Recently in Charitable Remainder Trusts Category

Federal Charitable Deduction Debate Continues

February 6, 2014,

In December we shared information on proposed changes at the federal level which might limit the tax-saving benefits of charitable deductions. President Obama previously suggested limiting certain charitable tax breaks for high earning individuals. This possible change was just one part of large ideas about re-writing significant portions of the U.S. tax code. Many are hoping to simplify the code in an effort to increase transparency.

The charitable deduction change proposal in particular drew the ire of many when first suggested. Now a large group of sitting U.S. Senators are adding their names to the effort to protect the charitable deduction status quo.

The Senate Letter
Late last month a total of thirty three Senators from both parties sent a letter to the chairman and ranking member of the United States Senate Committee on Finance. The letter reiterated that tax deductions for charitable giving has been a staple of the national tax code for a century. The underscored their support for "protecting the full value and scope of the charitable deduction."

The Senators explained that while the tax code re-write is driven in part by a desire to eliminate "loopholes," the charitable deduction is not a loophole. Instead, the letter refers to the deduction (and charitable donations themselves) as a "lifeline for millions of Americans in need." Research is referenced which argues that any limitation in tax benefit for charitable deductions will correlate into billions in fewer charitable donations annually, ultimately hurting the vulnerable individuals and non-profit organizations that rely on such support.

Referencing the overall reasons for the possible change, the open letter suggested that any federal revenue benefit from changing the deduction would be offset by the consequences. In other words, federal tax revenues may tick up slightly as a result of the change, but the decrease in charitable contributions that result would actually lead to an increase in public spending to make up the difference. At the end of the day, the Senators argue, the change would be a net negative for all involved (including the government).
The letter ended by arguing that "the federal government must affirm its long-standing dedication to encouraging private acts of charity and compassion, especially when our charities and the people they serve are facing so many challenges."

Changes Ahead
These potential changes in tax savings for charitable giving are just one part of many possible tax code edits that could impact New York estate planning. Be sure to keep abreast of any alterations that could affect your or your family. Speak with a qualified NY estate planning lawyer for tailored guidance.

"Donor Advised Funds" Gaining in Popularity

December 13, 2013,

Every day thousands of New York residents give donations of all sizes to popular charities. From dropping a few bucks in a local red bucket during holiday season to making multi-million dollars gifts to universities and everything in between, millions of residents are committed to giving a portion of their wealth to others.

Charitable giving is an important part of many long-term financial plans and estate planning efforts. While giving to charity may seem like a straightforward process--no different than buying a birthday gift--in reality, these donations can be structured in sophisticated ways to benefit both the donor and donee. New Yorkers are advised to speak with legal professionals to learn about their options.

Donor Advised Funds
Recently, Forbes discussed a rise in using one particular method of giving to a charity known as "donor advised funds." The author notes that these funds were colloquially referred to in the past as the "poor man's private foundation." These funds are simply legal vehicles which are created to manage the charitable giving of an entity (or family or individual). The fund has some tax advantages as compared to direct charitable giving but come with less cumbersome administrative details as private foundations. In addition there are fewer distribution rules. Private foundations usually must give out 5% of their assets annually, while donor advised funds have more flexibility on when and how much to give out.

A recent 2013 Donor Advised Fund report released by the National Philanthropic Fund illustrates that use of these tools is rapidly increasing. Specifically, the report explains how in the last year alone, the total assets held in these funds went from just over $38 billion to nearly $45.35 billion. In addition, in the last five years there was an increase of about 40,000 individual fund accounts.

Some speculate that use of these funds skyrocketed in 2012 as a result of uncertainty related to the extent of charitable tax deductions allowable under federal law. Use of these funds is, in essence, a way of "pre-giving" in order to ensure that the deduction will apply. The tax deduction can be taken when the money is moved to the fund, even though it does not have to be given to charity until later. Those tax rule changes did not take effect in 2012, though proposals are still on the table which may curb the overall tax benefit of charitable giving moving forward.

Contact our NY estate planning attorneys today for help weaving charitable giving into your estate plan.

