A lot of people have a desire to give something to charitable causes when they are engaged in financial planning, and it is certainly personally rewarding to engage in acts of generosity. But at the same time, you can also gain some tax benefits while you satisfy your philanthropic urges if you plan ahead intelligently with professional guidance.
One legal tool that is sometimes used by individuals who want to gain tax efficiency while giving to charity is the CRUT, or charitable remainder unitrust.
When you create one of these trusts, you name a beneficiary who will receive annuity payments annually. Most people act as their own beneficiary. These payments must equal between 5% and 50% of the trust’s value.
You also name a charitable beneficiary, and this charity must wind up assuming ownership of at least 10% of the original value of the trust.
The tax savings lie in the fact that you are removing these assets from your estate for estate tax purposes. You also get a charitable deduction that is calculated based on some rather complicated IRS rules.
If you place appreciated securities into the trust, you could spread out your capital gains liability over the term of the trust if you have the trust sell these assets.
Charitable remainder unitrusts can be a useful part of many financial plans. To learn more about them, simply take a moment to arrange for a consultation with an experienced Los Gatos, CA estate planning lawyer. He or she will listen as you explain your intentions and make the appropriate recommendations.