A charitable donation is a gift of cash or property to a non-profit organization
Many Austin estate planning clients make charitable gifts through estate planning. Charitable donations can offset income and estate tax liabilities and do not necessarily preclude ownership of the donated asset permanently. There are various types of charitable trusts to accomplish these goals. Most of these charitable trusts can be established during your life through an inter vivos trust, or at your death through your Will or a testamentary trust.
Private Foundations and Family Foundations provide additional structures for efficient holding and tax mitigation of legacy wealth.
Charitable Lead Trust
A Charitable Lead Trust pays an income to the selected charity and the asset goes to the family upon the owner’s death. Charitable Lead Trusts offer income tax deductions and mitigation of capital gains taxes.
Giving the Rest away: Charitable Remainder Trusts
Charitable remainder trusts provide an income stream to the client or family with subsequent donation to charity once the income is no longer necessary. Recent changes in the federal tax laws make these trusts more attractive. Charitable remainder trust lets a client convert a highly appreciated asset (stock, real estate, etc.) into lifetime income without capital gains tax when the asset is sold and reduces estate taxes at death.
What is the process?
An appreciated asset is transferred into an irrevocable trust. The asset is excluded from the estate upon the death of the client, and no estate taxes will be payable on the asset. The trustee may sell the asset at market value, with no capital gains tax, and subsequently invests the proceeds in income producing assets. The trust pays income from the trust assets to the client or beneficiary during their lifetime. Upon the client’s death, the remaining assets go to the selected charities.