Burbank Charitable Trust Attorney
Charitable Trusts or Legacy Trusts… What are they?
“Failing to plan is planning to FAIL.” - Ben Franklin
What is a Charitable Remainder Trust?
A Charitable Remainder Trust (CRT) is a special kind of Irrevocable Trust in which property or monetary funds will eventually be donated to charity, but the grantor or donor will either use the property or receive income from the funds while they are living. LA LAW Center has knowledgeable Charitable Trust Attorneys to help and your tax consultation with this type of strategic estate planning.
Who Should Consider a Charitable Trust?
Who is a candidate to take advantage of a CRT? Anyone who has assets that if sold would result in a large exposure to capital gains tax, and wishes to create an income stream from these assets for their use until they die. At that time, the remaining assets in the CRT will go to the charity(ies) of their choice, or perhaps to a family foundation that may be created at that time.
What Are the Different Types of Charitable Trusts?
There are a few different kinds of charitable remainder trusts discussed below:
1. Charitable Remainder Unitrust
A Charitable Remainder Unitrust, or CRUT, can be differentiated from others kind of these trust in two ways: 1.) A fixed amount of the trusts value will be distributed to the donor either annually or on a more recurrent basis, then 2.) At the end of the grantor's life (or perhaps that of another) or after a certain amount of time, the remaining balance is given to charity. The trustee will establish the fair market value of the CRUT's assets, while the annual withdrawal percentage is fixed between 5% and 50% of the fair market value of the assets. According to IRS formulas, it is planned that the CRUT will distribute at least 10% of the fair market value of the assets contributed to the CRUT after the death of the grantor.
(Information gathered from http://en.wikipedia.org/wiki/Charitable_remainder_unitrust)
2. Charitable Remainder Annuity Trust
A Charitable Remainder Annuity Trust, or CRAT, provides a specific dollar amount to be paid out, either annually or on a more recurrent basis until the end of the grantor's life or a certain amount of time (not exceeding twenty years). Unlike the CRUT, the amount paid does not change based on the value of the assets; instead, the same amount is paid out until the death of the grantor or the expiration of the trust.
3. Charitable Lead Trust
A Charitable Lead Trust, or CLT, is the opposite of a CRUT or CRAT; it provides a fixed amount of funds (or a percentage of the trust assets) to a charity for a specified amount of years and the remaining assets will eventually be distributed to the family members or beneficiaries of the grantor when the grantor passes. A CLT is usually established to set up lifetime giving to a chosen charity or non-profit organization or for other estate planning reasons.
There are several benefits in considering establishing a CRT. Obviously, the savings of having to pay capital gains tax on the selling of real property or appreciated stock is an attractive consideration. Also, since the IRS expects that 10% of the CRT assets will ultimately go to a charity, you are allowed a current deduction for a charitable contribution off of you income taxes. This amount will be the estimated present value of the ultimate gift to charity, and it can be quite sizable, having to be carried over for several years.
The income stream mentioned can go over the grantor(s) life/lives, and that of someone else such as a child or relative. The only issue is that the calculation on what income stream you may take will be based on the youngest person's life, which means that the monthly or annual amount available in an income stream to the grantor will be reduced more than if the younger person was not included.
The only potential con is that if you have hungry heirs expecting an inheritance, they will not receive anything. However, this can be mitigated by creating an Irrevocable Life Insurance Trust, having the CRT pay the premiums, and then having the proceeds of the insurance go to the intended beneficiaries in lieu of the CRT assets.
LA Law Center's estate planning attorneys can provide an experienced and knowledgeable consultation regarding any charitable trust needs that you may have. After a thorough review of your needs, we will structure a personalized comprehensive plan to allow you protection and control over your charitable assets.
Best Advice-Seek Experienced Legal Counsel!
The LA Law Asset Protection/Estate Planning Attorneys have the knowledge to make this as easy as possible and ready to help you understand your options. Our asset protection lawyers prepare custom asset strategies that address you and your family's particular circumstances and long term goals.
We are proud to be a part of the complete solution to your estate and charity gifting issues, not just the lawyers that create the legal documents. We understand the issues surrounding the asset protection and what it takes legally to meet your needs and goals, while giving you the peace of mind that your estate is at a greater level of privacy from public research.
Please contact our office for a free initial consultation with Joseph McHugh, a California Asset Protection / Estate Planning Attorney.
After a thorough review of the best strategies for your estate plan and our fees for the scope of work, we will structure a comprehensive estate plan created specifically to protect your assets and allow you to stay in control of your life & your money, while ensuring to make is much more difficult for stranger to know what is in your estate.
Our Law Office is located in Southern California; however, we serve many clients throughout the state and love an occasional road trip to help all of our clients, their family and friends. We also are happy to serve out of state clients with family or assets in California.
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