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CHARITABLE GIVING: GIVING BACK AS PART OF YOUR ESTATE PLANNING

The President of the University of Texas at Austin recently gave his Address on the State of the University. He noted that a record number of individuals gave to the university in their estate plans this year, for a total of $76 million. While you may or may not be a fan of the university, it is important to know that you have the ability to make a gift to a charitable organization while planning your estate. In fact, you have several options to include charitable giving in your estate plan.

Annual gift-tax exclusion

One simple was to donate money to a charity without tax considerations is the annual gift-tax exclusion. You can donate up to $14,000 to whomever you wish. These gifts are not deductible on your income taxes unless you give to qualified charities or educational institutions.

Charitable remainder trusts

A charitable remainder trust, or CRT, is one of the ways you can donate to the tax-exempt charity of your choice while receiving tax benefits. A CRT is beneficial for someone whose estate will be liable to estate taxes and also has a need for income. Also, if you are subject to paying capital gains taxes on appreciated assets, you may benefit from a CRT. This type of trust has two components, the income interest and the remainder interest. The individual who establishes the trust will receive the income interest for his or her lifetime or for a term of years, depending on what you include in your trust. When the trust terminates, the money remaining within the CRT is the remainder income, which will go to charity. Bear in mind that these trusts are irrevocable, so you will be giving up control over the trust property, so be sure that this is the step you want to take before committing.

Charitable lead trusts

A charitable lead trust, like the CRT, provides tax benefits to those who estates are large enough to be subject to the estate tax (in 2013, only estates over $5.25 million were subject to the federal estate tax). This type of trust works in the opposite way that a CRT works. Assets are placed into trust, and a percentage of the initial value is paid to the chosen charity for a period of time. Upon the termination of the trust, the assets remaining in the trust go to the beneficiaries that the creator of the trust has named within the trust instrument. Like the CRT, this type of trust is also irrevocable.

Both of the charitable trust devices can be difficult to set up. However, if they are properly established, they can provide needed funds to a favorite charity in addition to providing income during one’s final years or assets to an heir. An individual or couple who wishes to establish one of these trusts or who has any additional questions about estate planning should contact an experienced attorney for answers.