Recently in Charitable Remainder Trust Category

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.

See Our Related Blog Posts:

Unsellable Artwork Donation Saves Millions in Estate Taxes

Charitable Giving Tips: What to Consider

November 2, 2012,

Charitable giving is a critical part of many estate plans and not just for the super-wealthy. Many New Yorkers have worked hard their entire lives to ensure the financial well-being of their families. Besides passing on assets to loved ones, many local residents consider it an incredibly important testament to their values to share some wealth with charitable organziations that they hold dear. That does not have to mean donating enough money to have your name placed on the side of a new building. Instead, it often simply means providing a concrete indication of one's commitment to having a goal beyond oneself and the merit of giving back to others.

However, it is important to be educated about some pitfalls in charitable giving and the ways to make the donations prudently. For example, a brief article from The Hill this month provided a helpful "Do and Don't" list with regard to charitable donations. The issues shared in the story are worthwhile for donations made at any point in the year as well as long-term gifts like those crafted into estate plans. The underlying theme of the article is a basic checklist of tips to ensure the money you give actually acts to help the individuals that you hope it will and will be used in the manner you desire.

The story points to a list of "charity watchdog" groups that offer comprehensive analysis and recommendations to ensure that your donation is used as efficiently as possible. Those websites include: Charity Navigator, GuideStar, CharityWatch and The American Institute of Philanthropy.

The most important thing to understand about a potential charitable organization is how they are spending the money they receive. Charitable donors are entitled to basic information about the budgets of these organizations. The watchdog groups suggest that a general rule of thumb is that these non-profits should spend no more than 35 cents on fundraising for evey dollar taken in to actually provide the help they claim. Asking for that information is a critical first step. It also might be helpful to learn about the leadership organization. What is their vision and where do they plan on going in the future?

Money is a bit tighter for everyone these days and that includes charities. In these belt-tightening times helping others is often more important than ever. But at the same time it is of utmost importance to ensure that donations are used as efficiently as possible. Taking the time to ensure the organizations to which you are providing money are doing the best they can to use those funds wisely is a prudent way to make choices about both short and long-term gift giving.

See Our Related Blog Posts:

Improvement in the IRS Art Value Appraisal Service

Estate Planning Factors Beyond Taxes

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."

See Our Related Blog Posts:

Adding Charitable Giving As Part of Your Estate Plan

Charitable Remainder Trust (CRT) as an Estate Planning Tool

Charitable Remainder Trust (CRT) as an Estate Planning Tool

September 14, 2010,

Historically, charitable giving rises about one-third as fast as the stock market. While the stock market gains of 2010 remain slight (Dow is up 1.13% at the time of this writing), New York residents may still want to consider using the charitable remainder trust (CRT) in their estate planning.

This trust works well for those who:
• hold highly appreciated assets
• desire an income stream off of the assets
• want to donate to charity; and
• achieve tax benefits.

Because the CRT is irrevocable, this planning should be done with an experienced estate planning attorney.

How the CRT Works, in brief
Your assets and/or property are transferred to a CRT whereby your charity administers the trust. The charity serves as trustee, managing or investing your assets.
The charity pays you and/or your beneficiary a portion of the income generated by the trust for a certain number of years, or for the remainder of your life. At your death or the end of the set period, your charity receives the trust's remaining principal.

CRT Tax Benefits
By establishing a CRT, you avoid capital gains tax on the donated assets, because the charity is exempt from taxes. An income tax deduction may also be declared on the fair market value of the remainder interest in the trust. Additional savings are effected by removing these assets from your estate, reducing subsequent estate taxes.

Two Types of CRTs:
With the charitable remainder unitrust, the percentage rate on the value of the assets determines your and/or beneficiaries' annual payment. If the trust value changes, the payment to you and/or your beneficiaries changes.
A charitable remainder annuity trust is set up to pay a fixed rate of return based on the initial valuation at the time the property is placed in the trust. The trust's assets are never re-valued, so if the assets of the trust increase, the income portion does not change.


Conclusion
The remaining principal of the trust reverts to the charity of choice upon death and/or the end of the set term. (The trust life may be based on the life expectancy of the income beneficiary). Because some grantors may object to the loss of principal, they may purchase life insurance to replace the principal assets. An estate planning attorney then uses an Irrevocable Life Insurance Trust in conjunction with the CRT to assure the trust's value is also distributed to the income beneficiaries.

Online resources to charitable giving:
The National Center for Family Philanthropy

This website promotes philanthropic values, vision and excellence across generations of donors.

The American Institute of Philanthropy

This website rates and grades public charities to help donors make informed decisions.

The Foundation Center

This website provides news on charitable activities and links to private and public foundation websites.