In addition to considering the Advantages and Disadvantages of Bequests and Outright Gifts, it is necessary to examine some of the legal and tax requirements enforced by the Internal Revenue Service and State taxing authorities:
Organization Must Qualify to Receive Charitable Contributions – IRS Publication 526 provides guidance as to what sorts of organizations are eligible to receive charitable contributions. While this may seem self evident, it is the Donor who will inevitably bear the burden if a recipient organization ends up not to qualify.
Proper Documentation Must be Filed with the IRS – Donors may only deduct a charitable contribution that exceeds $250.00 if he or she obtains an Acknowledgment from the qualified organization or certain payroll deduction records. If more than one gift exceeding $250.00 is made, a Donor must obtain either separate acknowledgments for each gift that exceeds $250.00 or one verification that shows their total contributions.
Fair Market Value of the Donated Property must be Ascertained – For cash or publicly traded securities, this requirement is reasonably easy to accomplish. 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 innovative giving strategies also involve tax and legal requirements.
A result of the serious nature of these requirements, we regularly encourage seeking qualified legal counsel to assist you when making donations over $250.00.
For additional guidance and requirements, consult these IRS Publications:
IRS Publication 561: Determining the Value of Donated Property
IRS Publication 526: Charitable Contributions