Discriminatory Old University Trust May Be Modified

May 20, 2013,

Upon visiting an estate planning lawyer for the first time and learning about available options, many are surprised at the flexibility of different legal tools involved in the transfer of property. Far from simply doling out assets to specific friends and family members, one has immense control in deciding how those assets are used, when they are received, and what can trigger the loss of those assets. In this way, unique plans can be crafty which account for any number of family dynamics--multiple marriages, concerns about ex-spouses, children with special needs, relatives with poor money management skills, and more.

Similarly, the same flexibility often exists with gifts to charity. Many New Yorkers decide to share part of their assets with favorite non-profit causes. Those gifts can be one-time transfers or they may involve the creation of trusts for use in specific ways. For example, one of the most common charitable trusts involves setting up a scholarship fund to an alma mater to benefit future students. The trust may be funded with various assets, growing over the years and helping countless students.

Those creating these trusts can set many different terms on the gifts. Perhaps you'd like the funds to be used solely for those interested in pursuing nursing or for those who came from a certain disadvantaged background. In most cases, an attorney can help craft the legal arrangement so that your exact wishes are carried out.

The flexibility of trust details is vividly displayed in a story about an old scholarship trust that a university is hoping to modify. As discussed in The Chronicle, Columbia University asked a court to alter the terms of a trust that come with rigid requirements for those who benefit from it. Specifically, students who receive the "Lydia C. Roberts" Graduate Fellowship are required to have been born in Iowa and attended a Iowa undergraduate school. They must also move back to Iowa for at least two years after their graduation. In addition, they cannot pursue law, medicine, dentistry, veterinary surgery, or theology. Most egregiously, the trust--created in 1920--specifies that the recipients of the scholarship must be "from the Caucasian race."

Of course, this is a blatantly discriminatory requirement--a product of its time. That is why the University is seeking to have the race requirement thrown out by the court. While no one can support discrimination in this way, the fact that the university is still forced to seek court approval to modify the terms--nearly 100 years after the trust was created--is a testament to the extreme power of these legal tools. They allow individuals to exert significant control over their assets even a century down the road.

Obama Budget Proposal Calls for Changing Charitable Deduction Details

April 15, 2013,

Last week we discussed the release of President Obama's proposed budget. For estate planning purposes, one of the most obvious red flags in that proposal was a call for yet another edit to the federal estate tax. The President wants to raise the tax rate and lower the exemption level again, altering what was some thought was a more permanent fix agreed upon in the law passed in January.

But the estate tax is not the only aspect of the budget proposal which might affect long-term planning for New York residents. For example, the President is also calling for changes to how charitable contributions implicate tax matters. The possible change is being suggested in an attempt to increase tax revenues to plug budget holes.

The Future of Charitable Deductions
As discussed in a Forbes story, the proposal calls for a reduction in the value of charitable tax deductions. This is an idea that is not new, as the Administration has been calling for it for several years. The change would reduce from 35% to 28% the amount of any charitable deduction that can be taken for tax purposes.

Critics of the idea have been quick to pounce, one noted: "The White House proposal would raise the cost of giving to charity from 60 cents per dollar to 72 cents per dollar. That's a 20 percent increase in what can be called the 'charity tax.'" Some point to studies which indicate that anywhere from $2-$9 billion in fewer charitable contributions will be made each year as a result in the tax deduction shift.

Opponents of this shift also contend that the charitable tax deduction is unlike similar tools which may rightly affect only the affluent. For example, deductions can be taken for home interest mortgage payments. That deduction obviously benefits those with expensive homes more than those with smaller homes. In the same way, the charitable deduction benefits those capable of donating the largest sums more than those who are only able to give a little. But, there is a big difference between using taxes to incentivize the purchase of a large home versus using it to incentivize charitable giving.

As with the estate tax proposal, it is important to remember that many ideas in these budgets are merely opening salvos in negotiations--nothing is certain. But it is important for New York residents to be aware of this possibility and talk with an estate planning lawyer and financial advisers to see if it alters the feasibility of any long-term plan.

Obama Budget Proposal Calls for Changing Charitable Deduction Details

April 15, 2013,

Last week we discussed the release of President Obama's proposed budget. For estate planning purposes, one of the most obvious red flags in that proposal was a call for yet another edit to the federal estate tax. The President wants to raise the tax rate and lower the exemption level again, altering what was some thought was a more permanent fix agreed upon in the law passed in January.

