Types of Planned Gifts: A Catholic Fundraiser's Guide to Every Vehicle

 By Rhen Hoehn, Director of Marketing

A planned gift is a charitable gift arranged during a donor's lifetime but tied to their estate plan, retirement assets, or long-term financial picture rather than to their checkbook. Some are revocable and cost the donor nothing today. Others are irrevocable, pay the donor income, and require an attorney to create.

Here's the most useful thing to know first: the vehicles producing most of what Catholic organizations actually receive are the simple ones. Bequests and beneficiary designations need no trust document, no reserve fund, and no actuary. Master those, recognize the rest well enough to refer, and you're doing the job.

This article is written for fundraising professionals and does not constitute legal or tax advice. Donors considering any planned gift involving estate documents, trust agreements, or beneficiary designations should consult a qualified estate planning attorney. Organizations should consult their own counsel and their diocesan development office before accepting complex gifts.

Every planned giving vehicle at a glance

Consider these as falling into two groups. Everything low, a donor completes with a form. Everything high needs a professional you don't employ.

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In this article

• What is a bequest, and what are the four types?
• Why do beneficiary designations deserve more attention than they get?
• What is a qualified charitable distribution, and where do parishes get it wrong?
• What is a charitable gift annuity, and should your organization issue one?
• When is a charitable remainder trust the right vehicle?
• How do donor advised funds fit into planned giving?
• How can a donor give life insurance?
• What about real estate, closely held stock, and personal property?
• Six mistakes to stop making
• Frequently asked questions

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Part One: The Simple Gifts

What is a bequest, and what are the four types?

A bequest is a gift made through a donor's will or revocable living trust, directing that part of their estate pass to a charitable organization after death. It is the oldest and simplest planned gift, and by a wide margin the one most Catholic organizations will actually receive.

A bequest costs the donor nothing during life: no transfer of assets today, no minimum, and it can be changed in a later will or codicil. Don't think of that revocability as a weakness. It's why donors say yes to a bequest when they won't say yes to anything irrevocable.

Two things to notice. Residuary and percentage bequests age well, because a specific bequest written two decades ago may name a figure that's now a rounding error. And the contingent bequest, the form fundraisers underuse most, asks for nothing that competes with family. That is why donors accept it, and why someone who names the parish contingently at sixty-two often revisits the document at seventy-five with different priorities.

Sample bequest language

Donors' attorneys need three things from you, accurately: your organization's full legal name, its mailing address, and its federal tax identification number. Put all three on your planned giving page and in estate-planning mailings, using the name on your tax exemption letter rather than the name on the sign out front.

This residuary example is modeled on wording published by the Catholic Foundation of the Diocese of Rockford:

"With thanksgiving for the faith we have received as members of [Parish Name], we bequeath the residuum of our estate to [Organization], after our outstanding obligations and family bequests are paid."

It names gratitude as the motive, situates the gift in the parish where the donor received the faith, and puts family obligations explicitly first. It reads like a Catholic donor talking rather than a lawyer drafting.

The language is illustrative, not legal advice; donors should work with a qualified attorney to finalize wording for their state and circumstances. Say that out loud every time you hand it to someone.

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Why do beneficiary designations deserve more attention than they get?

A beneficiary designation names the person or organization that will receive an account or policy when its owner dies. Beneficiary designations are commonly used with IRAs, 401(k)s and 403(b)s, life insurance policies, certain annuities, and eligible bank and brokerage accounts.

To make the gift, the donor contacts the account custodian, plan administrator, or insurance company and follows its process for naming the organization as beneficiary of all or a percentage of the asset. An attorney or trust is often not required, although married donors may need spousal consent for certain employer-sponsored retirement plans.

Naming a charity as beneficiary of a traditional IRA or another tax-deferred retirement account can be one of the most tax-efficient ways to make a legacy gift.

The asset allocation principle worth teaching every donor

Appreciated assets, such as stocks and real estate, generally receive a new income-tax basis when their owner dies. That basis is usually the asset’s fair market value at death, so heirs may be able to sell shortly afterward with little or no capital-gains tax attributable to appreciation during the donor’s lifetime.

