The first thought is not always the best thought when one makes a gift to charity, according to Carol Kroch, a wealth and philanthropic planning specialist with Wilmington Trust.
Kroch, a managing director for the firm, which had $80 billion in assets under management at the end of last year, advises clients to proceed methodically and consider all their options. Such forethought helps avoid the common pitfalls and makes it more likely that a donation will be meaningful, have maximum impact and be tax-efficient, she said.
“Cash is not always king” as a way of giving, for example, Kroch said. “That may seem like an easy way.”
However, long-term appreciated publicly held stock is often a better vehicle tax-wise, Kroch said. One must remember, though, that the shares must be held for more than a year or the deduction will be limited to basis, which is generally the initial purchase price.
Kroch, a lawyer who worked for the Robert Wood Johnson Foundation in Plainsboro, N.J., before she joined Wilmington Trust in Delaware, reminds donors that an unacknowledged gift of more than $250 is not deductible. She urges them to make a habit of getting a contemporaneous written acknowledgement from the recipient to get the deduction.
This is important even if one donates to one’s own foundation. Such a foundation is a separate entity, so it must acknowledge the gift like any other entity, Kroch said.
Tax consequences are not the only things to consider when one decides to give, Kroch said. To make sure a gift has the desired impact, it is wise to attach conditions that spell out one’s intentions in detail and allow for twists and turns in the future.
For example, suppose a person or a family or an organization wishes to create an annual scholarship for a student in a particular field at a particular college, Kroch said. What happens to that scholarship if the college eliminates that department? Should it go to a similar department? Should it shift to another college? Does one wish for the scholarship to die with the department? These are the kinds of things that should be spelled out, she said.
Communication is key, not just between the giver and recipient, but also to family and friends and possible heirs, Kroch said. Communication among the parties avoids bitterness, misunderstandings and legal battles, she said.
Kroch also reminds Wilmington Trust’s clients to get a timely professional appraisal for donated property, including art, furniture, antiques and real estate. This goes for anything worth more than $5,000. The object must be appraised no sooner than 60 days before the date of the gift, Kroch said.
Often the wise course is not to give too large a gift in any one year, to take advantage of adjusted gross income rules, Kroch said. Plan on being able to use a five-year carry-forward provision, she recommends.
