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Quite simply, charitable giving implies a donation
from you to an organization of your choice. Charitable gifts serve as an
investment in your community, the nation, and the world. Your donation can be
of almost any type, (clothes, food, money, or property,) to any entity to qualify
under this definition, but in order to take advantage of some of the donor tax
benefits that exist, there are strict rules that govern the types of gifts you
can make and the organizations that can receive them.
Note: Giving to an organization that is “tax
exempt” does not necessarily result in any tax advantage for the donor. This
designation simply means the organization does not have to pay taxes. |
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The IRS generally restricts an income tax
deductible charitable contribution to one
where: (1) The donor does not receive an
expected benefit from the contribution; (2)
The contribution meets substantiation
requirements; (3) The contribution is to or
for the use of a qualified charitable
organization; and (4) The amount of the
contribution falls within the applicable
statutory ceilings. Such rules add a layer
of complexity to an otherwise simple to
understand concept.
A
charitable lead trust, (“CLT”,) is a
general classification for a type of
charitable giving vehicle that satisfies
requirements of either a Charitable Lead
Annuity Trust, (“CLAT”,) or Charitable Lead Uni-trust, (“CLUT”.) A CLT is an
irrevocable trust created when a donor
transfers assets to the trust for either a
period of years, or a beneficiary lifetime,
leaving any remainder interest to a
non-charitable entity and selecting a
charitable beneficiary for trust payments
during the trust term. At the end of the
term, the assets either revert to the donor
or pass to other persons, (typically family
members.) Just as for a CRT, a CLT must
meet strict statutory requirements in order
to qualify to receive deductible
contributions. |
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Benefits of a Charitable Remainder Trust
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Convert appreciated asset into lifetime income.
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Reduce your current income taxes with charitable
income tax deduction.
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Pay no capital gains tax when the asset is sold.
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Reduce or eliminate your estate taxes.
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Gain protection from creditors for gifted asset.
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Benefit one or more charities.
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Receive more income over your lifetime than if
you had sold the asset yourself
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Leave more to your children or others by using
life insurance trust to replace gifted
asset.
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