Charitable Remainder Trusts & Your Estate

There is no denying the fact that estate planning has a very intense financial side to it. This is not necessarily because you want to try to find a way to squeeze every penny out of a dollar, but because you want to keep what you have earned as you pass it along to your loved ones after your death.

When you examine the paradigm objectively the tax code seems to proceed from the standpoint that achieving the American dream through hard work and smart investing is going to come with a significant penalty. So you really have no choice but to take estate planning seriously if you don’t want to lose a very significant portion of your legacy in the transfer.

The good news is that the creative inspiration that the tax laws provide can sometimes result in the implementation of strategies that are beneficial to charitable organizations. One estate planning tool that can be a win-win across the board is the charitable remainder trust.

With these vehicles you fund the trust, and if you can, it is best to use appreciated securities because this contribution and future earnings will not be subject to capital gains taxes. You appoint a trustee which is usually going to be a bank or trust company. However, you may be able to appoint yourself if you want to, and you as the donor can also be the beneficiary.

Assuming you are the beneficiary, you must receive income of at least 5% and no more than 50% of the value of the trust’s assets annually. The charity of your choice ultimately receives the remainder of the trust after you pass away or at the end of the trust term, and this amount must be at least 10% of the original contribution.

In addition to the capital gains tax advantage, you reduce the taxable value of your estate by the value of the contribution into the trust. Plus the remainder value constitutes a charitable deduction for the donor upon the creation of the trust.

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Anthony Moccia

Anthony Moccia is an attorney and partner at The Law Offices of Kobrick & Moccia.His practice focuses on estate planning and elder law.He is a member of the New York State and Nassau County Bar Associations.He frequently presents free seminars on wills & living trusts to area residents and his seminars are said to be “informative, entertaining & easy to understand.”

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