Charitable Trusts

Charitable Trusts are irrevocable (i.e., they cannot be modified) and come in many types of packages. Often they are set-up to benefit a charity or charities a person already wishes to benefit, but do it in a manner which provides income to that person for their lifetime (and sometimes the lifetime of their spouse); an income tax deduction for the charitable gift; and, ultimately, a gift to the charity.

This is sometimes done with greatly appreciated assets (real property or stock which has increased in value from the original purchase price) which would cause a large income tax payment if liquidated by the owner. By transferring the assets to the Irrevocable Charitable Trust, a person is not selling or liquidating the assets, and thus they do not have a tax.

With an Irrevocable Charitable Trust, one does give up the income (rents, interest, dividends). However, the trust is set up to pay the person income that the person agrees on. The charity will often sell the property, but they do not have to pay a tax. The person gets a charitable tax deduction based on many factors including life expectancy, the value of the property, and the required interest payments to the person.

Often a person will use the amount of the tax savings to purchase life insurance in an amount and within an Irrevocable Life Insurance Trust, to replace the value of the asset placed in the Irrevocable Charitable Trust, as a benefit to their heirs (usually the children who now will receive the insurance proceeds in place of the asset which is now going to the charity).

A creator of the Irrevocable Charitable Trust wins by not paying income tax; the charity(ies) win(s) by receiving the gift; and the creator's family wins by receiving the life insurance, tax-free, rather than the inherited assets subject to tax.

To view a short video by Long Beach Estate Planning Attorney John T. Anderson on Irrevocable Charitable Trust and the different types of trusts prepared by The Law Office of John T. Anderson, Click Here

Contact the Law Office of John T. Anderson to schedule an appointment to discuss your estate plan and the best way to meet your charitable giving goals.

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