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Charitable Planning

You could donate an asset directly to charity and gain an immediate charitable income tax deduction.  In one fell swoop, you’d reduce the value of your estate—and thus future estate taxes—as well as avoid capital gains taxes.  But you’d miss out on an opportunity to maximize your income.  

The Charitable Remainder Trust combines current charitable income tax deductions and future estate tax deductions with the opportunity to avoid capital gains tax on a highly appreciated asset.  It then goes one step further to provide you with a new source of income. 

A Charitable Remainder Trust delivers best results when benefactors have a highly appreciated asset—such as real estate or stocks—that provides little or no income. 

When you create your Charitable Remainder Trust, you transfer your highly appreciated asset to your Trust.  The asset is usually sold, with the proceeds used to buy income-producing investments.  Then, each year for the rest of your life, you’ll receive income from your Charitable Remainder Trust.  When you die, your designated charity will receive whatever remains in your Trust.  Hence the name:  Charitable Remainder Trust. 

The incentives for using the Charitable Remainder Trust include: 

• an immediate charitable income tax deduction based upon the fair market value of the asset given away (less your received interest—or future income and subject to normal percentage limitations applied to itemized deductions);

• an opportunity to put the full value of your appreciated asset to work for you and avoid the costly impact of capital gains taxes;

• a new source of income;

• and a charitable estate tax deduction on the full fair market value of the asset you’ve donated to the charity when you die.

 It may sound like the Charitable Remainder Trust is a complex legal tool.  But just the opposite is the case.  Working with your estate planning attorney, you can set one up in fairly short order.

For more information on charitable planning, please contact us.

Business, Corporate, and Estate Planning Attorney Vincent J. Profaci, P.A., assists Clients with Business Operation and Management, Business Succession Planning, Business Purchase and Sale, Estate Planning, Trust Administration, Wills & Trusts, Estate and Gift Tax Planning, Probate and Guardianship, Estate Administration, and Real Estate Law.  

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