Effective Estate Planning Options to Protect Your Legacy
There are many reasons to incorporate charitable trusts into your estate plan. You may be philanthropically minded, you may wish to leave a legacy, you may be interested in the charitable deduction on rapidly appreciating assets without incurring income tax, or a combination these goals. Charitable trusts can be structured in various ways to provide both current and future benefits. The international estate planning team at Castro & Co. can explain the options available and how these options can be integrated into your overall estate plan.
If you’re interested in learning more about charitable trusts, schedule a free confidential consultation with one of our international estate planning attorneys by clicking here or calling (888) 595-5088.
What Type of Charitable Trusts Are Available?
Two of the most common types of charitable trusts are charitable lead trusts and charitable remainder trusts. These two categories are further broken down into more specific categories depending on how the distributions from the trusts are structured.
Charitable remainder trusts (CRT) are trusts that benefit your beneficiaries with a current income stream; after a specified period of time or upon their passing, ownership of the assets in the trust then vests in a charity. The benefit of a CRT is an upfront deduction when the CRT is created based on the calculated value of the remainder interest that is scheduled to go to the charity. This is typically best for highly appreciated assets with significant built-in gain. By transferring the asset to the CRT, you do not have to pay capital gains tax. Your beneficiaries will still get the income from the assets for as long as you wish, and the charity will eventually obtain the assets. Plus, if you include the formation of a Private Family Charitable Foundation, control of the assets never has to leave the family.
A charitable lead trust (CLT) is a trust that benefits the charity with a current income stream; after a specified period of time, ownership of the assets in the trust then vests in the beneficiaries, typically the children or grandchildren. This is best for assets that are currently rapidly appreciating. Not only does a CLT lock-in the current value, but the split-interest means the calculated value transferred to the children is significantly less for estate tax purposes.
Other Characteristics of Charitable Trusts
Charitable trusts are typically irrevocable trusts. This makes sense because the government could not allow a tax deduction without certainty that property was actually being utilized for the benefit of the charity as the basis for the deduction. This is important to know because irrevocable trusts can be difficult to alter or amend. Thus, it is paramount to ensure that you fully understand the charitable trust before you effect an irrevocable transfer of property. Our international estate planning team will consult with you and be ready to explain how a charitable trust could benefit your estate plan and meet the goals for the legacy you wish to leave.
What Other Benefits do Charitable Trusts Offer?
There are reasons beyond potential tax deductions to consider including charitable trusts in your estate plan. Charitable trusts can provide a vehicle to allow you to give back to an organization that has been important in your life, or to establish a legacy that will remain far beyond when you pass away. In addition, many organizations show their appreciation to donors because they know the importance of donor money to their organization. For example, often universities will make football tickets available to donors and have occasional donor dinners or game nights. This is a great opportunity to connect with other people who have also been impacted by the organization.
If you would like to talk with our International Estate Planning team about how charitable trusts might work into your estate plan contact us today at (888) 595-5088.