Charitable Giving Lawyers
What is Charitable Giving?
Charitable giving is the giving of wealth to a charitable cause. Charitable giving can be done both in life and in death, most commonly via a will or trust. Charitable giving serves the dual purposes of helping a charitable cause and giving the donor and their heirs a significant tax break.
A charitable trust is like any other trust - it is a property interest held by one person for the benefit of another. The only difference between a charitable trust and other types of trusts is that a charitable trust is always irrevocable. Once you establish a charitable trust you cannot reclaim your property interest. The most common type of charitable trust is a charitable remainder trust.
How Does a Charitable Remainder Trust Work?
Establishing a charitable remainder trust is a relatively simple thing to do. The following is a general guideline of how a charitable remainder trust functions:
- Set up a trust with a non-profit charity
- Transfer the property you want donated to the charity's trust account
- The charity functions as the trustee managing and or investing the property to produce income
- The income is payable to you for a period of time that you designate, but more commonly until the death of the donor
- At the end of the designated period, the property becomes the charity's possession
Advantages of a Charitable Trust
There are several tax advantages to creating a charitable trust:
- Estate tax: After the trust property formally becomes the property of the charity (at the end of the designated period or your death), the trust property is no longer considered part of your estate, and is not subject to the federal estate tax.
- Capital gains tax: A charitable trust allows you to convert appreciated property (property that has increased in value since you acquired it) into cash without paying tax on the profit.
Tax Advantages of Gifts
Giving gifts to your loved ones while you're alive has significant tax advantages when compared to giving gifts through a will or trust. For example, an unlimited number of $11,000 gifts of cash or property each year can be given tax-free to anyone. Also, as long as your spouse is a U.S. citizen, all gifts are tax-free.
Do I Need an Attorney for my Charitable Giving Matter?
You should always confer with a lawyer to plan the distribution of your estate. Lawyers understand the tax implications of estate planning, and will guide you through the difficulties associated with drafting wills and trusts. A lawyer will also help explain charitable giving, and how best to draft charitable trusts.
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Last Modified: 11-28-2011 04:44 PM PST
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