"Giving with warm hands" applies to charitable donations as well gifts made during your lifetime. With a charitable trust, you get to give with warm hands and get a nice tax deduction.
Does your will include donations to non-profit organizations who you feel are worthy of your generosity? If so, consider adding a charitable trust to your estate plan. A charitable trust allows you to enjoy both the personal satisfaction of the impact of giving during your lifetime—and the added bonus of excellent tax benefits.
A recent Kiplinger's article, "Are You Losing Big Tax Savings on Your Charitable Bequests?" ,says this approach will not leave you short on funds for living expenses now. Transferring money you plan to leave to charity at death to a charitable remainder trust now does four things:
- The trust pays you income during your life;
- You get an income tax deduction in the amount of the remainder interest, which—depending on your income—might be spread out over as many as six years.
- All trust assets and investments grow income tax deferred (like an IRA); and
- Whatever value is left over after you pass away goes to the charities you designate.
When planning how a charitable remainder trust pays you, you can generally choose a fixed dollar amount, like an annuity, or a fixed percentage of the value of the trust. The nice thing about a charitable remainder trust is that it adds the income tax benefits and income tax deterred investment so you can get more out of your future gift now.
Make sure that you speak with an experienced estate planning attorney who is familiar with the use of charitable trusts. To help you analyze the impact of the charitable trust on your overall tax situation, determine your comfort level and—if necessary—work with the charity’s development office to ensure that your gift is appreciated and applied correctly.
For more information on charitable trusts and other estate planning topics see our website. To talk with one of our experienced estate planning attorneys call our office.
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Reference: Kiplinger's (June 2016) "Are You Losing Big Tax Savings on Your Charitable Bequests?"