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Posted on May 19, 2023 in asset protection,estate planning
In many cases with estate planning, individuals choose to leave their assets to a charitable nonprofit, foundation, organization, institute, or other cause. This is a perfectly legal way to give back once you are gone. If set up properly, the ownership of a charitable trust will transfer smoothly following your passing and without having to go through probate. It is a common practice in estate planning and can be an honorable and supportive gesture that leaves long-lasting effects on your community and the world at large.
A charitable trust is an irrevocable trust meaning that the trust cannot be dissolved, not by the grantor or anyone else. This is the nature of an irrevocable trust — it cannot be changed, amended, or canceled by the grantor.
Nevada law deems a charitable trust as a trust that allows individuals to set a portion of their assets aside for a charitable cause or organization. The IRS does not claim charitable trusts as being tax-exempt, but a charitable trust may request an exemption from taxes as a charitable organization. Approval of tax-exemption status is contingent on the trust going through an organization test to determine its eligibility as a charitable organization itself.
One added benefit of a charitable trust is that when it is established, the grantor’s contribution allows for a charitable contribution tax deduction on the grantor’s tax filings for that same year. In addition, the value of the trust can be deducted from the taxable value of the donor’s estate.
Two types of charitable trusts exist — charitable lead trusts (CLT) and charitable remainder trusts (CRT). If you are considering setting up a charitable trust, it’s important to understand both types to ensure you select the right option to suit your needs.
A CLT is set up to make payments to the designated charity, either annually, semi-annually, quarterly, or monthly and for a limited amount of time. At the end of that time, the remaining assets in the trust are distributed to beneficiaries as outlined in the terms of the trust when it was established. On the other hand, a CRT is a trust that operates in the opposite manner of a CLT. A CRT provides income to a beneficiary for a preset duration of time, and at the end of that time, the remainder of the trust’s assets are paid out to the charity named when the trust was established. The timeframe is typically no longer than 20 years, and the culmination of payments over time usually is equal to anywhere from 5% to 50% of the value of the trust’s assets.
Most people who set up one of these charitable trusts to donate their assets to charity within estate planning do so with the advice of an experienced Las Vegas estate planning attorney who can explain the differences between the two types of charitable trusts, as well as the various advantages of each.
Once you have chosen which type of trust aligns with your personal goals in philanthropy, by either providing income for beneficiaries or charities, it is important to select an experienced trustee who can handle distributions properly. Because the details are crucial, hiring an experienced charitable trust attorney can ensure all necessary paperwork is completed accurately prior to registering the trust. A qualified attorney can guide you through drafting the charitable trust agreement, making sure to consider all the requirements the trust needs to meet.
It is crucial to outline all terms agreed upon in the terms of conditions. This includes funding areas like stock options or real estate, so everything runs smoothly when executing donations. Furthermore, it is important to be sure of the terms and goals set forth during the establishment of the trust because of the irrevocability of these trusts.
A: While the easiest way to leave money to charity is relative to the circumstances of a situation, one seemingly simple way is to include a charitable bequest in your will or living trust. This would require naming the charity and the percentage of your estate you wish for them to receive, along with any other details you wish to include in these instructions.
A: If you are deciding to leave all your estate to charity, it should be a decision made following much deliberation. Things to consider include the charity or charities you wish to bequeath your assets to, the percentage of your estate that each charity will receive, the reputation of the charities you select, and a backup in case the named charity is unable to receive your gift at the time of your passing. You can also name exactly what your donation is to be applied to once your gift is received.
A: Yes, you can name a charity as the beneficiary of a life insurance policy, as well as other financial accounts such as a 401K or an IRA. You can also donate property to charity, as in literal real estate or personal items like your furniture. Have your wishes put into writing by an estate planning attorney so your loved ones understand your wishes without question or dispute.
A: There are many reasons people decide to leave money to a charity when estate planning. Some advantages are the goodwill it bestows upon the receiving organization and the feeling it bestows upon the grantor to do something selfless and leave a positive legacy for their community behind. Depending on how a contributor decides to make charitable donation arrangements, it can also provide tax relief for the giver now and for their loved ones in the future.
If you still have questions regarding the decision to leave money to charity as part of your estate plan, contact Ken R. Ashworth & Associates. Our legal team is knowledgeable and understanding and can advise you as well as prepare the necessary documents that will carry out your final wishes. Call us today and schedule a consultation.