Charitable planning creates an opportunity for both the charity and donor to benefit from the gift. With the help of a Florida and Palm Beach County estate planning lawyer, you can structure gifts to charities that maximize the monetary benefit to the organization and ensure a favorable tax result for you - the donor - that is consistent with your charitable intentions.
Most lifetime gifts are designed to secure income tax deductions, while gifts occurring at death ordinarily reduce estate tax. Advanced charitable planning techniques often involve making partial gifts to charity with a portion retained or designated to the donor or other family members.
IRAs to Charity
In many cases, it is recommended to leave Individual Retirement Accounts (“IRAs”), as opposed to other assets, to charities. IRAs have deferred income tax burdens that must be paid as assets are distributed to the IRA owner or designated beneficiary. However, a charity, as a tax-exempt organization, does not pay income taxes on amounts received from IRAs.
The new Secure Act further incentives clients to leave IRAs to charities because individual designated beneficiaries (other than spouses) must generally take all assets from an IRA within 10 years. A Florida and Palm Beach County estate planning lawyer can consult with you to ensure your estate is carefully structured to leave IRAs directly to charities as opposed to designating those same amounts under a donor’s will.
Individuals can create their own tax-exempt entity to benefit various public charities. A private foundation is a tax-exempt entity that can be controlled by a limited number of family members for the benefit of certain types of charities. Donations to a private foundation will typically generate income tax deductions and be deductible for estate tax purposes.
A private foundation enables a donor to obtain a large charitable deduction in one year (possibly in the year of a sale of a business), while retaining the ability to select the eventual charities to receive grants over many years.
Charitable Remainder Trust
A charitable remainder trust (CRT) is a trust that returns to the donor a portion of the assets contributed for a period of time (often the lifetime of the donor) and gives the remainder to charity. Ten percent of the actuarial value of the assets contributed to the CRT must be reserved for charity as the remainder beneficiary. The donor receives an immediate income tax deduction at the time of the contribution to the CRT based upon the actuarial value of the charity’s interest. Additionally, the CRT allows gain to be deferred on the sale of appreciated assets over the CRT term. As a result, a CRT is a popular technique to utilize before the sale of an asset or business to defer income tax recognition, secure a charitable deduction, and benefit a charity.
Charitable Lead Trust
Under a charitable lead trust (CLT), the donor provides for an annual payout to charity for a number of years, with any remainder passing to various individual beneficiaries. If the assets in the CLT grow in excess of a minimum interest rate set by law (based upon prevailing interest rates at such time), the remainder goes to the beneficiaries.
A CLT is particularly attractive to a client that already gives a set amount to charity every year by enabling the growth in the value of the contributed assets in excess of this interest rate to pass to the donor’s beneficiaries free of transfer tax.
Strategize Your Charitable Giving with a Florida and Palm Beach County Estate Planning Lawyer
For more information on how to plan your charitable giving, contact a Comiter, Singer, Baseman & Braun Palm Beach County estate planning lawyer either online or by calling us at 561-626-2101 or toll-free at 800-226-1484. We work with clients throughout the state of Florida.