Articles Posted in Charitable Giving

Many clients, especially after they have had an especially profitable year, ask our team about how to best structure their charitable giving. Giving money away is a noble goal, and part of our job as estate planning attorneys is to help you figure out how to have the greatest impact while still making sure your financial foundation is solid. One tool we often suggest for our clients’ charitable giving is called the charitable remainder trust. Today’s blog goes into some details about this kind of trust, so that you might be able to discern whether it could be right for you.

A charitable remainder trust is a tool that allows you to both contribute to a worthy cause and be eligible for important tax benefits. Once you deposit money into the charitable remainder trust, you automatically offset or minimize your current tax liabilities. As time goes on, you stay in some control of the money deposited in the trust, and you become eligible to receive a potential income stream from the trust itself. Then, when you pass, the remainder of the trust is given to the charity or charities of your choosing.

Because you get the trust’s tax deduction today, but you still have access to the income from the trust over your lifetime, the charitable remainder trust can truly be the best of both worlds. Importantly, a contribution to a charitable remainder trust constitutes an irrevocable transfer of cash, so it is essential to choose your contribution wisely.

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Individuals may wish to put some of their hard-earned assets toward charitable causes or organizations throughout and at the end of their lives. While charitable gifts and lump sum donations may seem generous, they can sometimes incur unexpected tax benefits that require caution. One way to charitably donate in a tax-savvy way is through establishing a charitable remainder trust. This can be especially wise for appreciable assets or sums large enough to exceed gift tax limitations.

What is a Charitable Remainder Trust?

Charitable remainder trusts allow people to donate to charitable causes while also generating income for themselves or another beneficiary in the meantime. First, the person who wishes to donate will place the assets—which can include cash and equity, real estate, and even business interests— into the charitable remainder trust. The assets will be paid to a beneficiary other than the charity, such as you or other named individuals like family members, for a certain period of time. This period of time is up to 20 years or the lifetime of the noncharitable beneficiaries. After that time frame, the remaining assets are transferred to one or multiple charitable causes or organizations. This transfer avoids the headache of probate.

There are two types of charitable remainder trusts: annuity trusts and unitrusts. An annuity trust will pay you or your other noncharitable beneficiary the same dollar amount of your choosing each year, regardless of assets or investments coming into the trust. A unitrust will pay a variable amount that is a percentage of the fair market value of the trust and will be recalculated each year.

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Selecting the right legal instrument for a charitable donation can help ensure that your good deed goes unpunished.

One effective but lesser-known instrument for charitable donations is the charitable lead trust (CLT). Donors can set up this type of trust in Houston to provide a stream of income to a particular charity for a pre-specified term, after which the property will revert to selected members of the donor’s family.

Charitable Giving Options

For many, philanthropy and charitable giving is an important part of their life. For these philanthropic individuals, it is common to leave assets at the time of their death in order to continue the legacy. However, at the same time, it is still important to minimize their tax burden both during their life and for their family after their passing. Utilizing a planned gift is a great option. A Houston planned giving strategy allows individuals to make larger gifts to charitable organizations than they would be able to from their ordinary income.

By definition, a planned gift is any major donation to a non-profit made during a person’s lifetime or at their death as a part of the person’s estate planning. These gifts include life insurance, real estate, personal property, and cash.

Types of Charitable and Planned Giving

Benefits of Charitable Giving

When it comes to planning your Houston estate plan, one tool that should not be forgotten is charitable giving. As an estate-planning tool, charitable giving has two primary benefits. First and foremost, it provides an opportunity to give back and support the causes we care about. Secondly, charitable gifts reduce the taxable assets within an estate, potentially resulting in significant tax savings, particularly for substantial estates. A charitable trust allows Texans to achieve these two important estate-planning goals simultaneously.

A trust is an arrangement in which property is placed in the hands of a trustee to be managed and used for the benefit of a beneficiary. In the case of a charitable trust, the beneficiary is a charitable organization chosen by the grantor. Creating a charitable trust can have multiple tax benefits. For starters, a trust can be structured so that any donations made during the grantor’s lifetime can be deductible from their income tax. Furthermore, when the grantor dies, the assets within the trust are not included within the grantor’s estate. As a result, the tax burden on substantial estates can be reduced significantly through the creation of a charitable trust.

2.4.20A will or trust explains what you want to have happen to your assets when you die, hopefully in a very, very long time. While most people understand that a will explains what to do with money, property, and children, there are other parts you might be surprised by.

MSN’s recent article entitled “3 surprising things you might not think to include your will” tells about three things to include in your will that you may not have thought about before.


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11.9.19A fear that children will not be motivated to have careers because of their family’s wealth is a concern. However, in the long run, it can hamper how wealth is handled by the next generation.

In a perfect world, discussing a family’s legacy should be a process that begins when children are old enough to understand concepts as simple as giving and the notion that wealth comes with social responsibilities. In reality, few discuss their philanthropic or legacy goals with their children.

CNBC’s recent article, “Don’t expect Mom and Dad to clue you in on your inheritance,” says that 8 out of 10 financial advisors said that “some” or “hardly any” of their clients involve the next generation in family philanthropy, according to a recent survey from Key Private Bank.

9.5.19Estate planning attorneys and CPAs all keep an eye on letter rulings to see if IRS decisions have any bearing on their own client’s situations. In this case, a taxpayer is setting up a revocable trust and wants to use a Charitable Lead Annuity Trust known as a CLAT.

A recently posted letter ruling from the IRS addresses the use of a CLAT used in estate planning.

A CLAT letter ruling could be of interest to those who are using life insurance, annuities or other instruments in estate planning.

7.25.19The fight over Conrad Prebys’ $1 billion estate continues, three years after the San Diego developer and philanthropist died.

When the directors of the Conrad Prebys Foundation decided to give his son Eric $15 million, despite the fact that his father had left him out of the will, Preby’s longtime partner tried to sue them.

The San Diego Union-Tribune reported in the article “Court fight continues over control of $1 billion Prebys estate,” that in January, a San Diego Superior Court judge dismissed Debra Turner’s suit, holding that she had no legal standing to bring it. She then filed an amended complaint. However, the judge recently dismissed her lawsuit.

5.22.19Some people give generously all year long, supporting local nonprofits and taking care of their family members. If that’s you, perhaps it’s time to consider taking a more strategic approach to lifetime giving.

Not everyone gives because they are looking to minimize their taxes. If you’ve reached the age and stage where you have accumulated more than enough wealth to retire on, you may enjoy being generous and seeing the impact your gifts can have on the lives of those you love, or those who are less fortunate.

WMUR’s recent article, Money Matters: Lifetime non-charitable giving,” explains that lifetime giving means you dictate who gets your property. Remember, if you die without a will, the intestacy laws of the state will dictate who gets what. With a will, you can decide how you want your property distributed after your death. However, it’s true that even with a will, you won’t really know how the property is distributed, because a beneficiary could disclaim an inheritance. With lifetime giving, you have more control over how your assets are distributed.

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