But the estate tax is not the only aspect of the budget proposal which might affect long-term planning for New York residents. For example, the President is also calling for changes to how charitable contributions implicate tax matters. The possible change is being suggested in an attempt to increase tax revenues to plug budget holes.

The Future of Charitable Deductions
As discussed in a Forbes story, the proposal calls for a reduction in the value of charitable tax deductions. This is an idea that is not new, as the Administration has been calling for it for several years. The change would reduce from 35% to 28% the amount of any charitable deduction that can be taken for tax purposes.

Critics of the idea have been quick to pounce, one noted: "The White House proposal would raise the cost of giving to charity from 60 cents per dollar to 72 cents per dollar. That's a 20 percent increase in what can be called the 'charity tax.'" Some point to studies which indicate that anywhere from $2-$9 billion in fewer charitable contributions will be made each year as a result in the tax deduction shift.

Opponents of this shift also contend that the charitable tax deduction is unlike similar tools which may rightly affect only the affluent. For example, deductions can be taken for home interest mortgage payments. That deduction obviously benefits those with expensive homes more than those with smaller homes. In the same way, the charitable deduction benefits those capable of donating the largest sums more than those who are only able to give a little. But, there is a big difference between using taxes to incentivize the purchase of a large home versus using it to incentivize charitable giving.

As with the estate tax proposal, it is important to remember that many ideas in these budgets are merely opening salvos in negotiations--nothing is certain. But it is important for New York residents to be aware of this possibility and talk with an estate planning lawyer and financial advisers to see if it alters the feasibility of any long-term plan.

E-­Planning: Estate Planning in our Digital World

February 6, 2013,

Like it or not, our world is infatuated with technology. Smartphones conduct intercontinental transactions. Friends across the country communicate through instantaneous text messaging, and telephones and tablets close distances and miles through face to face conversations. Because technology plays such an important role in our daily lives, today's estate planning should include an arrangement for organizing and protecting technological and digital assets.

Dividing Up Digital Assets
We have frequently discussed how there are different kinds of digital assets to think about when drafting your estate plan. First, there are your personal digital assets, which would include any email accounts, personal social media accounts and maybe even a personal web site or personal blog. Personal digital assets might also include any photos or documents stored on different websites, like Snapfish, Shutterfly or Dropbox. Information stored in any cloud storage should also be considered personal digital assets.

Along with personal digital assets, there are also financial digital assets, which would include any online banking or financial account information. Many people choose to pay their bills electronically, and even automatically, through their banking system or their bank's website. Others may use a company's website to pay their bills directly through that site, such as paying a monthly credit card bill using the bank's credit card website or using a utility company's online billpay system. Often, paying bills can be a mass of online passwords, dates and accounts. Any of these passwords, or the information contained in any of these accounts, would be considered your financial digital assets.

Finally, there are your business digital assets, which would include anything related to your business itself or business records.

Planning for Digital Assets
So how do you include your digital assets as part of your estate plan in this age of technology?

Organization is the first step. First, you need to begin organizing your digital assets, so that you know what digital accounts and information you have. Begin to take note of all of your different accounts and passwords, and explore a safe, secure and easy solution for storing your passwords, as explained in this Forbes article. Once you have this list, you will also want to update it frequently with new accounts or password changes. In your organization, you may also want to consider which information you'd like family members to be able to access, like family photographs or important family documents, and create a space in cloud storage for multiple family members to access.

After you've organized your accounts and information, you'll likely want to think about how these accounts and information within these accounts should be handled after your own passing. For example, do you want your social media site to live on after your own passing? Or would you rather it be deactivated? After you've thought through how you'd like this information handled after your passing, then you should incorporate instructions regarding this information into your estate planning. It may be wise to ensure that your estate planner, as well as your executor, knows how to access your organized list of online accounts with passwords, and your instructions for the accounts and information. With a bit of forethought, organization and planning, your digital assets can be a well thought out part of your overall estate plan.

Is the IRS Going to Crack Down on Non-Cash Charitable Deductions?

January 28, 2013,

Our estate planning attorneys often help New Yorkers create trusts that are used to pass on assets to charities. When structured properly, gifts to favorited causes is both a great way to give back and a smart financial move to save on taxes and ensure that your long-term inheritance wishes are met.