Pretax retirement assets are treated differently. Traditional IRAs and similar retirement accounts generally do not receive that basis adjustment. Individual beneficiaries usually owe ordinary income tax on the taxable portion of each distribution. Under the SECURE Act, most non-spouse beneficiaries must also withdraw the entire account by the end of the tenth year following the owner’s death.

Together, these rules create a useful estate-planning principle for reducing unnecessary tax and increasing the value passed to beneficiaries.:

Consider leaving pretax retirement assets to charity. A qualified tax-exempt organization can generally receive the distributions without paying the income tax that would ordinarily apply to an individual beneficiary.

Consider leaving assets eligible for a basis adjustment to family. Heirs may receive those assets with less built-in income-tax liability.

This is a planning principle rather than a universal rule. The best allocation depends on the types of accounts involved, the beneficiaries’ circumstances, and the donor’s charitable and family goals.

This is not a choice between family and faith. It honors both more fully. One counter-case keeps you from overapplying the rule: a Roth IRA that has satisfied the required holding period can generally pass to heirs tax-free, so naming a charity as its beneficiary gives up that advantage for the family. Raise it as a nuance, then hand it to the advisor.

The beneficiary form beats the will. Every time.

Here is the highest-utility fact in this article, and most development professionals have never been told it plainly:

Retirement accounts and life insurance policies do not pass through a will. They pass by beneficiary designation. If the will and the account paperwork conflict, the beneficiary form wins.

Sit with the implication. A donor meets an attorney, thinks carefully about legacy, includes a charitable provision in the will, and tells you it's taken care of. Meanwhile the IRA still names a beneficiary chosen at a job they left in 1994. For that portion of the estate, often the largest portion, the intention in the will is unenforceable. The custodian pays whoever is on the form.

So the service you can offer is small and genuinely valuable: encourage donors to review all their beneficiary designations, not just their will. It's a legitimate agenda item for an estate planning workshop, a bulletin insert, or a visit, and it requires you to ask for nothing.

The notification problem, and your best soft ask

Many retirement plan administrators assume no obligation to tell a charity it has been named a beneficiary, and they won't monitor whether a designation is honored. A bequest is handled by an estate attorney who identifies beneficiaries. A beneficiary designation is just a form on file; the custodian pays whoever is named and closes the account. So a parish can be named on a substantial IRA and learn about it years later, when a check arrives with no letter and no one left to thank.

A donor who quietly named their parish deserves to be received as a legacy donor, not discovered as a line item in a probate filing.

That is why you must ask about it. This ask requests no money, and it reframes notification as something you're offering. In practice:

• Put a plain invitation on your planned giving page: if you have named us in a will or a beneficiary designation, please let us know so we can thank you and make sure your intentions are carried out.
• Offer a non-binding notification form, and say clearly that it commits the donor to nothing.
• When someone notifies you, respond within a week. This is a major gift moment.

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What is a qualified charitable distribution, and where do parishes get it wrong?

A qualified charitable distribution, or QCD, is a gift transferred directly from a donor’s traditional IRA to an eligible charity. Rather than being treated as a taxable withdrawal followed by a charitable deduction, the qualifying distribution is excluded from the donor’s taxable income. The donor must be at least age 70½ on the date of the transfer.

The QCD’s power lies largely in the income it avoids. Even beginning in 2026, when non-itemizers can claim a limited deduction for certain charitable gifts, a QCD may provide an additional advantage because it keeps the IRA distribution out of adjusted gross income rather than deducting the gift afterward.

That can be especially valuable for donors taking required minimum distributions. Taxable retirement distributions can increase the portion of Social Security benefits subject to tax, contribute to higher Medicare premiums, and affect other income-based tax provisions. A QCD can satisfy all or part of a required minimum distribution without adding the qualifying amount to taxable income.

Three requirements define a valid QCD.

1. Age. The donor must be 70½ or older at the distribution. Eligibility begins earlier than required minimum distributions do, so a donor can make QCDs for some years before being required to take anything.
2. Account type. The distribution must come from a traditional IRA, an inherited IRA, or an inactive SEP or SIMPLE IRA, not a 401(k), a 403(b), or an active employer plan.
3. Direct transfer. The money must go straight from the custodian to the charity and never pass through the donor's hands.

