Be charitable, but be smart in your gift-giving
Kim Ciccarelli Kantor | Naples Daily News | October 24, 2013
Donor gifts come in all forms: artwork, furniture, clothes, stocks and cash, to name a few.
Some donors create charitable trusts for future gifting, and others create a continued legacy through a family foundation or community foundation family fund.
Are you making direct gifts or leaving a bequest by will? If so, it will benefit you to review the many charitable giving plans available. By creating your own specifically designed philanthropic plan, more significant benefits might pass to your selected charities, with a greater personal fulfillment for the family.
Gifting through a donor advised fund is one such example. This DAF, coordinated with a charitable remainder trust, provides tax benefits and current income. If desired, the DAF can continue as an endowment after your lifetime to involve your children and grandchildren in philanthropy.
The key is to discuss your wishes first, then discuss options best suited to your needs with a competent adviser versed in charitable planning.
A Charitable Reminder Trust, for example, is a split-interest trust. More than one beneficial interest exists in the trust. One interest belongs to income beneficiaries who receive income for their lifetimes.
The second interest are charitable organizations named to receive the assets after the death of the last surviving income beneficiary.
If your trust already exists, the second interest beneficiary can be updated to a modern day DAF.
And, to ease any administration or due diligence, more clearly focusing the family’s efforts on the charitable work, a local community foundation can partner with you to accomplish what is most important.
The trust is a complicated document, but a flexible, useful document for your philanthropy. The design world of trusts is anything but limiting.
A CRT is a tax-exempt entity. As a general rule, income taxes and estate taxes are not paid by the trust. This permits a tax-efficient method for investing portfolio assets. There is generally no tax on property transferred to a trust.
An exception would be the transfer of your IRA or deferred annuity assets during your lifetime. The trust is irrevocable and the ultimate beneficiary is your designated charitable organization. This organization might be your DAF. Proposed tax laws might adjust the amount of available deduction, so be sure to check with your advisors before proceeding.
As income beneficiary, you have two choices for income: receive a fixed income yearly amount (annuity trust) or a defined percentage of the value of the CRT assets (a unitrust). Once established, additional future gifts can be made only if you select a unitrust.
An annuity trust or unitrust, might invade principal to pay out the income beneficiary, but care must be taken that a charity ultimately will benefit. Additional trust designs apply if you wish to defer cash flow from the trust, or wish not to invade principal.
The creator – you – may retain the right to change charities that ultimately benefit from your kindness. This gives you a flexible, lifetime customization plan for favored charities. You also might consider a donor advised family fund as beneficiary under the local community foundation. The ease to update beneficiaries or define a special interest gift can be captivating.
A community foundation removes the administrative burden of planning a continuing endowment for several charities, or distributing desired gifts. A DAF can accept the gifts from your CRT at the last income beneficiary’s death.
