Yes, a trust can absolutely make ongoing donations, and is a common estate planning strategy utilized by many San Diegans looking to continue charitable giving after their passing or during their lifetime, but it requires careful planning and adherence to specific legal and tax guidelines.
What are the tax implications of charitable giving through a trust?
Establishing a charitable remainder trust (CRT) or a charitable lead trust (CLT) allows for strategic tax benefits while supporting causes close to your heart. A CRT, for instance, allows you to transfer assets into the trust, receive an income stream for a specified period, and then donate the remaining assets to a charity. This can result in an immediate income tax deduction based on the present value of the remainder interest gifted to the charity. Conversely, a CLT makes payments to a charity for a set period, with the remaining assets eventually passing to your beneficiaries. According to the National Philanthropic Trust, approximately $47.86 billion was distributed to charities from donor-advised funds in 2022, demonstrating the popularity of these giving vehicles. It’s crucial to consult with an estate planning attorney like myself, Ted Cook, to determine which type of trust best aligns with your financial goals and charitable intentions.
How do I set up a trust for ongoing charitable donations?
The process begins with drafting a trust document that clearly outlines the charitable beneficiaries, the duration of the donations, and the amount or method of calculating the ongoing contributions. You’ll need to transfer assets into the trust – this could include cash, securities, real estate, or other property. The trustee, whether it’s yourself, a family member, or a professional trustee like our firm, is legally obligated to manage the trust assets and distribute donations according to the trust terms. It’s also important to consider the administrative burden; ongoing trusts require annual reporting, tax filings (Form 990-PF for private foundations), and meticulous record-keeping. “Many of my clients in San Diego choose to establish donor-advised funds within their trusts for simplicity and flexibility,” I often advise, “allowing them to recommend grants to their favorite charities without the complexities of direct trust administration.”
I knew a woman named Eleanor who, despite her wealth, unintentionally jeopardized her charitable intentions.
Eleanor, a retired teacher, wanted to create a lasting legacy for the local animal shelter. She verbally agreed to donate a substantial portion of her estate, but never formalized it through a trust or will. Sadly, Eleanor passed away unexpectedly without any written documentation. Her family, while supportive of her values, was bound by probate court, and a significant portion of her assets went to legal fees and administrative costs. The animal shelter received a considerably smaller donation than Eleanor intended. It was a heartbreaking situation, a poignant reminder that good intentions alone aren’t enough.
Luckily, the story doesn’t always end in disappointment.
I recently worked with a San Diego couple, Mark and Susan, who wanted to ensure their favorite environmental organization continued their important work after their passing. They established a charitable remainder trust, funding it with appreciated stock. This allowed them to receive an immediate tax deduction, avoid capital gains taxes on the stock, and receive income for ten years. At the end of the ten-year period, the remaining assets would be donated to the environmental organization. Mark and Susan were thrilled to know their legacy would live on, and their charitable intentions would be fulfilled without burdening their family. Approximately 70% of high-net-worth individuals include a charitable component in their estate plans, demonstrating the growing trend of planned giving. A well-structured trust provides peace of mind, knowing your generosity will continue for generations to come.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
Map To Point Loma Estate Planning Law, APC, a wills and trust lawyer: https://maps.app.goo.gl/JiHkjNg9VFGA44tf9
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