Charitable Pledge Letter Agreement

When
planning a significant charitable gift or bequest consider a letter agreement
with the charity clarifying for all involved what your intent is, how the
charity will use the funds, and addressing other issues. The following checklist
will provide a starting point for some of the many issues you may want to
address.

√Be specific as to when the bequest to the charity
shall take place.  If the bequest is made
under your will, state the date of the will that governs the bequest and what
will happen if you revise your will? Refer to the correct nature of a bequest your
will provides that the named charity will receive the intended bequest only your
children die not survived by issue, that is a contingent bequest. Imprecise
wording, e.g., listing the bequest as one of your remainder estate, might be
misleading and create an incorrect inference.

√Have the charity provide a copy of the letter they
receive from the IRS granting them tax exempt status. Occasionally, the name
the charity is known by (the one commonly used) and you want to be certain the
correct organization, and one which is tax exempt, is properly named. Example:
“ABC Charity, Inc., which is recognized by the IRS as qualifying for the
unlimited estate tax charitable contribution deduction. A copy of its tax
exemption letter from the IRS is attached.”

√If your bequest is under a will consider whether the
language of the gift letter should, or should not, make the bequest a binding
commitment. Any charity will opt for the latter. If in fact the charity is
starting a program or making commitments today based on your pledge, making it
binding might be only fair (and might be the only way to encourage the charity
to proceed with the program you wish). However, if there is no current change
in position by the charity, consider whether you should expressly state that
the pledge is not biding. This way, as circumstances change, you may revise
your will and the bequest.  “I recognize
that this pledged gift is a not a binding obligation of my estate, but merely a
statement of my current wishes which may change.”

√If the charity has oversees offices, specify whether
you wish the funds to be retained and used within the U.S. Be certain that if you want
the funds used overseas that your charitable deduction is not jeopardized.
Example, you might need to make your gift to a U.S.
“feeder organization” that qualifies within the U.S. and distributes funds overseas.

√Consider whether you want to designate specific goals
for the bequest.  (e.g. held as part of
the charity’s endowment fund to support services for those living with
Parkinson’s disease.)  Work out language
with the charity that is specific enough to assure that your charitable intent
is adhered to, but within those agreed parameters as flexible as possible to
give the charity the latitude to adopt to changed circumstances to assure the
longevity and effectiveness of your gift.

√  You should confirm the arrangements for
you to be informed of, or even participate in, the selection of specific
expenditures, or making other decisions. Consider whether you want the charity
to report to anyone on the use of the funds after your disability or demise,
who that should be and how it should be handled.

√Bear in mind there is no estate tax chartable
contribution deduction in 2010, but charitable gifts  by you during your lifetime, or by your
children from an inheritance after your death, will qualify for income tax
benefits. 

√If you designated that income from this fund shall be
used for a specific purpose you should also to provide flexibility for future years
if the goal is no longer relevant (e.g., a cure for Parkinson’s disease is
discovered), or in case the size of the fund declines to the point at which it
is not feasible to maintain. 

√What
happens to a dedicated project if there are changes. For example, you donate a
waiting room in a new wing of a hospital.
5 years later the hospital is redesigned and your waiting room moved.
Does the dedication continue? What about 15 years? What if you donated funds
for a research lab and the hospital ceased engaging in research as part of a
strategic restructuring? There is no longer a lab to bear the plaque. Does the
plaque acknowledging the gift get thrown out? Displayed? Where? Often significant
charitable gifts are intended to honor a particular cause or individual as well
as accomplish the good the funds contributed will achieve. Address these
matters in reasonable detail and be sure that if other components of a letter
are non-binding, that these guidelines are binding if the charity accepts the
gift.