In 2006, there were no major natural disasters like Hurricane Katrina and the Asian tsunami, yet Americans donated a record $295 billion to charitable causes, topping the $283 billion they donated in 2005.1

Philanthropy is a time–honored tradition. When you utilize a structured giving strategy, your efforts can help reap greater benefits for you, your heirs, and your favorite charity. Two popular methods for leveraging charitable gifts involve the following types of trusts.

Charitable Remainder Trust

When money, securities, property, or other assets are placed in a properly structured charitable remainder trust, the donor (or a beneficiary) receives any income generated by the trust. When the trust expires, a designated charity receives the assets that remain.

For the donor, there are several potential tax benefits. Assets placed in the trust may be partially deductible for income tax purposes. Upon the donor’s death, trust assets are not subject to estate taxes, because they are no longer part of the donor’s taxable estate. Finally, any appreciated assets in the trust are also exempt from current capital gains tax.

Charitable Lead Trust

This type of trust essentially works in the opposite way. The charity receives any income generated by the trust. When the donor dies, the remaining assets are distributed to the designated heirs. A properly structured charitable lead trust can help reduce the donor’s estate tax liability.

Keep in mind that donations to both types of charitable trusts are irrevocable; therefore, the assets cannot be withdrawn once the trusts are formed.

Not all charitable organizations are able to use all possible gifts, so it is prudent to check first. The type of organization you select can also affect the tax benefits you receive.

The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate conservation professional and your legal and tax advisors before implementing such strategies.

Hopefully, the current trend of charitable giving will continue. We can help you create an arrangement that benefits not only your favorite charitable organization, but you and your heirs, as well.

1) Giving USA, 2007





Giving for the Greater Good
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