Houston Estate Planning: The Multiple Benefits Of Charitable 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.

Charitable trusts can also be drafted in a way that allows grantors to maintain control over the causes that their assets will support. Although the grantor no longer owns the assets within the trust, they can still exercise some control over the why, when, and how the money is given. The level of control depends on how the trust is structured. For example, the grantor could name themselves one of the trustees, giving themselves a say in how assets are distributed. The grantor can also name specific charities as beneficiaries, and place specific terms requirements on the disbursement of funds. To illustrate, a trust could require that a nonprofit university create a scholarship fund in the grantor’s name to receive distributions from the trust.

There are several rules to be aware of when it comes to the creation of a charitable trust. First and foremost, a charitable trust must be created to serve a suitable philanthropic purpose. This fact may seem obvious. However, charitable trusts can be invalidated if the trust can be viewed as serving an individual rather than charitable purposes. For example, a trust created to establish a scholarship could run into trouble if it also requires that the grantor’s descendants be given preferential treatment. Issues can also arise when the trust is established to push for particular political and social causes. Other rules governing charitable trusts require care in the naming of the trust, as well as special attention to who or what is named as the trust’s beneficiary. Ultimately, the state Attorney General is responsible for ensuring that charitable trusts in Texas are serving legitimate purposes.

Are You Interested In Including a Charitable Trust In Your Houston Estate Plan?

The attorneys at McCulloch & Miller, PLLC, can help you determine if adding a charitable trust to your Houston estate plan is right for you. Our attorneys have the knowledge and experience to answer all of your estate planning questions, and help you develop a comprehensive estate plan that meets your needs. Call us at 713-333-8900 to schedule a free consultation with one of our attorneys.

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