Disadvantages of Bequests and Outright Gifts

While giving directly to charity has its advantages, it’s definitely not for everyone.

Here are some of the Disadvantages of Bequests and Outright Gifts:

  • Lack of Donor Control over Donated Funds – For both bequests and outright gifts, it is the recipient charity who will be the primary decision-maker on how such funds are spent. While charities may indicate that they will honor the Donor’s wishes on using the funds – 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 who wish to have a greater say over how their money is spent should consider other charitable giving strategies.
  • Loss of the Use of Assets During Lifetime (Lifetime Gifts) – 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.
  • Donor Misses Out on Lifetime Tax Benefits of Giving (Bequests) – 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.
  • Donor Misses Out on Seeing the Results of their Giving (Bequests) – 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.
  • 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.