Americans contributed $248 billion to
charity last year.As your
wealth grows and the tax burden increases, you have probably thought
about how making a charitable donation could best be used to benefit
others — and yourself. Charitable trusts can help you increase the
value of your donation by reducing your costs in capital gains,
income, and estate taxes.
Charitable Remainder Trusts
A charitable remainder trust (CRT) is
an irrevocable trust whose beneficiary is a charitable organization.
Throughout the donor's lifetime, they receive regular payments
(fixed or variable) from the trust. When the donor dies, the charity
receives any remaining principal.
Assets donated to a CRT are not
subject to capital gains taxes and will not be included in the
donor’s taxable estate. In addition, the donor may take an income
tax deduction on the value of the assets during the year in which
the trust is created.
Charitable Lead Trusts
A charitable lead trust (CLT) is
nearly the opposite of a CRT. With a CLT, the charity receives
regular income generated by the trust throughout the donor’s
lifetime. When the donor dies, their heirs will receive the assets
in the trust.
Pooled Income Funds
A pooled income fund is an
irrevocable trust to which several donors may contribute. Funds are
administered by a charitable organization and pay donors regular
income for the remainder of their life. When a donor dies, his or
her contribution to the fund becomes the property of the charity.
Donors are not subject to capital gains taxes and can reduce their
current taxable income and estate.
The holiday season is the time of
year many people are inclined to help others and improve their tax
situations. If the season kindles your desire to give, consider how
charitable trusts can help both you and the recipient make the most
of your donation.
Always consult with your tax
professional for specific information pertaining to your situation.
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