In addition to weighing out the Advantages and Disadvantages of Bequests and Outright Gifts, it is vital 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 direction as to what types of organizations are entitled to receive charitable contributions. While this may seem apparent, it is the Donor who will inevitably pay the penalty 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 is given an Acknowledgment from the qualified organization or certain payroll deduction records. If more than one gift exceeding $250.00 is made, a Donor must receive 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 Determined – For cash or publicly traded securities, this requirement is relatively straightforward 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 advanced giving techniques also involve tax and legal requirements.
A result of the considerable nature of these requirements, we regularly recommend seeking qualified legal counsel to assist you when making donations over $250.00.
For more information and requirements, consult these IRS Publications:
IRS Publication 561: Determining the Value of Donated Property
IRS Publication 526: Charitable Contributions