Photo by Charles Postiaux on Unsplash

Question:

My estate in general is less than the taxable federal limit. Is there a problem in leaving a portion of it to an organization in London, England, that is certified as a non-profit organization in England but not described in IRC 2055(a)?

Response:

That’s fine. It’s not tax deductible as a charitable contribution, but that doesn’t matter since your estate won’t be paying any taxes in any case.

At least that’s the federal result. If you live in a state with its own estate or inheritance tax, your estate may be large enough to pay a tax. Your gift to the British charity won’t be tax deductible.

Some larger non-U.S.-based charities have set up U.S.-based 501(c)(3) non-profit organizations so that contributions from Americans are tax deductible. Think of Doctors Without Borders.

In fact, I’m on the U.S. board of an Australian charity, So They Can, that runs schools in Kenya and Tanzania. Even though they’re much smaller than Doctors Without Borders they have also created a U.S.-based 501(c)(3) non-profit entity so that their U.S. donors can benefit from tax deductions.

So, make sure that your charity doesn’t have a U.S. arm. While it won’t matter for federal estate taxes, it might for state taxes or for your income taxes if you are also making contributions now while you’re alive.

Related Articles

Does Your State Have Estate or Inheritance Taxes? Paying for Long-Term Care Out-of-Pocket Gifting Appreciated Property to Charities Can Provide Substantial Tax Benefits