Without question, the most common charitable giving technique is for a Donor (or his Executor) to simply write a check to a worthy charity of their choice. An outright gift of Cash, Stock, or Real or Personal Property is a simple, direct and effective way of benefiting both the Donor and the recipient organization.

A Bequest, wherein the Donor leaves assets to a qualified organization in their Will or Trust, can be an equally simple and efficient method.No other technique or plan surpasses these kinds of gifts for simplicity and ease of use.

However, it's worth taking a closer look at some of the benefits and disadvantages of such charitable giving strategies.

Benefits of Bequests and Outright Gifts

1. Inexpensive and Easy to Use - Let's face it, it doesn't get much cheaper or easier than simply opening up a checkbook and writing a large check to your favorite charity. No ongoing administration of charitable trusts or foundations, no hiring of independent trustees to manage trust assets, no filing of annual compliance reports, etc.

However, some basic tax code requirements do apply, and it would be an enormous mistake to overlook them. Here are a sample of some of the more basic requirements for charitable giving:

1. Organization Must Qualify to Receive Charitable Contributions - IRS Publication 526 provides guidanceas to what kinds of organizations are eligible to receive charitable contributions.

2. Proper Documentation Must be Filed with the Internal Revenue Service - A Donor 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 receive either separate acknowledgments for each gift that exceeds $250.00 OR one acknowledgment that shows their total contributions.

See IRS Publication 526: Charitable Contributions, for additional guidance.[i]

3. Fair Market Value of the Donated Property must be Assessed - For cash or publicly traded securities,this requirement is fairly clear. 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).

See IRS Publication 561: Determining the Value of Donated Property, for additional guidance.[ii]

2. Timeliness of the Gift – One compelling benefit, especially at year-end tax planning time, is the speed with which one can make a direct charitable gift. Charitable trusts or private foundations can take from days to weeks to establish, but a check can be written (or stock transferred), in a comparatively short period of time.

3. Bequests: Donor Retains All Lifetime Benefits of the Asset - Unlike charitable trusts or foundations, which may restrict the Donor's use of his or her assets during their life, a bequest allows the Donor to retain unlimited control during their life, and receiving full tax deduction benefits upon their death. Certain IRS rules and regulations govern this area, so we recommend seeking qualified legal representation when making a bequest.

4. Charity Retains Maximum Flexibility in Use of Donated Funds - In the case of a major gift or bequest, the recipient charity will be the primary decision-maker on how such funds are spent. While certain gifts may be tagged by the Donor for certain uses (i.e. endowing a chair at a local university), in the majority of cases the charity, and not the Donor, will determine how the funds are spent. Donors wishing to retain stronger control over how their money is spent should consider other charitable giving strategies.

Disadvantages of Bequests and Outright Gifts

1. Lack of Donor Control over Donated Funds - As discussed above, the recipient charity will be the primary decision-maker on how such funds are spent. While charities may indicate that the Donor's wishes on the funds' usage (a promise that is frequently made during the charitable solicitation process), the Donor is largely at the mercy of the charity when it comes to the actual use of the funds. (This is far more common in situations where a Donor is making a modest donation to a large charitable organization). Donors wishing to retain stronger control over how their money is spent should consider other charitable giving strategies.

2. Lifetime Gifts: Donor Loses Use of Assets During Life - Unlike charitable trusts, which often permit the Donor to retain many of the economic (and other) benefits of their assets, simply giving away cash, stock, or other assets deprives the Donor of these benefits. While this may not be of much consequence for smaller gifts, the economic ramifications for larger gifts may be substantial.

3. Bequests: Donor Misses Out on Lifetime Benefits of Giving - In the case of bequests, which do not take effect until the death of the Donor, many of the benefits of charitable giving may be lost. From a tax perspective, no tax deduction is available until the Donor has deceased and the gift is accomplished. Therefore, no lifetime income tax deductions are available for the Donor.

However, lifetime income tax deductions may serve to leave more money to a Donor's heirs or other non-charitable beneficiaries than would otherwise be possible. In addition, with a Bequest, the Donor is deprived of the benefit of seeing his or her money put to good use by the charitable organization, and the accompanying satisfaction brought about by such generosity. A Donor may feel good knowing that, after their death, others will benefit from their generosity; but they will be unable to "see with their own eyes" the enjoyment that such a gift brings to others

4. Lack of Involvement of Donor's Family & Heirs - For those Donors who wish to involve their children and grand-children in the philanthropy process, outright gifts of cash are often not the best way to achieve these goals and purposes. More sustained giving structures, such as a Family Foundation or Supporting Organization may allow for greater family involvement in the philanthropy process. These entities allow the family to come together for a common purpose (i.e. the support of favorite charities), and hold meetings, research organizations, etc., which promote family unity and provide a vehicle for instilling one's values and beliefs in the next generation.

Again, this is only an introductory discussion of the subject of Philanthropy and Charitable Giving. We invite you to contact our office to discuss your legal needs in greater detail.