A Charitable Remainder Trust, for example, is sometimes a prudent estate planning tool. This is particularly useful for those with assets that have significantly appreciated who wish to save on taxes while generating an income stream on something that will eventually go to charity. Essentially, this works by creating a trust that is managed by the charity to which the asset will go. The trustee (the charity) then pays you a portion of the income generated by the trust for so many years or the rest of your life. Upon your passing the charity retains the principal.

These trusts have many benefits. They can take assets out of one's estate for estate tax purposes. Also, income tax deductions can be taken on the fair market value of the interest that remains in the trust. By using appreciated assets, the capital gains tax can also be avoided.

Changing in the Future?
All those considering leaving sums to favorite causes should learn more about the charitable remainder trust option to see if it is a good fit. It is also crucial for individuals to remain aware of any possible changes in the tax code which might alter how charitable donations affect one's tax obligations. With tight budgets on the federal level specifically, policymakers continue to make noise about limiting the tax benefits of giving to these organizations in certain ways.

Part of the problem, as discussed in a recent Accounting Today story is that many taxpayers may mistakenly take income tax deductions that violate current law. Specifically, the story points to a new Treasury Inspector General for Tax Administration report which found that nearly $4 billion of deductions are taken by taxpayers annually for "noncash" charitable contributions erroneously. While it is perfectly legal to take deductions on noncash contributions (like those that are often part of charitable remainder trusts), there are specific reporting requirements that must be met Many taxpayers are apparently skirting over those rules.

All of this may lead to IRS changes to crack down on those taking these deductions and lowering their tax liability without following proper protocols. The report itself identified six recommendations, such as better educating taxpayers and more aggressively enforcing the rules.

It is unclear what specific changes, if any, will be made in the coming year to deal with this issues. But, at the very least, this is a key reminder of the need to have professional help with all of these inheritance and tax issues to ensure that the law is following every step of the way.

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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Unsellable Artwork Donation Saves Millions in Estate Taxes

Estate Planning, Values, & Spirituality

November 21, 2012,

A perennial hot-button topic in estate planning and the creation of inheritance documents involves the passing on of personal values. Of course, the majority of work related to estate plans invovles physical assets: who gets the house, the bank accounts, the stocks, the insurance, the family china, and more. Making these allocations efficiently and saving on taxes are the hallmarks of these preparations. But our team often discusses the other aspects of estate planning, including setting in place material that ensures one leaves a legacy for those they are leaving behind.

This often includes spiritual issues but can just as well include secular notions like hard work, the importance of charity, and other values.

But how are these issues woven into an estate plan?

For one thing, as discussed in a recent article, "spiritual" estate planning is on the rise. This includes making inheritance allocations based on values, such as donating to religious charities or non-profits that support favored causes. In fact, according to one industry group--Charity Navigator--bequests to charities are up 19% this year as opposed to last year. Working with a professional beforehand can be crucial if one wants to leave sums to charity, because the gifts can be structured in various ways to ensure they are of maximum value for all parties.

On the other hand, some may want to incorporate their faith or values more directly into their plans, including trying to influence the actions of heirs with regard to respecting the faith. For example, a recent Wall Street Journal story on the tricky subject of using an estate plan to pass on religious values.

The article explained how there are a wide range of throny legal issues tied up in connecting inheritances with these faith-based requirements. Perhaps the most common heavy-handed approach invovles disinheriting those who are not spiritually devote or who marry outside of the faith. In most cases courts have upheld these requirements so long as they are not written to encourage divorce. Yet, even when legal, those familiar with these situations frequently explain that this often comes with very severe family controversy and confusion. As such, while the intentions are to honor one's religion, the ultimate consequences of this sort of feuding often do little to advance that cause.

In most cases, the best bet is still to share one's faith and values while alive, instead of trying to force the matter via inheritance details in an estate plan.

See Our Related Blog Post:

Passing on Religious Values At Death

Thinking Beyond the Paperwork--Creating an Ethical Will

Forbes Estate Tax Article Catches Fire on Social Media

November 15, 2012,

The popularity of social media sites has led to an outburst in use of the word "viral." "Viral" videos and articles are frequently pointed to as a product of the mega-popularity of sites like Facebook and Twitter. This just refers to stories and movies/clips that spread very quickly from person to person over these channels.

