To Do the Most Good

Americans are a charitable group. More than 80% of the money raised by charities in this country comes from individuals.¹ In 2005, Americans donated an estimated $260 billion.²

While donating money is certainly good, a giving strategy that utilizes a charitable trust may provide meaningful financial advantages in addition to the personal satisfaction that comes from giving.

Charitable Remainder Trust

When money, securities, property, or other assets are placed in a properly structured charitable remainder trust, the donor or a beneficiary receives income for a specific term or for life. When the trust expires, the designated charity receives the assets that remain.

For the donor, there are several potential tax benefits. Assets placed in the trust may be partially deductible for income tax purposes. At death, trust assets are not subject to estate taxes because they are no longer part of the donor’s taxable estate. Finally, any appreciated assets in the trust may not be subject to current capital gains tax.

Charitable Lead Trust

A charitable lead trust is an estate conservation tool that uses your assets to provide income for a charity during your lifetime and then transfers the remaining assets to your heirs when you die. This could potentially reduce any estate tax that may be due on the assets in the trust, most notably on highly appreciated assets, because they are not subject to current capital gains tax.

Keep in mind that donations to both types of charitable trusts are irrevocable; therefore, the assets cannot be withdrawn once the trusts are formed. Not all charitable organizations are able to use all possible gifts; it is prudent to check first. The type of organization you select can also affect the tax benefits you receive. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.

A properly structured charitable trust may not only benefit your fellow man but could help you realize additional tax benefits as well.

1) Better Business Bureau Wise Giving Alliance, September 2006
2) Giving USA Foundation™, 2006