Estate Planning, Charitable Giving

If you would like to pass on some of your wealth to one or more charities, there are a number of options available to you. Charitable trusts may be set up during a donor's life, or as a part of a trust or will at death, as testamentary.

Charitable Remainder Trusts

Charitable Remainder Trusts are irrevocable structures established by a donor to provide an income stream to the income beneficiary, while the public charity or private foundation receives the remainder value when the trust terminates.

A trust makes its payments, either of a fixed amount (charitable remainder annuity trust) or a percentage of trust principal (charitable remainder unitrust), to whomever the donor chooses to receive income. Normally, the donor may claim a charitable income tax deduction, and may not have to pay an immediate capital gains tax when the charitable remainder trust disposes of the appreciated asset and purchases other property as it diversifies its portfolio of trust property. At the end of the trust term, which may be based on either lives or a term of years, the charity receives whatever amount is left in the trust. Charitable remainder unitrusts - paying a fixed percentage - provide some flexibility in the distribution of income, and may be helpful in retirement planning, while charitable remainder annuity trusts paying a fixed dollar amount are more rigid and usually appeal to much older donors unconcerned about inflation's impact on income distributions who are using cash or marketable securities to fund the trust.

Charitable Lead Trusts

Charitable Lead Trusts make payments, either of a fixed amount (charitable lead annuity trust) or a percentage of trust principal (charitable lead unitrust), to charity during its term. At the end of the trust term, the remainder can either go back to the donor or to heirs named by the donor. The donor may sometimes claim a charitable income tax deduction or a gift/estate tax deduction for making a lead trust gift, depending on the type of a charitable lead trust. Generally, a non-grantor lead trust does not generate a current income tax deduction, but it eliminates the asset (or part of the asset’s value) from the donor’s estate.

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This information is not intended to be a substitute for specific individualized tax or legal advice.  We suggest that you discuss your specific situation with a qualified tax or legal advisor.