San Diego County Estate Planning Lawyer Mark Ignacio Can Help You Support Your Charitable Giving
The peal of church bells echoes through San Diego County neighborhoods each Sunday morning—a gentle reminder of the integral role faith plays in many people's lives. If you feel called to share your abundance with the church ministries and faith-based charities that uplift your spirits and strengthen your community, Mark Ignacio Law can help.
Experienced estate planning lawyer Mark Ignacio often works with clients who want to ensure their assets will be used to support the religious institutions and causes that matter most to them. Every estate plan we create in our office is personalized to fit the client’s unique needs, but we often recommend charitable trusts as a tool to support faith-based giving.
Benefits of Charitable Trusts
Trusts are popular estate planning tools for people with philanthropic goals for several different reasons. Some of the most important benefits of charitable trusts for California residents include:
- Flexibility. Depending on your goals and circumstances, an estate planning lawyer can help select the right type of charitable trust and tailor it to your needs. For example, you might specify that 75% of their charitable remainder trust's assets should go to your church, while the other 25% is earmarked for a faith-based organization that supports disaster relief efforts.
- Lower tax burden. Charitable trusts are tax-efficient giving vehicles. When a charitable trust is funded, you receive a tax deduction based on the estimated present value of the remainder interest that will eventually go to charity. If the trust is funded with long-term appreciated assets, capital gains taxes can be avoided. And because the assets are removed from the estate, the overall estate tax burden may be reduced.
- Professional management. When assets are placed in a charitable trust, they are managed by a trustee who is responsible for investing the funds and administering the trust according to its terms. This professional management can help ensure the trust's assets are prudently invested and distributed in accordance with your wishes.
- Privacy. Charitable trusts offer a level of privacy that direct giving may not. If desired, the trust can be administered without public disclosure of your identity.
Types of Trusts That Can Facilitate Faith-Based Giving
When faith is an integral part of your life, it's only natural to want your legacy to include support for cherished religious institutions and causes. Fortunately, charitable trusts provide a meaningful way to turn your philanthropic visions into reality.
Charitable Remainder Trusts
A charitable remainder trust (CRT) is an irrevocable trust that generates income for the grantor or other beneficiaries for a specified period, with the remainder going to designated charitable organizations. The grantor transfers assets, such as cash, securities, or real estate, into the trust and may qualify for a partial tax deduction based on the estimated present value of the future donation.
There are two main types of CRTs:
- Charitable Remainder Annuity Trust (CRAT). This trust pays the beneficiaries a fixed annuity amount each year, regardless of the trust's investment performance. The annuity amount must be at least 5% but no more than 50% of the initial fair market value of the trust assets.
- Charitable Remainder Unitrust (CRUT). This trust pays the beneficiaries a fixed percentage (at least 5% but not more than 50%) of the trust's assets, revalued annually. The payment amount fluctuates based on the trust's performance.
CRTs can be tailored to meet your specific philanthropic goals, such as supporting a church's building fund or endowing a faith-based scholarship.
Charitable Lead Trusts
A charitable lead trust (CLT) is essentially the inverse of a charitable remainder trust. The CLT first distributes income to designated charitable organizations for a specified term, with the remaining assets reverting to the grantor or other non-charitable beneficiaries when the term expires.
Like CRTs, CLTs come in two forms:
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Charitable Lead Annuity Trust (CLAT). The trust pays a fixed annuity amount to the designated charities each year, regardless of the trust's investment performance.
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Charitable Lead Unitrust (CLUT). The trust pays a fixed percentage of the trust's assets, revalued annually, to the designated charities.
CLTs can be a useful tool for faith-based giving, particularly if you wish to support religious organizations during your lifetime while ultimately passing assets to your children or other heirs. Depending on how the CLT is structured, you may qualify for a gift or estate tax deduction.
