In addition to considering the Advantages and Disadvantages of Bequests and Outright Gifts, it is crucial to examine some of the legal and tax requirements imposed by the IRS and State taxing authorities:
Organization Must Qualify to Receive Charitable Contributions – IRS Publication 526 provides assistance as to what types of organizations are entitled to receive charitable contributions. While this may seem obvious, it is the Donor who will actually pay the penalty if a receiving organization turns out not to qualify.
Proper Documentation Must be Filed with the Internal Revenue Service – Donors may only deduct a charitable contribution that exceeds $250.00 if he or she receives an Acknowledgment from the qualified organization or certain payroll deduction records. If more than one gift exceeding $250.00 is made, a Donor must be given either separate acknowledgments for each gift that exceeds $250.00 or one acknowledgment that shows their total contributions.
Fair Market Value of the Donated Property must be Assessed – For cash or publicly traded securities, this requirement is fairly simple to carry out. Less clear, however, can be the fair market value of assets that are more difficult to evaluate (i.e. works of art, real estate, etc).
More state-of-the-art giving strategies also involve tax and legal requirements.
A result of the serious nature of these requirements, we always strongly recommend seeking qualified legal counsel to assist you when making donations over $250.00.
For more guidance and requirements, check with these IRS Publications:
IRS Publication 561: Determining the Value of Donated Property
IRS Publication 526: Charitable Contributions