Estate & Corporate Planning
Planned Charitable Giving
Charitable Remainder Trust
Making a substantial future gift through a charitable trust while retaining an income interest for life, multiple lives, or a term of years.
Advantages
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Tax deduction up to 60% of AGI (varies with type of gift & charity)
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5 year carry forward for unused deduction
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Removes transferred assets from your taxable estate.
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Substantial benefit to charitable causes important to donor.
Disadvantages
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Ultimate beneficiary of trust assets is charitable - heirs are disinherited. Gifted assets can be replaced with life insurance.
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Trust income is LIFO (Last In First Out).
Charitable Lead Trust
A trust designed to pay immediate income to charitable beneficiaries with the remainder interest returning to the donor or the donor's estate - the reverse of the CRT above. The trust benefits from a discounted value of the trust's remainder interest.
Private Foundation
An entity established for the purpose of the perpetual funding of charitable causes at the discretion of the directors.
Advantages
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Family members, who carry out the intent of the founder, can be made salaried Directors and Board Members.
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Additional funding can be received from other donors or organizations.
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PFs are public entities. As such their grants and gifts can be very high profile.
Disadvantages
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Very complex and expensive to establish and maintain.
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Private Foundations are not "private" if founders wish to be anonymous. As such they may be solicited heavily by charitable organizations, etc.
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Must abide by stringent rules governing distributions, limitations on private business assets held, self dealing, charitable intent of expenditures, and responsible management of trust assets.
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Highly appreciated asset transfers retain their basis.
Alternatives are Donor Advised Funds, Community Foundations, and
Charitable Trusts (See above).
Donor Advised Fund
An investment vehicle managed by a 501(c)3 entity for the benefit of charitable organizations. Donors can benefit from an immediate tax deduction up to 50% of taxable ordinary income for year end tax planning, while having discretion over the timing, amount, and organization to receive the funds. Some of the largest institutional investment companies administer these funds, in addition to some charitable organizations that offer funds of their own.
It is one of the simplest, lowest cost, and most private charitable giving strategies besides direct gifts.
Wealth Replacement Trust
When an asset is transferred, either directly or indirectly, to a charitable organization or trust, generally, it is eliminated from the donor's taxable estate. Consequently, the asset is also removed from the legacy the donor will pass on to heirs. To avoid disinheriting the donor's heirs, an ILT (Irrevocable Life Insurance Trust), funded with life insurance, can be used to maintain the inherited value of the estate, funded with "discounted dollars" (insurance premiums) passing outside the donor's taxable estate.
