Charitable Planning

Charitable planning is an effective tool to carry out benevolent ventures and ambitions, but can also provide significant income tax and estate tax benefits for our clients. Charitable planning often includes outright gifts to charity, such as bequests provided for you in your will or by virtue of beneficiary designations of retirement accounts. More sophisticated charitable planning may include the use of a tax-exempt charitable trust or a “split-interest trust” such as a charitable remainder trust or charitable lead trust.

Charitable Reminder Trust (CRT)

A charitable remainder trust is an irrevocable trust which provides for a specified distribution, at least annually, to one or more beneficiaries. At least one of the beneficiaries must be a non-charitable entity, who is a beneficiary for the rest of his or her life or a term of years. Once the beneficiary passes or the term of years expires, one or more qualified charities receives the remainder interest. Because the remainder interest is a commitment to a charitable endeavor, the federal tax code provides a variety of tax benefits for the grantor.

Charitable Lead Trust (CLT)

A charitable lead trust is similar to a charitable remainder trust, but works in the opposite direction. The qualified charitable organization receives its benefit first, prior to the non-charitable beneficiaries. For example, a charity may receive income from the assets placed in trust for a fixed time or during the lifetime of the donor. Upon the termination of that time period, the assets revert back to the grantor’s estate or to named beneficiaries. If structured correctly, the creator or grantor of the trust is eligible for certain tax deductions and exemptions. It allows you to provide a meaningful gift to your favorite charities while also providing valuable tax benefits as well.

Private Foundation

A private foundation is a nonprofit organization which is usually created via a single primary donation from an individual or a couple and whose funds and programs are managed by its own trustees (if organized as a trust) or directors (if organized as a business). Private foundations can be controlled by related parties and be funded by a relatively small group. A private foundation generates income by investing its initial donation, often disbursing the bulk of its investment income each year to desired charitable activities. Private foundations can be organized as an operating foundation, which actually run the charitable activities, or non-operating foundation, which disburse funds to other charitable organizations.