the best you can by the donor. What would you want if the situation was reversed? Think about what you would do if the donor was a friend or a member of your family.

When you are in the process of acquiring a planned gift, ask yourself questions, such as:

  • Is the donor logically considering future financial needs?
  • Does the donor have the means to give us this gift?
  • Is this the ideal gift size for this particular donor?

You are probably not going to have the donor’s entire financial situation displayed in front of you. But you should have a general sense of things.

Solutions to Questions Regarding Planned Giving Ethics

Instate specific policies and procedures to govern the actual process of making a planned gift. That way, you can always refer to the text and know you are in the moral and ethical clear.

In our article on prospect screening ethics, three of the suggestions for respectful and reasonable researching were: be transparent, hire high-quality staff, and evaluate your conduct.

Although those suggestions were prospect research-based they easily apply to solving any moral or ethical problems you might encounter through your planned giving program.

One last thing…

Occasionally with planned giving scenarios, the nonprofit and for-profit worlds collide. This is all usually to the benefit of everyone involved.

Planned giving can become confusing in a hurry and it helps to have the sage advice of financial professionals, especially those who deal with estate planning. Experts should be welcomed.

Just ensure that all parties have good intentions and are arranging the planned gifts for nonprofit, not for-profit, purposes.

Questions of ethics can get a bit heavy, even if you do your best to keep things light. There is no reason to be concerned, planned giving is not a topic that is normally oriented around philosophical debates.

Ethics are worth delving into for preparedness’ sake, but ethical problems are barely blips on the radar of a standard planned giving program.

Read the DonorSearch Planned Giving Whitepaper

2 Questions About Planned Giving and Ethics