The third requirement is where people trip up. A donor who withdraws IRA funds, deposits them, and writes a personal check has made a taxable withdrawal followed by an ordinary cash gift. The benefit is gone and cannot be fixed retroactively. So whenever a donor mentions giving from an IRA, say the words directly from your custodian to us before the conversation ends.

There's also an exclusion to know: QCDs cannot be made to donor advised fund sponsors, private foundations, or certain affiliated charities legally classified as supporting organizations under §509(a)(3), even though all three are charities. A Catholic donor with a DAF at their diocesan foundation cannot use a QCD to fund it. The gift must go directly to the parish, diocese, school, or ministry.

Annual amounts, indexing, and the special elections attached to QCDs change year to year. Point donors to the IRS guidance on IRA distributions and to their own custodian and tax advisor rather than publishing figures that go stale.

The acknowledgment error that creates a real problem

Because a QCD is excluded from adjusted gross income, it is not eligible for a charitable deduction. Your year-end statement must not include QCD amounts in the deductible total; listing them there hands your donor's tax preparer a number that will produce an error on the return. Send a separate acknowledgment letter instead, confirming the amount and date received and noting that the gift was a qualified charitable distribution not eligible for a deduction. Many dioceses receive QCD funds centrally, so learn your diocese's pathway and get the receipting protocol in writing first.

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Part Two: The Advisor-Required Vehicles

Everything above, a donor completes with a form. Everything below requires a professional your organization doesn't employ. Your job here is narrower: recognize the situation, describe the vehicle honestly, and hand it off.

What is a charitable gift annuity, and should your organization issue one?

A charitable gift annuity is a contract in which a donor makes an irrevocable gift to a qualified charitable organization, and in return the organization promises to pay a fixed amount to the donor, and to a second beneficiary if desired, for the rest of their life. When payments end, what remains goes to the mission the donor designated.

The donor transfers cash, appreciated securities, or sometimes real estate, and the organization issues a written contract promising fixed payments, typically quarterly. The rate depends on the annuitant's age at the gift: older donors receive higher rates, because payments are expected to run for a shorter period.

Two features fit Catholic donors in or approaching retirement. First, it resolves a tension a bequest cannot: this is the vehicle for the donor who says I'd love to do more, but I can't afford to give away principal I'm living on. Second, the two-life option fits Catholic couples, with the rate for two beneficiaries set lower to reflect the longer expected payment period.

Rates follow guidance from the American Council on Gift Annuities, whose model is built so a meaningful portion of the original contribution is expected to remain for charitable purposes when the contract ends. Rates change as conditions warrant, so never quote one from memory. Send donors to acga-web.org or your diocesan foundation.

Most Catholic organizations should not issue their own gift annuities

Unless your organization is among the largest Catholic entities in the country, do not self-issue charitable gift annuities.

A CGA isn't a gift. It's a lifetime financial obligation on your balance sheet, backed by a contract that a court will enforce. Issuing them responsibly requires:

• State registration and reserves. Several states regulate gift annuities directly and commonly require dedicated reserves, calculated on prescribed assumptions and held apart from operating funds.
• Annual actuarial review, with investment restrictions. Liabilities must be valued yearly by a qualified actuary, and reserve assets are often limited in what they may hold.
• Perpetual administration. Quarterly payments, annual tax reporting to annuitants, and mortality tracking for decades, across staff turnover, without a missed check.

A parish that issues one annuity has created an obligation that will outlast the pastor, the development director, and the finance council that approved it. Being clear-eyed about that is stewardship, not timidity. The vehicle is still available to your donors; you just don't have to be the issuer.

• Catholic Gift Annuity is issued by the Catholic Church Extension Society, which has been providing charitable gift annuities since 1912. It exists precisely so Catholic entities can offer annuities without carrying the issuing risk.
• Your diocesan foundation or Catholic community foundation may run a pooled program serving parishes, schools, and ministries. This is the first call to make, and many development directors have never made it.

