What Are the Tax Benefits of Charitable Trusts?   Americans give freely to support the causes they value, from churches, education, and the arts to medical research. Fortunately, current tax laws encourage and even reward philanthropy. Beyond the basic tax deductions for charitable giving, setting up one or both of the following types of trusts could provide financial advantages in addition to the personal satisfaction that comes from giving.   Charitable Remainder Trust   When money, securities, property, or other assets are placed in a properly structured charitable remainder trust, the grantor or the grantor's beneficiaries receive receive payment of a specified amount at least annually. When the trust expires, the designated charity receives the assets that remain.   For the grantor, there are a few potential tax benefits: (1) Assets placed in the trust may qualify for an income tax deduction on the estimated present value of the remainder interest that will eventually go to charity. (2) At death, trust assets are not subject to estate taxes because they are no longer part of the grantor’s taxable estate. (3) Any appreciated assets in the trust are also exempt from current capital gains tax.    Charitable Lead Trust   A charitable lead trust is an estate conservation tool that uses the grantor’s assets to provide income to a charity. At the end of the trust period, the remaining assets are paid to the grantor or the grantor's beneficiaries. This type of trust could potentially reduce the estate tax due upon death, most notably on highly appreciated assets, because they are not subject to current capital gains tax.   Keep in mind that donations to both types of charitable trusts are irrevocable. This means that the assets cannot be withdrawn once the trust is formed. Also bear in mind that not all charitable organizations are able to use all possible gifts. It is prudent to check first. The type of organization selected can also affect the tax benefits that may be received.   When structured properly, these tools could possibly be used to benefit the charities of your choice and also help to reduce your tax obligations at the same time.   The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.   The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.    This material was written and prepared by Emerald. © 2010 Emerald

This website may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting, or tax advice. You may wish to consult an attorney, tax advisor, or accountant regarding your specific situation. No representations are made as to the accuracy of the information contained herein or any information contained in any link provided herein.

 

 

 

Important Consumer Information:

This site is for informational purposes only and is not intended to be a solicitation or

offering of any security and;

1. Representatives of a broker-dealer ("BD") or investment advisor ("IA") may

only conduct business in a state if the representatives and the BD or IA they

represent (a) satisfy the qualification requirements of, and are approved to do

business by, the state; or (b) are excluded or exempted from the state's licensure

requirements.

2. Representatives of a BD or IA are deemed to conduct business in a state to the

extent that they provide individualized responses to investor inquiries that

involve (a) effecting, or attempting to effect, transactions in securities; or (b)

rendering personalized investment advice for compensation.