Understanding your charitable giving options before the end of the year

Now is the time to consider making your charitable gifts, before the end of the year. If pledges were made during the year, this is the time to make the gift. If you pass away prior to the end of the year and the gift is not made, it will not qualify as a charitable gift for deduction purposes on your income tax return. 

In any event, there are several options for making gifts, as follows: 

1. You may make a specific gift of an item or dollar amount to a charity. For instance, you may give your vehicle (that you own) at the time of your death to the charity.
   
   
2. A further general bequest is one as stated as a dollar amount, such as “I give $50,000 to XYZ charity.” Again, provided that the assets are includable in your estate and that you have those assets left, then the charity will receive the funds.
   
   
3. A residuary bequest could be a percentage or dollar amount of your estate when you die. For instance, you could leave the greater of 1% of your estate or $10,000 to the charity, regardless of the amount that you have left. You could also specify that the charity would only receive that gift if your gross estate was of a certain sum. For example, I give 5% of my estate to XYZ charity so long as my estate is $500,000 or more. If my estate is less than $500,000, then the charity shall receive the sum of $10,000. 

You can either restrict the gift or keep it as an unrestricted gift. A restricted gift is one that for which there is a purpose or specific designated use of the funds, such as to add to a building for the charity or to add to a scholarship fund. (A recent client of mine wished to add a specific dollar amount to a fund for flowers at her church for Sunday Mass every week.) However, some charities will not accept a restricted gift if it is too limiting or if the fund is too small to make it productive, such as having only the income from a very small bequest be used for the intended purpose. Before making a restricted gift, you should contact the charity to be sure that they will accept the gift under the terms that you want. 

As most charities’ uses and needs change over the years, an unrestricted gift (one basically without any conditions) is the most useful, since the charity may then utilize the funds for the whatever purpose it feels is most important and appropriate.

 Finally, often a client wants to set up funds for a scholarship, but the scholarship fund is relatively small, and therefore, the income would not make a significant difference. In this type of situation, you should check with the charity to be sure that they would accept a gift under the terms of whether the funds may be added to an existing fund where all funds may be co-mingled to make a more significant gift. If not, then the Community Foundation in the local area servicing you may be available to administer the gift, as it may already have in place the appropriate guidelines and committee to review requests for scholarships funds as well as attend to any investments of the assets. 

Most charities, colleges, etc. have planned giving staff members available or at least volunteers to assist with the acceptance of gifts, and these individuals should be contacted before finalizing your intended donation.

 

Hyman G. Darling, Esq.

Image credit: Microsoft