It isn't very often that any story related to estate planning in any way "goes viral." However, this week one story in Forbes on the estate tax was shared, re-tweeted, and "liked" far more than anything else on the topic. In the world of financial planning and long-term legal preparation it is fair to say that this artcle went viral. You can take a look at the story here.

The issue discussed in the article is one that we have frequently touched on--the likely changes to the estate tax starting January 1st. The summary is that while over $5 million can be used on gift and estate tax exemptions per individual this year (double that for married couples), the exemption will likely drop to $1 million on the first of the year. In other words, large chunks of assets can be given without any tax implications right now, but hundreds of thousands (or even millions) might be lost in taxes if that transfer does not occur until 2013.

Importantly, local residents should remember that taking advantage of this opportunity does not automatically mean that one gives up total control of the assets transferred. Various trusts can be used, along with business entities and insurance options to structure the transfer so that total control is not given up while still benefiting from the 2012 favorable tax rates.

Then again, it is impossible to know for sure what the future holds. The Obama administration and the Republican Congress have different ideas about what the gift and estate tax should look like, and they will be negotiating in the coming weeks to perhaps hammer out a deal. Right now though, as the article notes, "The only certainty is that the rest of 2012 is a bargain, and you don't have to die to take advantage of it."

No doubt the pent-up debates and feuding related to the election played a role in the popularity of this estate tax article. Many people are looking for "what now" stories in the aftermath of the election, trying to figure out how laws, rules, and regulations might be changed as a result of President Obama's re-election. That was likely amplified by the fact that this story is very time-sensitive: Act Now Before Its Too Late.

For New Yorkers, the story is simply yet another reminder that now is a perfect time to visit with a legal professional and handle some long-term financial matters. Immense tax savings might be in play by doing this work now instead of waiting. The attorneys at our firm are ready and able to help all local residents with these matters, no matter how big the estate.

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Selling Memorabilia Before Estate Tax Changes

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.

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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."

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Adding Charitable Giving As Part of Your Estate Plan

Charitable Remainder Trust (CRT) as an Estate Planning Tool

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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Charitable Remainder Trust (CRT) as an Estate Planning Tool

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Art and Antique Succession Planning Should Not Be Overlooked

December 5, 2011,

In many cases the most difficult aspect of conducting proper New York estate planning is ensuring that everything necessary is taken into account. Experienced New York estate planning lawyers usually know what options make the most sense in any given situation, but those plans are less effective if certain aspects of a community members' situation are not accounted for within the overall plan. Few individuals forget to discuss assets like bank accounts and real estate. Fewer take the time to conduct less common planning needs, such as ensuring proper business succession details are in place.

Another often overlooked planning area involves art and antique collections. Last week Wealth Management discussed some tips for art succession planning. The authors noted many families have considerable wealth invested in their antique or art collections, but many fail to take much planning care with these items. The articles notes that "Many don't realize the true value of their 'stuff,' thinking that the antique toy collection, family jewelry, or painting passed down by grandpa have no significant worth for which succession planning is essential." Often that idea is misguided. A new Social Welfare Institute study from researchers out of Boston College found that in a few decades inter-generational asset transfers will total $41 trillion, of which roughly 10-13% will be art and antiques.

Considering that sizeable sum, it is incumbent that these objects be properly accounted for in all estate plans. Failure to do so is a serious preparation mistake. Not accounting for these assets may result in significant tax liabilities. Also, without proper evaluation there may be large discrepancies in the asset allocation to heirs--with one child getting much more than another accidentally. Even worse, heirs may dispose of collectibles at rates much less than their actual worth if they do not suspect something is valuable and are not given any guidance on its worth.

To avoid these problems, residents should follow a few basic steps. For one thing, an up-to-date art and antique inventory is essential to start the planning. For more advanced collectors, specially designed software can be purchased to better keep track of these items. Also, all items should have a qualified appraisal and valuation. All purchase and sale records regarding these items should be maintained adequately. When meeting with an estate planning attorney, it is important to keep them aware of the extent and value of these collections. The advisors will be able to explain what strategies are most appropriate. For example, depending on long-term wishes, an irrevocable trust or charitable remainder trust might be logical options.

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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.

See Our Related Blog Posts:

High-Profile Example Highlights Needs for Clarity in the Estate Planning Process

Charitable Remainder Trust (CRT) as an Estate Planning Tool