Estate Planning

Charitable Giving    

Americans contributed $161 billion to charity last year.

 
As your wealth grows and your tax burden increases, you may be wondering 

how a charitable donation from you could best be used to benefit others — 

and yourself. You may want to gift money to your church or give a tithe to your church, or help out a local non-profit group in your town.

Charitable trusts can help you increase the value of your donation 

by reducing your costs in capital gains, income, and estate taxes.

Charitable Remainder Trusts
A charitable remainder trust (CRT) is an irrevocable trust whose beneficiary is a charitable organization. Throughout his or her lifetime, the donor receives regular payments (fixed or variable) from the trust. When the donor dies, the charity receives the remaining principal.

Assets donated to a CRT are not subject to capital gains taxes and, if eligible, will not be included in the donor’s taxable estate. In addition, the donor may take an income tax deduction (subject to certain limits) on the value of the assets during the year in which the trust is created.

Charitable Lead Trusts
A charitable lead trust (CLT) is almost the opposite of a CRT. With a CLT, the charity receives regular income generated by the trust throughout the donor’s lifetime. When the donor dies, his or her heirs receive the assets in the trust.

Pooled Income Funds
A pooled income fund is an irrevocable trust to which several donors may contribute. Funds are administered by a charitable organization and pay donors regular income for life. When a donor dies, his or her contribution to the fund becomes the property of the charity. With this type of fund, donors are not subject to capital gains taxes and can reduce their current taxable income and estate.

This time of year gives many people an inclination to help others and potentially improve their tax situations. If the season has kindled your desire to give, consider how charitable trusts can help both you and the recipient make the most of your donation.

Before taking action, be sure to consult with your tax professional for specific information pertaining to your situation.