Mr. Wittick served on the Board of Directors of a local charity, “South County Senior Services” for 3 years and on their Planned Giving Department for 7 or 8 years. He is also active in the Christian advisor community where he has serviced charitable estate planning objectives and with the upper net worth community for whom charitable estate planning alternatives can provide amazing results.
It has been estimated that most people give to charity with the intent of supporting worthwhile causes but there are many tax benefits as well. In fact, many clients have only two choices, either to be a voluntary or involuntary philanthropist. A preview of some charitable alternatives follows.
Charitable Remainder Trust (CRT)
Client Profile: If you have highly appreciated stock, real estate or qualified retirement plans, do not wish to manage them any longer, do wish to minimize capital gains and estate tax and have a need for more income, the contribution of such assets to this tax exempt CRT will provide income to the beneficiaries of your choice for life, at the end of which the remaining asset value passes to charity. Other benefits are as follows:
- During Life
- Avoid capital gain tax of 15% (federal) and 9.3% (state) on sale of the asset by the trust
- Reinvest sale proceeds of full market value in tax free environment like IRA, thus realizing tremendous benefit of tax free compounding inside trust
- Immediate significant charitable income tax deduction usually large enough to purchase life insurance to replace gift to charity
- Higher Income stream than from former low yielding asset for life or 20 years
- No longer need to manage asset
- Create future endowment for favorite charity
- At Death:
- Asset and future appreciation excluded from estate
- Replace gift to charity with Life Insurance
- Avoid IRD on certain assets
- Be sure to contribute qualified retirement plans at death to a testamentary CRT to avoid paying income tax on the MRD and being subject to an AGI limitation
Charitable Lead Trust (CLT)
Client Profile: If you need to reduce or zero out estate tax, want to give to children or grandchildren, and do not need the income produced by the gifted asset, a gift of income producing assets like securities or real property to a CLT may be appropriate. A CLT is the reverse of a CRT. Instead of receiving the income and giving the asset to charity in a CRT, you give the income producing asset to a CLT (not a tax exempt trust) which distributes the income to charity for a set period that precedes or “leads” the remainder passing to your beneficiaries, with the following benefits:
- During Life:
- Deferred Gift of asset to Family at Charitable Gift Tax Discount
- At Death:
- Asset and future appreciation excluded from estate of donor and are transferred to beneficiary of your choice
Charitable Planning in Revocable Living Trust
- Income in Respect of Decedent (IRD) assets, which are income taxable to beneficiaries for income that would have been taxable to the asset owner had he lived long enough to receive it, such as retirement plans, are excellent gifts to charity
- May be able to zero out estate tax using a testamentary charitable lead annuity trust (TCLAT) alone or in combination with a CRT subject to a formula funding clause in a revocable living trust if client wishes to delay inheritance of beneficiaries long enough to zero out the tax
Private Foundations
Client Profile: If you want to fulfill charitable desires in a very specific way that may incorporate your family values and maintain maximum control of the charitable dollars as well as reduce income and estate taxes, you may wish to set up a private foundation in an irrevocable trust or non profit corporation with the following benefits
- Maintain control of distribution of assets consistently with charitable family goals
- Family Values Perpetuation
- Family Name Recognition
- Immediate charitable income tax deduction
- Charitable estate tax deduction at death
Supporting Charitable Planning Organizations
Client Profile: If you want to support only one or more specific public charities in a way that may incorporate your family values but do not need to maintain control of the charitable dollars nor do you wish the stringent operating requirements of a private foundation and you also want to reduce income tax more than with a private foundation and reduce estate taxes as well, then you would be a candidate for a supporting organization with the following benefits:
- Family Values Perpetuation without control or restrictive operating requirements
- Immediate charitable income tax deduction greater than with private foundation
- Charitable estate tax deduction at death
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