Results tagged “new york charitable remainder trust” from New York Estate Planning Lawyer Blog

Donor-Advised Funds for Charitable Giving

December 18, 2012,

The holiday season is a popular time for charitable giving. It is helpful for those considering gifts--particular sizeable donations--to properly think through all of the tax and legal implications. There are smart ways to make contributions and clumsy ways. As always, an estate planning lawyer or similar professional can explain how any such decision is best carried out.

For example, the Wall Street Journal reported recently on the rise of "donor-advised" funds. The use of these tools is likely spurred by two tax uncertainties in the upcoming year. Will charitable deductions on taxes be limited in the future, counseling toward a large gift this year? Will income tax rates increase next year, counseling toward using the deduction next year instead of this year? It is a somewhat tricky problem, as no one knows for sure what lawmakers might decide.

That is where these donor-advised funds come into play. They are accounts managed by national charities and foundations. The basic idea is that a donor can give the gift this year--locking in a tax deduction--while waiting to actual disperse the funds to the charities as they see fit over time. The funds grow tax-free throughout this period.

Interestingly, the National Philanthropic Trust and other sources provides data on the sharp rise in use of these funds. Many of the largest charitable entities increased anywhere from 60% to 80% in use of these funds this year as compared to last year. And that is on top of the fact that last year saw a 10-15% rise in use from 2010.

Most accounts can be opened with $5,000--large sums are not needed. The donations can then be given out in small increments of as little as $50. In other words, there is a lot of flexibility for those with assets of all sizes. When using these tools however, it is important to have tailored advice on the best manner in which to give. For example, it might make sense to donate stock that has appreciated, instead of donating the profit after sale of the stock. By selling the stock directly some capital gains can be saved and a larger charitable deduction can be taken.

Of course, these donor-advised funds are just one of many ways that might be appropriate to give to charities smartly. Various trusts and other legal arrangements are available to ensure your gift is maximized. No matter what the case, though, it is important to act quickly, as the future remains uncertain and it is helpful to lock in current rates as soon as possible.

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The Sociology of Giving Back in Inheritance Planning

January 12, 2012,

On Tuesday we discussed a few ways that our New York estate planning lawyers incorporate charitable giving into strategies to reduce taxes during inheritance planning. Of course, for most local families who want to give some of their wealth away, the motivation is not just to save tax money for themselves or their heirs in the process. Instead, as an interesting new article discussing the matter in Financial Planning noted, there are many emotional connections behind giving back. A mix of empathy, gratitude, and the desire to make an impact for others are often behind philanthropic efforts included in New York estate plans.

One sociologist suggests that empathy is at the root of most charitable giving--the ability to actually experience the struggles faced by others. Many donors providing support to certain charitable causes see much of themselves, their children, parents, or other family members in those that they are helping. The ability to care for others as an extension of ourselves is one of the most valued human abilities, and many of our clients share that attribute, wanting to incorporate it as part of their long-term planning.

The time that many are conducting estate planning is usually a time when they are winding down their efforts to collect more wealth. As a result it is a natural opportunity to consider other objectives, goals, and wishes. A sociologist familiar with this time in life explained how residents "then face the question of how to live next and impart to their children a moral biography. Most will want to give back because giving is a natural source of happiness." When reflecting on how far one has come in life, many consider that they themselves were helped along the way. Giving aid to others (financial and otherwise) is a way of returning the help one personally received at a time when it was needed most.

Another consideration is the effect that particularly large inheritances might have on offspring. Researchers have found that many wealthy individuals fear the effect of a large inheritance on their children. Increased charitable giving seems like an appropriate action in those situations.

At the end of the day, providing help to others is perhaps the single most important way that any of us can shape the world around us. At the same time it is a way of meeting our own needs as well. The Greek word from which we derive philanthropy, "philia," actually means "mutual nourishment."

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Adding Charitable Giving As Part of Your Estate Plan

January 10, 2012,

New York estate planning is primarily concerned with passing on assets to family members and saving taxes in the process. While the inheritance planning portion of the effort may seem straightforward, there are many considerations involved. It is much more than simply saying that John gets the house and Jane gets the car. When done right, the process should include consideration of many issues like what legacy one wishes to leave, how they'd like their children to remember them, and what values they wish to pass on. For many families this process involves leaving some assets to a charity of choice.

A story in this weekend's Western Farm Press emphasized how charitable giving is an important part of estate planning for many families. It was a follow up to an article that had been recently written about the value that farm families have in visiting an estate planning attorney to keep a farm alive in the future. The latest story noted that including valued charities in one's inheritance is a helpful way do some good while saving on taxes in the process.

It was explained how using these charitable donations in combination with estate tax exemptions can go a long way to pass along assets to desired family, friends, and causes without losing it to the government. Many assets that have appreciated significantly in value can be given to charity which may allow them to avoid being eaten up by capital gains taxes. Also, retirement savings, like IRAs, can be included in estate planning efforts to benefit charity. This often helps to reduce or eliminate tax liabilities. When done properly it can increase the funds that are going to heirs while also increasing the amount provided to a charity.

Perhaps the most common way that our attorneys work with clients on charitable giving is via use of charitable remainder trusts. These legal entities are unique tax-exempt irrevocable trusts that often provide the best avenue to transfer cash or assets to a charity of choice. Upon the trust's creation, assets are transferred into it. The one who created the trust is then allowed to receive income from that trust (either for life or a set number of years). Whatever is remaining at the end of that income collection period is then given to the named charitable cause. In fact, in certain circumstances the trust income may be paid over the life of one's spouse or children. There are limits on payout rates and other tax implications, and so it is always important to have experienced legal advice to explain whether or not one of these devices in useful in your specific situation.

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Planning Required to Make Smart Charitable Contributions

October 5, 2011,

Our New York estate planning attorneys have spent decades helping local families make long-term preparations for their estate. Legal and tax rules must be accounted for in all significant property transactions, even when one is giving money away. As a Wall Street Journal story this weekend explained, it can actually be quite challenging to properly plan for a charitable gift. If professionals are consulted, residents can often leave money in ways that provide significant tax breaks, particularly if they account for the ever-changing estate tax rules.

When conducting New York inheritance planning, many community members indicate an interest in leaving assets to support a favorite cause, like helping the less fortunate or nursing the arts. When the gift is made at death it is known as a "bequest." A bequest lowers the money subject to estate taxes; however, donors cannot enjoy an income tax deduction for the gift if it is made at the time of death. If a gift is given while the individual is alive then an income tax deduction can be taken. Yet, lifetime charitable gifts are irrevocable and an individual cannot change their mind about the donation as they might be able to if they were planning a bequest.

Of course, many residents leave funds to charity for reasons beyond taxes, but there is no reason why community members should not take stock of the tax consequences when planning to give money to these causes. In 2010, the year when there was no federal estate tax, charitable bequests increased by nearly 17%. That year donations totaled just shy of $23 billion nationwide according to information published by the Giving USA Foundation.

The New York estate planners at our firm know that there are many ways provide money to favorite non-profit causes. For example, part or all of an individual retirement account can be given to charity by designating it as a beneficiary. In addition, it is often helpful to use special legal tools like charitable remainder trusts to support a cause after death while generating an income stream while still alive. They are helpful for those who are eager to help the charity but have concerns about maintaining cash flow. The basic idea behind these trusts is that assets are set aside in trust with income paid to the donor (or family) for a set number of years or until the donor dies. At that point the remaining money goes to the designated charity. When using these trusts the donor may also be able to receive a tax deduction up front for the expected donation.

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