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Question:


What are some options I have for gifting my favorite charitable institutions long term?
-DaisyScott


Answer:


This is a complicated subject best dealt with by lawyers, accountants and/or financial planners, but if you’re thinking about the long term and have a substantial amount that you’d like to divide among various organizations, a charitable remainder trust might be suitable. This type of vehicle, which has been growing in popularity, can help donors claim an income tax deduction and escape various other taxes down the road, while also providing regular income for themselves. A charitable remainder trust works like this: Assets are placed in a trust with charities of the donor’s choice named as beneficiaries that will receive whatever assets are in the trust when he or she dies. Meanwhile, a fixed, predetermined percentage of the value of the assets is distributed to recipients not associated with charities – typically the donor and the donor’s spouse – each year. There s some flexibility on the timing of these distributions, but they must be at least 5 percent a year.
 
After the donor and/or other beneficiaries of these payments die, what’s left in the trust – the remainder, hence the name – goes to the designated charities, which by the way, the trustee, who is often the donor, is free to change over the years. The advantage of such a trust is that the IRS considers the assets not to be part of the donor’s estate, so there are no estate taxes. There are no taxes on capital gains, either, which is why tax planners encourage donors to place assets with large unrealized gains in the trusts, such as real estate or stock bought many years ago. Donors to a charitable remainder trust also receive an income tax deduction based on the market value of the assets they contribute. Because some of the value of the trust will be distributed as income to recipients other than charities, however, the amount that can be deducted is likely to be less than for a straightforward donation. That’s yet another reason to seek professional advice.
-Conrad de Aenlle



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