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Bequest Management

How State Laws Affect Charitable Giving and Gift Planning

June 20, 2019
How State Laws Affect Charitable Giving and Gift Planning

Planned giving and charitable bequests can sometimes be affected by state laws. As such, it is important for charities and non-profit organizations to be mindful of the ways legal issues can have an impact on planned giving activity.

State Registration

Charities and non-profit organizations must be aware of and comply with their own state’s charitable solicitation requirements.  Likewise, such organizations must be aware of and comply with other states’ requirements as well.  Organizations should not assume that their state’s definitions and requirements will match that of another state, as what constitutes “solicitation” can vary among jurisdictions.  A single out-of-state donor making a single gift may involve only one-time compliance.

However, if organizations seek to engage in continual charitable giving and gift planning with out-of-state donors, permits, fees, laws and other regulatory schema may govern the process.  Compliance with the laws of certain states can be an easy an inexpensive matter.

Nonetheless, in other cases an organization that issues a charitable gift annuity without first obtaining the necessary authority to do so risks fines and other sanctions.  Meeting the requirements of such states can involve a long-term commitment in which organizations must take a number of actions both initially and annually thereafter.

Validity of the Will

Charitable giving and gift planning can also be affected in some scenarios if a donor moves out-of-state.  For example, if a donor uses a lawyer in the same state as an organization to draft a will that makes a charitable bequest to the organization, there shouldn’t be any issues.

However, if the donor then moves to another state and passes away without having his or her will reviewed by a lawyer in that state, then there could be concerns regarding the validity of the will.  In order for an organization to benefit from an out-of-state donor’s gift, it must first ensure that both the bequest and the will are valid.  It is possible that the probate process of outside states is much different than that of the organization’s state.  As such, it might take a significant amount of time to navigate that process and cause delays in estate distribution.

Therefore, it is important for organizations to keep track of donors who have notified it of their bequest intentions and then prompt such donors who have moved out-of-state to consult with new representatives regarding all aspects of their estate plans, including charitable bequests.

Common Law States

Some states have some type of community property law that affects how spouses own their assets and the income attributable to those assets.  Community property laws can differ from state to state, and organizations operating in so-called common law states may not be aware of such differences.  Nonetheless, these organizations may have to be aware that gifts that are seemingly made by married couples can really be a gift from just one of them.

Call Chisholm Chisholm & Kilpatrick LTD for a Free Case Evaluation

Overall, it is crucial for charities and non-profit organizations to be aware that the same gift can raise different issues depending on the states involved.  However, this can often be very complicated and it might be beneficial to get help from an experienced attorney who focuses on bequest management.  For a free case evaluation, call Chisholm Chisholm & Kilpatrick LTD at 800-544-9144.