Massachusetts Estate Planning & Asset Protection Blog

How To Become a Tax-Savvy Philanthropist

Posted by Dennis Sullivan & Associates on Fri, May 27, 2011

The idea of giving to charity would seem to be a simple, but the simple methods aren’t always the best ones. Sometimes a bit of financial finesse can go a long way, helping both your charity of choice and your own finances. I refer to that as “doing well by doing good.”

If you want to be a tax-savvy philanthropist, consider using a time-honored strategy known as a “charitable remainder trust” (CRT).

A CRT allows you to give assets to charity in a tax-savvy manner that may even provide an income stream that helps both you and your charity. When the CRT is established, the assets you’ve chosen to donate are transferred to the trust. The charity you’ve chosen is the trustee, and manages the assets. They may pay you and/or your beneficiaries a portion of the income generated by the trust either for a certain number of years, or your entire life. At the end of the term, depending on the type of payout you’ve chosen, the charity receives the remainder of the principal in the trust.

This strategy works best when the underlying assets are highly appreciated, and by donating them to charity you can avoid a significant capital gains tax.

Of course, your family members may not be too happy to see those assets going to charity – so you may want to consider replacing their value for your heirs with life insurance.

You can learn more about charitable trusts by attending one of our free "Trust, Estate & Asset Protection" workshops.  Register online or call 800-964-4295.  While you're there, you might also want to read about Gifting Strategies for Estate Planning.

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Tags: Estate Planning, Charitable Giving, CRT, charitable remainder trust

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