If philanthropy is an important part of your legacy, consider taking steps to ensure that your donations are used to fulfill your intended charitable purposes. Indeed, outright gifts can be risky, especially large donations that will benefit a charity over a long period of time.
Add restrictions to your 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 that they’re financially stable and use their funds efficiently and effectively. One powerful research tool is the IRS’s Tax Exempt Organization Search (TEOS), found at https://bit.ly/43MVQ3e. 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 plan, please contact us. We can explain your options.
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Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Fee based planning offered through SDM Advisors, LLC. Third party money management offered through Valmark Advisers, Inc a SEC registered investment advisor. 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431. 1-800-765-5201. SDM Advisors, LLC is a separate entity from Valmark Securities Inc. and Valmark Advisers, Inc. Form CRS Link
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
HYPOTHETICAL DISCLOSURE:
The examples given are hypothetical and for illustrative purposes only.
