Changes in your Charitable Intent

Make your charitable intent known while you are still alive to  support a valued cause or reduce taxes

Increasingly, donors of charitable gifts are specifying the exact use to be made of the gift and want to assure their philanthropic dollars are going to the right cause. However, it is important to understand how a donor’s wishes might be interpreted as times progresses – and long after the benefactor has passed away.

Donations to charities have a dual purpose: Reducing taxes and supporting valued causes. For those looking to consider both reasons, a charitable trust is a perfect way to accomplish this goal. The justification for the different treatment of charitable trusts is to encourage charitable giving. However, for those with considerable estates, this could mean hundreds of thousands of dollars in tax savings as well. Charitable trusts can have the following benefits:

  • Preserve the value of highly appreciated assets
  • Provide income tax deductions
  • Reduce estate and gift taxes
  • Create income from non-income-producing properties

Types of Financial Instruments

There are several rules that usually apply to the formation and governance of a charitable trust and several types of instruments to consider. A few examples include:

A Charitable Remainder Trust (CRT) gives an appreciated property or security to a charitable cause while retaining an interest income for you and your family. It also enables you to give more while allowing you to reduce potential estate tax, eliminate capital gains and claim an income tax eduction. CRTs are irrevocable, meaning there are two sets of beneficiaries: income beneficiaries (you and your family) and the charity itself.

The type of program you choose depends on your priorities regarding wealth preservation and estate planning, how you want the charity to receive the gift, and even the types of assets you would like to donate.

CLTs are another type of trust similar to the CRT. However, with a CLT,the charity collects the income interest for a set time or for a person’s lifetime, with individuals receiving the residual assets at the end of the trust term period.

A donor-advised fund can be used in combination with split-interest trusts, such as CLTs and CRTs, to assist several charities simultaneously. It also provides the flexibility for donors to be cost-efficient if their charitable giving priorities shift, advise how and when the assets are invested, and determine the timing and amount of the distributions to the recipient charities.

We're here to help

Working with your accountant and estate planning attorney, Munn & Morris Financial Advisors can help you make the crucial decisions needed to assure your charitable donations match your intent while supporting a cost-effective tax strategy.

Contact us today for help regarding charity assisted accounts, pooled income funds, charity advised accounts, or in setting up any type of trust or tax-sheltered instrument.

While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

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