CHARITABLE GIVING STRATEGIES
"This section contains additional data that supplements basic information contained in
Your Money Matters
and should be used in conjunction with the material contained in Your Money Matters."
Charitable Remainder Trust
If you are charitably inclined, charitable trusts offer a variety of advantages both during your lifetime and when your estate is eventually settled. When you set up a charitable remainder trust, you place the property you want to donate into an irrevocable trust. The income from this trust is distributed to anyone you choose usually yourself and yourspouse, but sometimes children are included. Depending upon what you want,this income is usually distributed to you or your beneficiaries for life.Once the last income recipient dies, the property in the trust is givento a charity.
A number of benefits are provided by charitable remainder trusts. First, you receive a partial income tax deduction for your donation based on the value of the property that the charity will ultimately receive. This property is also removed from your estate so that estate taxes will not be paid on it upon your death. Finally, of course, you receive a lifetime income in return for your donation. Not a bad deal. While charitable remainder trusts usually require a contribution of at least $50,000, many charitable organizations have programs that provide similar advantages for persons who prefer to donate less money as little as $5,000. These programs are called pooled income funds and charitable gift annuities .
Charitable Lead Trust
In many respects a charitable lead trust operates in the opposite way from a charitable remainder trust. The income provided by property that is placed into a charitable lead trust is given to a qualified charity (rather than the donor). But a charitable lead also includes the provision that upon the death of the donor, the property is to be given to specified noncharitable beneficiaries typically, family members. From the time the trust begins operation, the value of the property in the trust is no longer included in your taxable estate, but there is no immediate tax deduction granted to you upon opening the trust. Therefore, a charitable lead trust can provide significant estate tax savings while keeping the property in the family. The price you pay, of course, is that you give up the income generated by the property for the rest ofyour life.