In addition to considering the Advantages and Disadvantages of Bequests and Outright Gifts, it is vital 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 direction as to what kinds of organizations are eligible to receive charitable contributions. While this may seem clear, it is the Donor who will actually pay the penalty if a receiving 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 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 reasonably uncomplicated 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.
Because of the the serious nature of these requirements, we consistently advise seeking qualified legal counsel to assist you when making donations over $250.00.
For additional information and requirements, check with these IRS Publications:
IRS Publication 561: Determining the Value of Donated Property
IRS Publication 526: Charitable Contributions