When planning a significant charitable gift or bequest consider a letter agreement with the charity clarifying for all involved what your intent is, how the charity will use the funds, and addressing other issues. The following checklist will provide a starting point for some of the many issues you may want to address.
√Be specific as to when the bequest to the charity shall take place. If the bequest is made under your will, state the date of the will that governs the bequest and what will happen if you revise your will? Refer to the correct nature of a bequest your will provides that the named charity will receive the intended bequest only your children die not survived by issue, that is a contingent bequest. Imprecise wording, e.g., listing the bequest as one of your remainder estate, might be misleading and create an incorrect inference.
√Have the charity provide a copy of the letter they receive from the IRS granting them tax exempt status. Occasionally, the name the charity is known by (the one commonly used) and you want to be certain the correct organization, and one which is tax exempt, is properly named. Example: “ABC Charity, Inc., which is recognized by the IRS as qualifying for the unlimited estate tax charitable contribution deduction. A copy of its tax exemption letter from the IRS is attached.”
√If your bequest is under a will consider whether the language of the gift letter should, or should not, make the bequest a binding commitment. Any charity will opt for the latter. If in fact the charity is starting a program or making commitments today based on your pledge, making it binding might be only fair (and might be the only way to encourage the charity to proceed with the program you wish). However, if there is no current change in position by the charity, consider whether you should expressly state that the pledge is not biding. This way, as circumstances change, you may revise your will and the bequest. “I recognize that this pledged gift is a not a binding obligation of my estate, but merely a statement of my current wishes which may change.”
√If the charity has oversees offices, specify whether you wish the funds to be retained and used within the U.S. Be certain that if you want the funds used overseas that your charitable deduction is not jeopardized. Example, you might need to make your gift to a U.S. “feeder organization” that qualifies within the U.S. and distributes funds overseas.
√Consider whether you want to designate specific goals for the bequest. (e.g. held as part of the charity’s endowment fund to support services for those living with Parkinson’s disease.) Work out language with the charity that is specific enough to assure that your charitable intent is adhered to, but within those agreed parameters as flexible as possible to give the charity the latitude to adopt to changed circumstances to assure the longevity and effectiveness of your gift.
√ You should confirm the arrangements for you to be informed of, or even participate in, the selection of specific expenditures, or making other decisions. Consider whether you want the charity to report to anyone on the use of the funds after your disability or demise, who that should be and how it should be handled.
√Bear in mind there is no estate tax chartable contribution deduction in 2010, but charitable gifts by you during your lifetime, or by your children from an inheritance after your death, will qualify for income tax benefits.
√If you designated that income from this fund shall be used for a specific purpose you should also to provide flexibility for future years if the goal is no longer relevant (e.g., a cure for Parkinson’s disease is discovered), or in case the size of the fund declines to the point at which it is not feasible to maintain.
√What happens to a dedicated project if there are changes. For example, you donate a waiting room in a new wing of a hospital. 5 years later the hospital is redesigned and your waiting room moved. Does the dedication continue? What about 15 years? What if you donated funds for a research lab and the hospital ceased engaging in research as part of a strategic restructuring? There is no longer a lab to bear the plaque. Does the plaque acknowledging the gift get thrown out? Displayed? Where? Often significant charitable gifts are intended to honor a particular cause or individual as well as accomplish the good the funds contributed will achieve. Address these matters in reasonable detail and be sure that if other components of a letter are non-binding, that these guidelines are binding if the charity accepts the gift.
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