Maximizing Your Philanthropic Impact with Charitable Trusts

Philanthropy can reach new heights when coupled with astute planning. If you're contemplating a significant contribution to a cause close to your heart, a charitable trust can be a powerful vehicle to meet your philanthropic goals. At Wilson & Wilson Estate Planning and Elder Law LLC, we understand that the decision to establish a charitable trust is not only an expression of generosity but also a critical component of your overall financial strategy.

A charitable trust not only facilitates substantial donations to your chosen charities but also bestows notable tax benefits upon you and your beneficiaries. However, it is important to weigh this option carefully, as charitable trusts are irrevocable, binding you to the commitments spelled out once the trust is active.

For those exploring larger charitable endeavors, our team at Wilson & Wilson Estate Planning and Elder Law LLC is ready to guide you through the intricacies of charitable trusts. Smaller, more casual donations likely do not necessitate the creation of such a trust, but we can advise on a wide range of giving strategies suited to diverse philanthropic objectives.

A charitable remainder trust is the most prevalent form of charitable trust. Wilson & Wilson Estate Planning and Elder Law LLC can help you navigate the establishment of this trust, which includes:

• Transferring your assets into the trust
• Assigning a qualified charity to act as trustee and asset manager
• Determining an income stream for yourself or a designated beneficiary for a specified term or the duration of your life
• Ensuring the remaining assets are endowed to the charity upon conclusion of the specified payment period or your passing

Aligning your philanthropic aspirations with your financial planning can yield multiple tax benefits.

When you contribute to a charitable trust, an income tax deduction is available, which can be extended over a span of five years. Calculating this deduction involves assessing the gift's worth after subtracting potential income derived from the property—this necessitates precision and knowledge, which our team can provide.

Assets transferred to your chosen charity through the trust are excluded from your estate, freeing them from federal estate tax considerations. Remember, estate tax impacts only sizable estates, and our advisors at Wilson & Wilson can help determine how this applies to you.

Appreciating assets are often subject to capital gains tax when sold. By channeling these assets through a charitable trust, you enable the charity to sell and repurpose the proceeds without incurring capital gains tax, directly benefiting you and your philanthropic ambitions.

For illustration, consider the case of Toni who possesses stock now valued at $300,000 which cost just $20,000 two decades ago. By creating a charitable trust with Environmental Action as her charity of choice, and using the stock to fund her trust, the organization sells the stock tax-free and diversifies the funds. Toni receives a steady stream of income from this amount for life, without the burden of capital gains tax.

In determining your income from a charitable remainder trust, we can employ various methods:

One option involves fixed annual payments—ensuring consistency in your income despite fluctuating trust earnings. However, post-establishment of the trust, these payments are unchangeable.

Alternatively, your payments can be defined as a percentage of the trust's annually appraised value, providing flexibility to adapt to inflation and market shifts while maintaining compliance with IRS regulations.

Felix serves as a prime example. His stock vaulted from an initial $400,000 investment to $1.6 million. Capital gains tax would have significantly reduced his earnings had he sold outright. Instead, by establishing a charitable remainder trust with his university as the beneficiary, the school sold his stock tax-free, generating sizeable, and potentially increasing, annual returns for Felix.

To embark on your path towards philanthropy with strategic financial advantages, contact Wilson & Wilson Estate Planning and Elder Law LLC at (708) 482-7090 for a Consultation.