Planned Charitable Giving can take a Bite Out of Taxes

Planned charitable giving can play an important role in estate, gift and income tax planning.  Below are some of the more common methods of providing assets to charities.

 Outright gifts: This is the most common and popular form of charitable gift.  A will or revocable trust includes a provision leaving a fixed dollar amount or percentage of an overall estate to a particular charity.  You can modify the planned gift at any time. 

Charitable remainder trusts: This estate planning technique allows you to put assets into a trust and receive each year a fixed amount of income, or a percentage of the fair market value of trust assets.  At the end of specified term of years, or on the death of all named trust beneficiaries, the remaining trust assets pass to one or more charities.  The person who donates assets to the trust is entitled to a charitable deduction for the value of the trust assets that are anticipated to pass to charity.  This amount is determined under Internal Revenue Service rules.

Charitable lead trusts: This kind of trust is the exact opposite of a charitable remainder trust.  Under a charitable lead trust, a specific dollar amount or a percentage of the annual fair market value of the trust assets is paid to one or more charities for a certain period of time.  After that, the remaining assets in the trust passes to named individuals – usually children.

This kind of trust can be a perfect vehicle for a family that wants to minimize estate taxes, give to charity, and provide for heirs as well.  It is particularly useful when heirs have the financial security to wait a number of years before receiving the trust assets. These planning tools carry a number of technical rules and complications.  Please contact us to discuss what makes sense for you and your family.

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