Never make a statement to a donor about annuity payments until you know who stands behind the contract.

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When is a charitable remainder trust the right vehicle?

A charitable remainder trust is a split-interest arrangement: the donor transfers assets into an irrevocable trust, receives income for life or a term of years, and directs the remainder to one or more charities when the trust concludes. The types differ in how the payment is calculated.

The FLIP is the variant most worth recognizing because it addresses a common practical problem. A standard unitrust funded with an unsold farm or other illiquid property would still be required to make unitrust payments before the trust has cash available. Before its triggering event, a FLIP generally limits payments to the trust’s income. After the property sells, it converts to a standard unitrust at the beginning of the following tax year. This can give the trustee time to pursue an orderly sale rather than selling simply to fund immediate payments.

Federal law establishes the permissible payout range and minimum charitable remainder. The Section 7520 interest rate used in the actuarial calculations changes monthly. Don’t calculate or promise a payout, charitable deduction, or tax result. Refer to the IRS overview of charitable remainder trusts and let the donor’s attorney and tax advisor use the current figures.

This is not a general-audience tool. A CRT involves meaningful legal, administrative, appraisal, and investment costs, so it generally makes sense only for a sufficiently valuable asset. Your diocesan foundation may establish a practical minimum for the trusts it will administer or accept.

The likely prospect is a donor holding substantially appreciated, illiquid property that would generate a large taxable gain if sold: a farmer who has owned the same land for decades, for example, or a business owner considering the future sale of a closely held interest. Your job is to recognize the signal, not design the structure.

When a donor mentions appreciated property, a possible business sale, or concern about the tax cost of selling an asset, explain that some donors use charitable remainder trusts to pursue both income and charitable legacy goals. Encourage the donor to involve qualified advisors early, before entering into a binding sale agreement.

On bequest vs. charitable remainder trust: a bequest is free, revocable, and produces nothing for the donor during life. A CRT costs money to create, is irrevocable, and pays income now while committing the remainder.

What about a charitable lead trust?

A charitable lead trust is the mirror image. Where a CRT pays the donor first and the charity last, a CLT pays the charity first: your organization receives income for a set term, and when the term ends the remaining assets pass to the donor's heirs.

A CLT suits a donor who doesn't need income, expects the assets to appreciate, and wants to move wealth to children while supporting the mission in the meantime. It's a wealth-transfer tool with a charitable engine, which is why it appears almost exclusively among donors already working with an attorney. If a donor's advisor raises one, get your diocesan gift planning office and your finance officer in early, and confirm the payment schedule in writing before anyone budgets against it.

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How do donor advised funds fit into planned giving?

A donor advised fund is a charitable account held at a sponsoring public charity. The donor contributes cash, securities, or other assets; the contribution is irrevocable and legally becomes the sponsor's property; and the donor retains the privilege of recommending grants over time. Sponsors must approve those recommendations, and in practice follow them when the recipient is a legitimate charity.

Commercial versus Catholic sponsors

Not all DAF sponsors are the same, and this is a comparison no secular consultant can make for your donors.

Commercial sponsors affiliated with large financial institutions are the largest by assets and offer broad accessibility. They also carry no inherent alignment with Catholic teaching, either in how assets are invested while they sit in the account or in which organizations may receive grants. A donor's charitable capital can spend years invested in industries the donor would never knowingly support, and the eligibility screen is simply whether the recipient is a qualified charity.

Catholic community foundation DAFs, operated by diocesan foundations across the country, address both points. The Catholic Community Foundation of New Orleans is one clear example: investments are made in accordance with Church social teaching and grants are limited to organizations whose purposes and activities are consistent with Church teaching.

This is perfect for a donor who has thought about where their money sits while they decide where it goes. Many donors with commercial DAFs have never considered that the account has an investment policy at all.

The orphaned DAF, and the succession conversation

A DAF's advisory privileges generally expire at the donor's death. Without a succession plan, the sponsor distributes the balance according to its own policies, typically its general charitable priorities rather than the donor's intended beneficiaries. The account becomes an orphan.

