When you are planning your estate, you may want to consider your broader legacy. Giving back can be a very powerful thing, especially when you are thinking about how you will be remembered after you pass away.
Acts of charitable giving can be rewarding on a personal level, and you can sometimes gain tax benefits when you give to charitable causes.
There are various different ways that you can give to organizations and causes that are meaningful to you. Some people create private charitable foundations.
It could seem as though a foundation is out of reach, because they are often identified with families like the Rockefellers and the Gates family. However, in reality, the majority of foundations in the country are working with less than $1 million.
Charitable remainder trusts can also be used to set aside assets for the benefit of a worthy cause. Let’s look at the details.
Charitable Remainder Trusts
When you create a charitable remainder trust, you name a charitable beneficiary who will assume ownership of assets that remain in the trust after the term of the trust expires. The charity must assume ownership of at least 10 percent of the original value of the trust.
As the grantor of the trust, you accept annuity payments out of the trust throughout its term. The trust can be in place for your entire lifetime, or you could fix a term, but the term cannot be longer than 20 years in duration.
With a charitable remainder unitrust, your payments would be a fixed percentage of the value of the trust. The percentage must be no less than five percent annually, and no more than 50 percent.
There are also charitable remainder annuity trusts. With these trusts you would receive a fixed annuity payment rather than a percentage of the whole.
There are various different tax advantages that you gain when you create a charitable remainder trust. You get a tax deduction, because the charity will eventually be receiving a contribution.
When you fund the trust, you are removing the assets from your estate for estate tax purposes, and this is another advantage.
You can also spread out your capital gains responsibility if you contribute appreciated assets into the charitable remainder trust. The trust could sell the assets, and the entirety of the capital gains tax would not be due all at once.
These trusts can be a good choice for many people who want to give to charitable causes while they simultaneously minimize their tax exposure.
Schedule a Free Consultation
If you would like to learn more about charitable remainder trusts and other vehicles of charitable giving, we can help. Our firm offers free consultations, and you can send us a message requesting an appointment through this link: Indianapolis IN Estate Planning Attorneys.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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