Lustig Law Firm Estate Planning Blog

Wednesday, June 24, 2015

Why Charitable Giving Is Great For Your Estate Planning

Charitable giving is not only a good way to contribute to society but it can also reduce tax exposure and educate younger generations about doing more for those less fortunate. By informing loved ones of your philanthropic objectives, you, as a donor, can get your family involved in this charitable giving process by holding family meetings to discuss goals and selecting charitable organizations that will receive your donations. This is an effective way to pass core values on to younger generations.

An example of a charitable estate planning structure that families use is one in which the family places assets into a special trust that is viable for a specific number of years, which has to pay a certain sum to a family foundation created at the same time. The family foundation can use the family members as members or directors, depending on how they structure the foundation. Over a 5-10 year period, this trust will then pay an annuity to the foundation, which is then is required to distribute 5% of the value of the to various charities. This allows the younger generations to: (i) see the money come into the foundation; (ii) become engaged in discussions as to which charities will receive the distributions; and (iii) learn about money, finances and management.

At the end of the trust term, the assets distributed stay within the foundation, and the remaining assets in the trust are distributed to the beneficiaries (family members) free of gift, estate and income tax.

See Jason Notte, Why Charitable Donations Are Great For Your Estate Planning, June 12, 2015.

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