Give
and Get
Americans like to give
generously to charitable organizations, with gifts exceeding more than $200
billion annually.¹ Many Americans also find themselves giving liberally to
another organization this time of year — Uncle Sam.
If you would like to see
more of your money going to charity and less to taxes, you might be interested
in how to supercharge your giving so that you and your family may receive more
than satisfaction in return.
Two types of trusts can
be used to help leverage the value of your charitable gifts and reduce certain
types of taxes.
Charitable
Lead Trust
When assets are transferred to a properly structured charitable
lead trust (CLT), any income generated by the trust goes to a designated
charitable organization.² Upon the donor's death, the assets in the trust
revert to the donor's beneficiaries. This strategy can help reduce estate taxes
on the assets in the trust. It is especially useful if the assets placed in the
trust have appreciated because there are no capital gains taxes.
Charitable
Remainder Trust
When assets are transferred to a properly structured charitable remainder trust
(CRT), the trust pays an income to the donor for his or her life or for the
joint lives of the donor and his or her beneficiary. After the donor's death,
the assets in the trust go to the designated charity.
The potential tax
benefits here are three-fold: (1) assets placed in the trust may be partially
deductible for income tax purposes; (2) any appreciated assets become exempt
from capital gains taxes; and (3) trust assets are no longer considered part of
the donor's estate for estate tax purposes.
At least one limitation
on the use of these trusts should be considered. Donations to CRTs and CLTs are
irrevocable. A donation cannot be taken back once it has been made.
Before implementing a
strategy involving trusts, you should consult an experienced estate planning
professional. Call today to learn more about how the appropriate giving strategy
can help improve the quality of your gifts and possibly your tax situation.
1) American Association
of Fundraising Counsel, 2003
2) Bear in mind that 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.
