A charitable trust is truly the gift that keeps giving since it allows you to generously donate assets to charity and provides you and your heirs with tax breaks.
Establishing a charitable trust is fairly easy. First, the charity you choose must have tax-exempt status from the IRS. With the help of an estate planning attorney, you can then set up the trust and transfer the assets you wish to donate to that trust. The charity serves as the trustee, and manages or invests the property to provide income for you or your beneficiaries. Then, upon your death, the property reverts to the charity.
Usually, the income you receive from a charitable trust is through a fixed annuity or a percentage of the trust assets (at least 5% of the value of the trust per IRS rules).
By setting up a charitable trust, you receive significant tax advantages. You can take an income tax deduction over five years for the entire value of your gift, minus the income you are likely to receive from it.
If you donate property, stocks or bonds, the charity will sell these to acquire property that will produce income for you – and since charities are not subject to pay capital gains tax, all the proceeds remain in the trust.
When you die and the trust property reverts to the charity, it is no longer a part of your estate, so it is exempt from any federal estate tax.
The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0041.