Some gifts from donors’ estates are more trouble than they are worth, said Aviva Shiff Boedecker, a charitable gift-planning consultant in San Francisco, in a speech Friday at the National Conference on Philanthropic Planning in Orlando, Fla.
And once a charity has accepted a gift, managing it properly is even more important than getting the gift in the first place, Ms. Boedecker said, because you don’t want to upset your donors. “They’ll tell their friends,” she said. “You get a terrible reputation.” You might even have problems with the IRS if you don’t report things properly, she added.
Don’t work with gift brokers. Such brokers advise their clients to do a planned gift for the broker’s best financial interest, and they shop around to find charities that are going to make the best offer, Ms. Boedecker said. The broker then gets commissions and other fees. But she noted that ethical rules for fund raisers usually prevent charities from paying their donors’ legal expenses.
Even if donors ask, do not give legal and tax advice. “We know a lot more than the average person on how the world works in this arena, but you have to keep in mind that we represent our organizations,” Ms. Boedecker said. Dispensing legal advice can raise the issues of conflicts of interest or undue influence on donors. If they refuse to get independent advice, make sure you have a good paper trail, Ms. Boedecker said. Also, don’t ever draft documents for donors. “You cannot act as the donor’s attorney, accountant, or financial planner,” she said.
Don’t neglect appraisal requirements. The law says all donated property valued at more than $5,000, except cash and publicly traded securities, must have a qualified appraisal for the donor to claim an income-tax deduction. Make sure that the donor is aware that a third-party qualified appraiser is needed. If the donor does not do so, hire your own. “It’s a good reality check,” Ms. Boedecker said.
Ask questions about real-estate gifts. What is the donor’s intent? Does he or she want the property to be kept in perpetuity by the charity, or can the property be sold? Also:
- Make sure that the property has no liabilities. Prepare an independent environmental inspection and title search.
- Find out whether it has tenants. If it’s a commercial property, that’s fine; for residential properties, it isn’t, Ms. Boedecker said.
- Make sure there’s a market to sell the property and a staff member to handle the sale or manage the property until it’s sold.
Don’t forget the economics. Carefully analyze the ultimate benefit to your charity when accepting a gift. How long will it be until your organization gets the remainder of a gift that provides income to the donor over his or her lifetime? Will it be enough for the designated purpose of the donation? What will the gift be worth by the time a donor dies? Also, consider management costs.
Don’t disregard donor-relation issues. Counting and acknowledging gifts can be a minefield, Ms. Boedecker said. How do you acknowledge certain gifts over others? Should you give equal “credit” to donors of outright or deferred gifts? Determine the right amount of attention being given to donors during this process. Spending too much time on a given donor means less time cultivating other potential donors.
Be careful about the timing of year-end gifts. Do not be pressured into accepting an “emergency” gift that you are not certain about. Consult your gift-acceptance policy or gift-acceptance committee. Also, make sure that all gifts are postmarked by the post office or received by the charity before or by December 31 for it to be considered a gift within the tax year. Postmarks by private carriers, such as FedEx or UPS do not count.
*Photo provided by Tony Martignetti