When a donor makes a gift, the most important thing for a charity to do is to acknowledge the gift quickly with a letter, appropriate receipt and possibly a phone call or personal visit, depending on the size of the gift, its use and the charity’s resources.
But sometimes acknowledging a gift is not so straightforward. Consider these situations:
Q. A donor made a gift through a donor-advised fund. How should I acknowledge the gift?
The advised fund should be receipted for the gift. The donor who “advised” the gift should be acknowledged with a thank you letter, but the tax-deductible gift was made to the fund. The donor should not be given a receipt for the gift.
Q. When a donor gives from a revocable trust (sometimes referred to as a “living trust”), does the donor receive the tax benefits of that gift?
A. With a living trust, all the tax ramifications flow through to the donor and are reported on his or her individual tax return. A donor who makes a gift through a living trust should receive an acknowledgment for the gift and should report the gift as a charitable deduction if the donor itemizes. The revocable living trust does not file a separate return.
If the gift is instead made through the donor’s personal foundation, the acknowledgment would be made to the foundation as the foundation is a separate legal entity. Nothing would be claimed on the donor’s personal return.
If in doubt, it is important to contact donors to determine the nature of a particular entity. It can be difficult to distinguish between entities that are equivalent to the donor and those with a separate legal identity.
These questions and others are answered in Sharpe’s popular seminar “Gift Planning Fundamentals.”