Many of us, as we get older, find that we want to have a broader positive impact on the world around us. Often this takes the form of financial support to organizations that do good work in the community or even halfway across the world. While many people make generous contributions to charities during their lifetime, they may also want to continue that support through gifts made upon their death. There are a number of ways to accomplish this aim, some of which are more problematic than others.
Most forms of planned giving are unnecessarily cumbersome for either the donor or the charity receiving the gift. For instance, charitable remainder trusts, charitable gift annuities, and pooled income funds all require funding during the donor’s life. What’s more, these gifts are irrevocable—meaning that if the donor later changes his mind about the gift or the organization, he may have no recourse.
For that reason, most people who plan charitable gifts on death provide for them in a will or trust instrument. This type of planning gives the donor the flexibility to change the amount or recipient of a so-called deferred gift, or to cancel it altogether.
The donor may fail to have a lawyer formalize the gift in his estate plan, perhaps relying on verbal instructions to heirs who forget them or prefer to keep the entire inheritance. Or the donor may make his revocable trust remembering the charity, only to leave the gift out when the estate plan is updated. Another common scenario is for the donor’s estate plan documents to be misplaced, not to be found until the estate has been settled. By that time, the gift to the charity is lost as well. It is also possible that there are not enough assets left in the estate to satisfy a gift to a charity.
Charitable pledges payable on death (POD) may be the answer to most, and possibly all, of the problems noted above. What is a charitable pledge POD? You are no doubt familiar with the concept of a charitable pledge; you may have made one during a pledge drive on your favorite public radio station or during a telethon on behalf of a particular charity. Such gifts are intended to be paid at some later date or commonly, in regular installments.
Occasionally, a pledge for payments to be made in installments for a specified period will have so-called “backup” provisions for continued payment in the event of the donor’s death before the scheduled payments are completed.
A similar mechanism can be put in place for charitable gifts that are not payable until the donor’s death. A charity can provide a standard form to a donor to make the pledge. The simplicity of using a form means a donor will be more inclined to make a pledge, and there is no need to delay or to consult a third party, which might result in the gift never actually getting made.
When a donor promises a gift to a charity, provides for the gift in the will, and then later revokes the gift, the charity may not find out for some time that the promised money will not be forthcoming. With a pledge form, however, the charity maintains a copy (as it surely would not with a potential donor’s will or trust). This prevents loss of the record of the intended gift. The donor, of course, would also have a copy for their records.
A pledge form avoids the necessity of expensive pre-planning or making an irrevocable gift that the donor might later regret. A pledge to make a gift payable on death is revocable, which gives the donor needed flexibility. However, revocation almost always requires written notification to the charity. This means that the charity will not be left in the lurch, expecting a gift that never comes, with no explanation.
Lastly, pledge forms usually contain contact information for the donor’s next of kin or intended executor so that when the charitable organization learns of the death of the donor, they can contact the family at the appropriate time. This ability to be proactive, rather than sitting back and waiting for the family to contact the charity about the gift, increases the likelihood that the charity will receive the gift.
If you are interested in making a gift to a favorite charity through a charitable pledge payable on death, or represent a charity that would like to create a form for such gifts, we invite you to contact Gudorf Law Group to schedule a consultation.
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