Our Torrance Lawyers Will Assist in Charitable Planning
Most people find great satisfaction in helping others in need. Giving to charity will not only benefit others but will also decrease the size of the donor's probate estate, reducing the amount of estate taxes payable upon death. Whether you make a lifetime donation or a charitable bequest in a will or trust, you can accomplish the dual goals of helping others in need and assisting your family upon your death.
For those with significant assets, both the charity and the estate will benefit by setting up a charitable remainder trust. The chosen charity must be qualified, meaning it has tax-exempt status from the IRS. The person who donates the money is the donor or settlor of the trust and the trustee will be the charity itself.
The trustee will manage and invest the property constituting the principle of the charitable remainder trust, producing income for the donor during his or her lifetime. After the donor's death, the trustee will distribute the principle to the charity tax-free, and the funds will not be part of the donor's taxable estate.
The donor of a charitable remainder trust is also entitled to an income tax deduction for the amount invested in the trust less any income paid back, spread out over five years. Additionally, the principle of the trust will not be subject to capital gains taxes for either the donor or the charity.
Charitable Trusts Produce Income Back to the Donor
Donors receive income from a charitable remainder trust in one of two ways. They can choose to receive money by scheduling a fixed annuity or a percentage of trust assets. A fixed annuity, as the name states, is a fixed amount a donor receives back each year no matter what the investments are producing. Choosing how much fixed income to take back will depend on multiple factors, including the amount of money in the principle and the amount of income the donor needs. The higher the payments back, the lower income tax deduction will be and it has the potential to reduce the principle in the trust.
Receiving a percentage of trust assets is another option for donors. As the trust's productivity may vary from year to year, it is a good option to ensure the principle remains intact. The IRS sets a minimum percentage for donors at 5 percent or greater.
You Need an Attorney for Charitable Planning
An experienced South Bay estate planning attorney at the Law Offices of James C. Shields understands that many people wish to leave money to charity to assist others in need while also helping their own family avoid estate taxes after their death.
Contact our Torrance estate planning attorneys to explore your charitable planning options.
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