Charitable Giving – Part 2

charitable_giving_gift_trust_will_losgatos_Charitable Giving is a wonderful option to consider as you do your estate planning. In Part two of this 2-part post, we will cover some of the specific terms used when discussing charitable giving and estate planning.

Gifts of Split Interests – A split interest trust is one that includes both charitable and non-charitable beneficial interests.  It allows the donor to retain an interest in the trust assets, but obtain a current income tax deduction for the value of the charitable interest.

Charitable Remainder Trust – Formation of a Charitable Remainder Annuity Trust or a Charitable Remainder Unitrust results in a current income tax deduction for the remainder interest passing to a charity and removes the asset from the donor’s taxable estate. Estate planning advantages center around the idea that there is no payment of taxable gain on the sale of the appreciated assets in a Charitable Remainder Trust.  Therefore the income payable to the donor is on before tax dollars. Therefore the income payable to the donor is on before tax dollars.

Annuity Trust – This type of trust specifies that a fixed dollar annuity is to be paid to one or more non-charitable beneficiaries each year.

Unitrust – The unitrust entitles the non-charitable beneficiaries to an annual payment based on a fixed percentage of the net fair market value of the trust assets, valued annually.

Net Income with Make up Provision – Provides net income to the beneficiaries with a make up provision for those years that the net income is less than the unitrust percentage.

Pooled Income Fund – Allows the donor to transfer assets to a charitable organization under an agreement that requires that the charity pay the donor for life the same rate of return on the value of the contribution that the organization earns on the fund.

Charitable Lead Trusts – Individual may make a contribution of an asset to a trust that pays all income to the charity for a period of years with a reversionary interest to the donor or the donor’s non-charitable beneficiaries.  Because the value of the remainder interest is discounted according to the number of years, the remainder beneficiaries will potentially receive far more.  The disadvantage is that they have to defer enjoyment.

Read Charitable Giving – Part 1

If you would like to learn more about your best options regarding charitable giving, you are welcome to come in for a free consultation. Simply call to schedule a time and bring in this Free Consultation Certificate when you visit.

 

estate_planning_living_trust_preparation_losgatos_Diane M. Brown, Esq.
Working every day to keep my clients out of court!
It’s your money… Let’s keep it that way!
Call 408.376.2755

 

 

This blog contains general information and is not meant to apply to a specific situation. Please seek advice of counsel before proceeding as each case is unique.

Photo Credit: Diane Brown’s photo by Lisa Whalen.

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  1. Charitable Giving – Part 1 | Diane M. Brown, Esq. - March 25, 2014

    […] Read Charitable Giving – Part 2  which addresses “Gifts of Split Interests,” including Charitable Remainder Trusts and Charitable Lead Trusts. […]

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