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Sentimental Assets

Gifts With Purpose: Add Restrictions To Large Charitable Gifts

If charitable giving is an important part of your legacy, consider the options available to help ensure that your contributions effectively serve your intended charitable objectives. Of course, making direct gifts can pose risks, particularly when it comes to substantial donations intended to support a charity for an extended period of time.

Add Restrictions To Large Charitable Gifts

Even if a charity is financially sound when you make a gift, there are no guarantees that it won’t suffer financial distress, file for bankruptcy protection, or even cease operations down the road. The last thing you want is for a charity to use your gifts to pay off its creditors or for some other purpose unrelated to the mission that inspired you to give in the first place.

One way to help preserve your charitable legacy is to place restrictions on the use of your gifts. For example, you might limit the use of your funds to assisting a specific constituency or funding medical research. These restrictions can be documented in your will or charitable trust or in a written gift or endowment fund agreement.

Depending on applicable federal and state laws and other factors, carefully designed restrictions can prevent your funds from being used to satisfy creditors in the event of the charity’s bankruptcy. If these restrictions are successful, the funds will continue to be used according to your charitable intent, either by the original charity (in the case of a Chapter 11 reorganization) or by an alternate charity (in the case of a Chapter 7 liquidation).

Research Potential Charities

In addition to restricting your gifts, research the charities you’re considering to help ensure they’re financially stable and use their funds efficiently and effectively. One powerful research tool is the IRS’ Tax Exempt Organization Search (TEOS), found on their website here. TEOS provides access to information about charitable organizations, including newly filed tax returns (Forms 990), IRS determination letters, and eligibility to receive tax-deductible contributions.

If you’d like to incorporate charitable giving into your estate or wealth management plan, please contact us.

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