Give to Charity in a Tax Efficient Manner
Taking advantage of the charitable deduction is not limited to outright gifts of money or other property to charity. The tax laws permit charitable gift devices which not only provide a charitable deduction but allow the transferor to obtain additional benefits. Two popular specialized charitable giving devices are Charitable Remainder Trusts (“CRTs”) and Charitable Lead Trusts (“CLTs”).
Robert J. Kolasa, Ltd. has had substantial experience in assisting clients in implementing charitable trust strategies.
Click "Advise your Clients on How They Can Increase Their Cincomies, Avoid Capital Gains Taxes, Reduce Estate Taxes and Become a Saint" (published article) to to review my discussion of the Charitable Remainder Trust rules.
Charitable Remainder Trusts ("CRTs")
A Charitable Remainder Trust (“CRT”) is an irrevocable, tax-exempt trust comprised of two parts: (1) the income interest, and (2) the remainder interest. The income interest is the income paid to the individuals who established the trust (or their designated beneficiaries) for their lifetime or a term of years. The remainder interest is the property remaining in the CRT when the trust terminates. The remainder interest is given to the qualified charity (including family foundations and donor advised funds) of the donor’s choice as specified in the trust document.
Charitable Lead Trusts ("CLTs")
Charitable Lead Trusts (“CLTs”) are an excellent estate planning vehicle to pass assets to heirs at a reduced transfer tax, while making a significant gift to charity. A CLT is a powerful instrument for donors who anticipate high estate and gift taxes in transferring their wealth to heirs. The two main types of Charitable Lead Trusts are the Grantor Lead Trust, in which the assets of the trust revert to the donor at the end of the trust term; and the Non-grantor Lead Trust, in which the assets of the trust are transferred to one or more beneficiaries designated by the donor. With a CLT, the charity receives an income stream for the life of the trust.
A Charitable Lead Trust is an irrevocable, taxable, split interest trust. The donor funds a trust that will pay an income stream to a charity of their choice for a specified term. The assets of the trust are invested and managed by a trustee. At the end of the trust term, remaining trust assets revert to the donor, or are transferred to family member beneficiaries designated by the donor.