Modern Christmas is about a lot of things and yet giving has remained a core value of the holiday. When we gather with friends and family, we give our time. When we awaken on Christmas morning, we give gifts to our loved ones. When we settle around the table for dinner, we give thanks. And so, given the occasion, we want to take the opportunity to address giving as a part of your estate plan.
Spread the Joy with a Charitable Trust
If there were ever an estate planning tool designed to spread the giving spirit it would be a charitable trust. Assets invested in a charitable trust are set up to benefit you, your beneficiaries, and one or more charitable organizations—all at the same time. Here’s how.
The Two Types of Charitable Trusts
Charitable trusts come in two types: charitable remainder trusts and charitable lead trusts. Each provides different benefits but shares the characteristic of being irrevocable. This means that assets placed in this kind of trust cannot be retrieved. Irrevocable trusts offer powerful benefits at the expense of being subject to stringent regulations.
Charitable Remainder Trusts
A charitable remainder trust benefits a charitable organization of your choosing while at once providing you tax benefits and a lifetime income.
Highly appreciated stock invested in a charitable remainder trust, for instance, is not subject to capital gains tax. Nor is it counted as a part of your estate for estate tax purposes. Assets placed in an irrevocable trust no longer belong to you and thus present no tax liability.
Whatever you place in a charitable remainder trust is sold and re-invested in income-producing assets. This income is paid to you until you die after which the remainder goes to your chosen charitable organization(s).
Charitable Lead Trusts
This type of trust might be characterized as the inverse of a charitable remainder trust. Assets invested in a charitable lead trust are sold, re-invested, and the income produced is donated to a charitable organization for a set period. Whenever the determined time frame is up, the balance of the trust is paid out to a noncharitable beneficiary.
You might use a charitable lead trust to leave a legacy of giving without burdening beneficiaries with an inheritance they don’t yet need. What’s more, just like a charitable remainder trust, this type of trust provides income and capital gains tax benefits.
With Christmas fast approaching and a new year on the horizon, now is a great time to think about how charitable giving may benefit all of your estate, your loved ones, and those causes you hold dear.
To learn more about charitable trusts or other estate planning strategies you can use to care for your family and tend to your legacy, do not hesitate to contact the Polaris Law Group either by calling or using the contact form on our webpage.