The succession menu is broader than most donors realize: name a charitable beneficiary to receive the balance in a lump sum, name successor advisors who continue recommending grants consistent with the donor's intentions, direct the balance to an endowment, or build a hybrid. A DAF also works from the other direction: a bequest to the sponsor, or naming the sponsor as beneficiary of a retirement plan, policy, or trust, so one instrument supports many organizations.

If you know a donor holds a DAF, succession is the highest-value conversation available to you, and nobody else is having it with them. Frame it as charitable intentionality rather than administration.

DAF versus private family foundation

Both options have real benefits. A private foundation is not for vanity: for a family who want durable control and a named institutional vehicle, it does things a DAF cannot. For most Catholic donors, a Catholic community foundation DAF delivers the intergenerational family giving they actually want at a fraction of the cost. Which is right is not your call, and you should say so.

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How can a donor give life insurance?

Donors often hold policies bought for a purpose that no longer exists: protecting children who are now grown. There are three structures, and they aren't interchangeable.

The beneficiary designation is the simplest of the three, and the tradeoff is no current deduction, precisely because the donor can change their mind.

A warning that will save someone real disappointment: a term policy has an end date. If the donor outlives the term, there is no death benefit and the gift never materializes. Term insurance is designed to expire. Permanent policies are the ones conducive to charitable giving, and the ones with cash value that makes an ownership transfer meaningful. When a donor mentions giving a policy, the first question for their insurance professional is what kind it is.

Two more cautions apply. Insurable-interest and consent requirements vary by state and may differ depending on whether the charity receives an existing policy or applies for a new one. The organization should have qualified counsel or an experienced insurance professional review the arrangement before accepting ownership.

The organization’s gift-acceptance policy should also address life insurance in advance. A charity may reasonably decide that the potential premiums, administrative responsibilities, policy-performance risk, and dependence on the insurer’s financial strength make ownership inconsistent with the prudent use of its resources.

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What about real estate, closely held stock, and personal property?

These three can produce transformative gifts. They can also produce liabilities that outlive the gift. Your role is recognition and referral, not acceptance, not evaluation, and never a commitment made in the moment.

Real estate carries the highest inherent risk of any non-cash asset class. Before accepting property, an organization typically needs a donor-obtained qualified appraisal, disclosure of liens and encumbrances, a title review, and an environmental assessment. That last item is important: property ownership carries legal responsibility for contamination regardless of who caused it, so a well-meant gift of farmland or a commercial building can expose a Catholic organization to significant liability. Never accept real estate without a board-authorized review, legal counsel, and consultation with the appropriate church authority. The USCCB is unambiguous here, directing in Stewardship: A Disciple's Response that church-related organizations check with the appropriate church authority before signing any agreement that would legally bind them under civil or church law.

Closely held stock brings valuation and liquidity problems listed securities don't. It may carry buy-sell agreements, transfer restrictions, or a market so thin the organization can't realize the intended value for months. These gifts need legal counsel and usually an independent appraiser.

Tangible personal property, including artwork, antiques, jewelry, vehicles, and collections, is the most mishandled category at the parish level, because collections may need insurance, climate control, or off-site storage for years. With no capacity to appraise, store, insure, or liquidate one, decline graciously and without apology.

That's what a gift acceptance policy is for. It isn't primarily a legal document; it's a governance tool, and most get used to manage offers of things the organization simply isn't equipped to handle. It's far easier to say our gift acceptance policy doesn't permit us to accept this than to walk a donor through every reason you're hesitating. Declining a gift you can't responsibly manage is not a failure of gratitude. Accepting one you can't manage burdens the mission the donor was trying to advance.

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Six mistakes to stop making

1. Leading with the complicated vehicles. Trusts and annuities are interesting. Bequests and beneficiary designations are what you'll usually receive.
2. Letting a donor withdraw IRA funds and write a check. The QCD benefit dies the moment the money touches the donor's account.
3. Publishing the wrong legal name. Attorneys use what you give them, and the name on the building rather than the name on the exemption letter introduces ambiguity into a will.
4. Assuming the will covers the retirement account. It doesn't. Ask whether donors have reviewed their designations, not just their will.
5. Discussing gift annuities before knowing who would issue them. Confirm the pathway first.
6. Accepting a non-cash gift without a policy. Real estate, closely held stock, and collections are where good intentions become liabilities.

