CHARITABLE PLANNING

Many clients come in with a desire to benefit certain charities (and when we say charities we mean local and national charitable organizations, churches and other religious institutions and also public colleges and universities). Of course, there is no need to discuss why benefiting charities is a good thing. But, what may not be so obvious is that benefiting a charity can also directly benefit you!

Many charitable giving techniques allow you to take income tax deductions. Some allow you to sell highly appreciated assets while avoiding huge capital gains taxes. They also allow you to reduce the value of your estate and thus can help lower the amount of estate taxes your heirs will have to pay.

Charitable Remainder Trusts: The general idea behind a Charitable Remainder Trust (CRT) is that you transfer assets into the trust. The trustee sells the assets and may reinvest them without paying capital gains taxes. The trustee then pays to you and/or the beneficiaries you name a guaranteed income for your life or lives. When the trust terminates (when you and the beneficiaries you have named have died) whatever is remaining in the trust goes to the charity that you have named. You get an income tax deduction when you transfer the assets into the CRT. The highly appreciated assets you owned are sold without a big capital gains tax due. Additionally, whatever is in the CRT is not considered part of your estate when you pass away, so your heirs will have less estate taxes to pay.

Charitable Lead Trusts: A Charitable Lead Trust (CLT) is similar to a CRT. The difference is that instead of giving you or your named beneficiaries an income for your life, you transfer assets into the CLT, set a period of time and during that period of time the CLT will pay an income to the charity you name. When the period of time expires, whatever is left in the CLT goes to your named beneficiaries. The CLT allows you to transfer assets to your heirs while avoiding gift, estate and generation skipping taxes.

While we believe the Charitable Trusts listed above offer you and your beneficiaries the most benefits, there are several other charitable gifting techniques that may work for your specific situation. Depending on your specific needs and goals we can discuss making charitable gifts via your last will and testament or your revocable living trust, we can discuss the benefits of outright gifts to charities, or the possible benefits of bargain sales or pooled income funds.

We would also be happy to discuss the advantages and possible disadvantages of making charitable gifts from a retirement plan. Retirement plans are often subject to both federal estate tax and federal income tax at your death. Donating all or part of your retirement plan can make a lot of sense for you in certain situations and we would be happy to discuss this and other issues with you and your financial advisor and/or accountant.