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Charitable Gift Letters of Intent

Charitable gifts are an important part of many persons’ financial plans, not only doing good but also providing some level of satisfaction to the donor. Charitable gifts may range from a small amount paid in cash to very large sums transferred in kind, by check or other manner. When the amount is at all substantial and particularly where it is intended by the donor to fund a particular project of the charity, it is not uncommon for the charity to ask for a pledge or some other form of written confirmation of the planned gift.
This is where things may get complicated for the donor. Depending on the source of the funding promised, it may not be advantageous for the donor to provide a formal, or even verbal, pledge to the charity. A pledge becomes an enforceable obligation of the donor. This is not a problem where the donor intends to write a check to the charity and has the resources to do so. However, where the donor holds funds invested in a donor advised fund, under IRS rules that fund is not permitted to transfer money to the charity as it would benefit the donor by satisfying the donor’s legal obligation.
Not surprisingly, there is an approach which will both permit the donor advised fund to make the recommended grant to the charity and provide the charity with a written confirmation of the donor’s plan to gift that money. This is called the non-binding letter of intent. The letter will state the donor’s intent to recommend that the donor advised fund make a grant to the charity as well as explain that the decision to act upon the recommendation lies with the public charity which runs that donor advised fund.
The point of this discussion is to remind those with charitable intent that it is important to ensure that whatever you do satisfies the various legal requirements so that the gift you want to make can be effectively done without causing you any problems. Consultation with your attorney or advisor or, more particularly, the donor advised fund where applicable, will help you get the best advice on making that gift. Since charitable giving is so important to so many worthwhile causes, it is well worth the effort to do it right.


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