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Frequently asked questions

What are the most common types of planned gifts?

Bequests through a will or living trust, and beneficiary designations on retirement accounts and life insurance policies. Both are revocable and cost the donor nothing during life. Qualified charitable distributions from IRAs are a distant third but growing, particularly at the parish level. Gift annuities, charitable remainder trusts, and gifts of real property are real vehicles most organizations encounter rarely.

What is the difference between a bequest and a charitable remainder trust?

A bequest costs nothing to create, can be changed anytime, and delivers nothing to the donor during life. A charitable remainder trust is irrevocable, costs real money to draft, pays income to the donor for life or a term of years, and directs the remainder to charity. Donors who want simplicity want a bequest; donors holding a large appreciated asset they need to convert into income should ask their attorney about a trust.

Can a parish issue its own charitable gift annuity?

It should not. Issuing annuities means a lifetime contractual payment obligation, state registration and reserve requirements, annual actuarial valuations, investment restrictions on reserve assets, and payment administration for decades, which is impractical for all but the largest Catholic entities. Work instead through Catholic Gift Annuity, issued by the Catholic Church Extension Society, which has provided gift annuities since 1912, or a pooled program at your diocesan foundation.

Can a donor make a qualified charitable distribution to a donor advised fund?

No. QCDs cannot be made to donor advised fund sponsors, private foundations, or certain affiliated charities legally classified as supporting organizations under §509(a)(3), even though all three are charities. A donor who holds a DAF at their diocesan Catholic community foundation cannot use a QCD to fund it. The gift must go directly to the parish, diocese, school, or other qualifying charitable organization.

Which assets should a donor leave to charity and which to family?

Taxable retirement accounts such as traditional IRAs and 401(k)s are generally the most efficient assets to leave to charity, because a tax-exempt organization pays no income tax on the distributions while individual heirs owe ordinary income tax on every dollar they withdraw. Assets receiving a step-up in basis at death generally pass to heirs with the least tax friction. This is not a choice between family and faith; it honors both more fully.

Does a will override a retirement account beneficiary designation?

No. The beneficiary designation wins. Retirement accounts and life insurance policies pass by contract to whoever is named on the form, outside the will entirely. A donor who wrote a charitable provision into their will but never updated their retirement beneficiary form has left that intention unenforceable for that portion of the estate. Encouraging donors to review every designation, not just their will, is one of the most useful services a development office can offer.

How will we know if a donor has named us as a beneficiary?

Often you won't, which is the problem. Many plan administrators assume no obligation to notify a charity that it has been named and don't monitor whether designations are honored. This is why a standing, low-pressure invitation to notify you matters: a donor who quietly named their parish deserves to be received as a legacy donor rather than discovered as a line item in a probate filing.

Is a term life insurance policy a good charitable gift?

Usually not, if the plan depends on the death benefit ever being paid. A term policy has an end date, and if the donor outlives the term the gift never materializes. Permanent policies, such as whole life or universal life, accumulate cash value and remain in force, which makes them better suited to charitable giving, whether through an ownership transfer or a beneficiary designation.

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Where to go from here

Knowing the vehicles is the easy half. The harder half is a program that surfaces them: a planned giving page carrying your correct legal name and tax ID, a beneficiary review you promote once a year, a standing invitation to tell you when someone has named you, and a gift acceptance policy that lets you say no gracefully. Start with the complete guide to Catholic planned giving for how those pieces fit together.

The hardest part of this material isn't any single vehicle. It's keeping them straight in the moment a donor raises one, and knowing which professional to call. We built a free Planned Gift Cheat Sheet for exactly that: each gift type, the financial situation that typically motivates it, and which kind of advisor sets it up. Keep it in the folder you take to donor visits. You'll find broader fundraising resources for Catholic development offices in the Petrus resource library.

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