Creative Strategies to Charitable Planning

Many people dedicate a substantial amount of their time and resources to supporting the causes that are important to them. Whether serving on the board of a foundation or coordinating a fundraising event, these individuals are passionately devoted to furthering the causes they support. Many of our clients ask us how they can create a legacy that will support their charities and causes in perpetuity.

The great news is that philanthropic giving not only supports the charity receiving the funds but also provides the donor with various tax benefits. Following are some of the strategies we advise for our clients:

• Charitable Remainder Trusts: This is a type of Irrevocable Trust in which the Grantor contributes a set amount to fund the Trust. Each subsequent year, the Trust pays out a percentage of its assets to the Grantor and/or another Beneficiary (which is not a charity). This annual payout continues typically for either 20 years, or the life of the Grantor or Beneficiary. At the end of the payout period, all assets remaining in the Trust are donated to the designated charity. Two advantages of Charitable Remainder Trusts are that they reduce the Grantor’s income tax liability in the year that the Trust is established, and they provide a steady stream of income to the Grantor or Beneficiary.

• Charitable Lead Trusts: This is a type of Irrevocable Trust that acts the opposite way as a Charitable Remainder Trust. In a Charitable Lead Trust, the Grantor contributes a set amount to the Trust. In future years, the Trust pays out a percentage of its assets to the designated charity. At the end of a predetermined number of years, any remaining assets in the Trust either return to the Grantor or a Beneficiary. Two benefits of Charitable Lead Trusts are that they provide the Grantor with a tax benefit the year that the Trust is established, and they reduce gift and estate taxes.

• Donor Advised Funds:  These are funds run by different types of organizations that aggregate donations from multiple donors. A donor contributes cash, stock, private company stock, crypto, or other types of assets to the fund. The assets grow in the fund over time. The donor can choose to continue contributing additional funds at a later time, or just let the initial contribution grow.  At any point after the initial fund contribution, the donor can decide to allocate a portion of the funds to a charity. The donor receives a tax donation whenever they contribute to the fund. Additionally, the fund grows tax-free, allowing the donor to contribute even more to their desired charities than a straight donation would.

• Charitable Foundations: Setting up a charitable foundation as part of an estate plan offers several advantages, including tax benefits, legacy preservation, and increased control over charitable giving. By establishing a foundation, individuals can make significant contributions to causes they care about while reducing estate taxes, as charitable donations are often tax-deductible. Additionally, a foundation allows the donor to establish a long-lasting philanthropic legacy, ensuring that their values and charitable goals are upheld for future generations. It also provides greater flexibility and control over how the funds are distributed, allowing the founder to direct support toward specific causes or organizations, ensuring their vision is maintained beyond their lifetime.

Contact us today to discuss your philanthropic goals and we can develop a tailored plan to turn them into reality. Depending on the specifics of your situation, we may recommend one or several of these strategies or the development of the private foundation, a life deed estate, or other approaches.  

Huth, Pratt & Milhauser

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HPM is a specialized law firm that offers a wide range of legal services in the specialty areas of Wills, Trusts, Estates, Probate and Guardianship for planning, administration, and litigation. The experience and skills of our attorneys and staff, coupled with our knowledge of applicable law, enable us to provide exceptional representation to our clients.

We proudly serve clients throughout the country and around the world from our Boca Raton, Florida office. We strive to provide superior and focused counsel in a timely manner and at a competitive price.