Even with the 2024 election behind us, estate planners will continue to have clients who wish to promote partisan interests by financing political causes in their estate plans. Unlike charitable gifts made to favored social causes, lifetime and legacy political giving are subject to restrictions, prohibitions and reporting requirements, and sometimes, a fiduciary is required to balance competing considerations in administering the gift.

Here are seven considerations that practitioners should keep in mind when drafting wills and trusts for clients who want to make legacy political gifts:

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Identify. A client may say they want to give to “that Pro-American political action committee (PAC),” but there may be five or six PACs with that or a similar name on file at the Federal Election Commission (FEC). (There are no copyright protections when choosing names for political organizations.) The best practice is to go to the FEC’s website (www.fec.gov) to identify the political committee the client is referring to and to include its full name and FEC identification number in the language of the gift. Example: “On my death, I give the sum of $200,000 to the Committee to be Pro-American, Inc., FEC ID number C00004123.”

Advise. Tell your client what the annual, or per-election, contribution limits are to the political organizations they favor and if the contribution is tax deductible (most aren’t). Note that the FEC has ruled that a decedent’s estate may take advantage of the indexed contribution limits that are in effect at the time the contribution is made rather than the year the trust was executed or the year of the decedent’s death.

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Define. Consider pecuniary gifts instead of parts or percentages of the whole estate or trust. A set amount will permit the fiduciary to know exactly how much cash the estate or trust will need to satisfy a contribution.

Direction. Some clients may want to give the fiduciary discretion regarding the recipient of a future contribution, assuming that the fiduciary would “know what I would want.” This is permitted but not advisable beyond a certain point. The risk is that the FEC could consider a fiduciary who exercises too much direction and control as the donor. Phrases like: “whoever represents greater Cincinnati in Congress” or “any future Republican nominee for Senate in Ohio” are good examples of appropriately worded gifts, but “whoever is the more liberal candidate in the presidential primaries” leaves too much discretion in the hands of the fiduciary.

Select. Political organizations can accept illiquid assets as contributions but often prefer not to. Political committees rarely accept real estate or personal property as a donation, and many committees find it politically risky to accept cryptocurrency as a donation. A donor who gives appreciated stock to a political committee will be subject to capital gains. Most political committees immediately sell stock given to them to avoid any appreciation while they’re holding the gift.

Communicate. Without disclosing names or amounts, consider speaking with the treasurer of a future benefiting political committee to make sure the identifying information you have is correct. FEC treasurers’ names and contact information are found on a Committee’s FEC Statement of Organization. Political committee treasurers are generally knowledgeable and handle donor questions frequently.

Explain. Gifts to a political committee are almost always made with one purpose: to finance political activities. There are two important exceptions: (1) large gifts to a National Party Committee; and (2) gifts to an Internal Revenue Code Section 501(c)(4) organization that may have a general operating account and a segregated political account. Wills and trust instruments must clearly identify the recipient, the amount and the account or purpose for which the money is intended.

*This article is an abbreviated summary of “Is Your Trust Agreement Politically Correct?” which appears in the December 2024 issue of Trusts & Estates.