Charitable Trusts

GIMME A TAX BREAK

Why I Recomend The Establishment Of Charitable Trusts

There is a former best selling title “Doing Well While Doing Good”. The theme of the book is that people who have concern for others and their well being usually do rather well, financially speaking.

I subscribe to that theme even though it is contra to the “dog eat dog world” that some people try to pursue or the phrase used by Leo Durochure, the former major league manager, who said “nice guys finish last.”

When a client indicates that they have a philanthropic bend and are planning to leave a portion of their estate to their Alma Mater, a Hospital or some other charitable or non-profit organization, I try to walk them through the tax benefits of establishing a Charitable Remainder Trust during their life time.

At this time, I will not go into a full discussion of the benefits. However, the following is a brief highlight of the tax and often cash flow benefits of establishing a trust during one’s lifetime.

• Even though the trust is irrevocable, the designated charities can be changed anytime during the donors’ lifetime.
• The charities do not need to be given advance notice that they are going to receive a bequest at the death of the donor. This prevents them from making excessive contact with the donor and allows for the ease of changing the charities if the donor wishes.
• The establishment of the trust gives the donor a substantial income tax deduction in the year it is established.
• The assets placed into the trust can be readily sold by the trustee without paying any capital gains taxes. Therefore, the full value of the asset is placed into the trust to permit the establishment of a diversified portfolio.
• The income the portfolio generates allows for a very handsome annual distribution to the donor and/or spouse for their lifetime. This is usually 7-10% of the value of the trust. This is often several times the amount of income distributed to the donor from the original assets prior to their being placed into the trust and sold.
• The donors know that ultimately on their death, usually the death of the surviving spouse, the assets will go to a charity of their choice without hassle of probate or other administrative matters.

07/30/2007

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