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Home » Resources » Frequently asked questions » Charitable Gifting

Charitable Gifting

    • Charitable Gifting

    • If philanthropy is part of life right now, why not make it part of the legacy you leave behind when you are gone? Philanthropy can take many forms and can be directed at a wide number of diverse beneficiaries. It can also be handled in several different ways in your estate plan, depending on the type of beneficiary, size and complexity of the gift, and the amount of control you want to maintain over that gift. To help you better understand your charitable gifting options, the estate planning attorneys at Collins Law Group have put together some frequently asked questions and answers relating to charitable gifting. If you have additional questions or concerns, please feel free to contact our office to schedule a consultation.

    • Can I make gifts to my charities in my Last Will and Testament?

    • Yes. Making gifts in your Will is certainly the simplest way to make a charitable gift; however, there are several drawbacks to using this method. First and foremost, gifts made using a Will do not allow you to retain any control over how the gift is used by the beneficiary. Once a gift is made in your Will the funds or assets gifted become the property of the recipient with no strings attached. If it matters to you how your assets are used by the charity, gifting in your Will is not an ideal option. In addition, if you wish to make any changes to the gifts you make in your Will it is usually necessary to revoke your Will and execute a new one. Adding a charitable gift, therefore, would require you to execute a new Will which is rather cumbersome. Finally, by waiting to make your charitable gift in your Will you miss out on any potential tax benefits you might get from those gifts and, instead, your estate may incur and estate tax debt because the assets remained in your estate until after your death.

    • Is a trust a better option for making charitable gifts?

    • For many people, a trust does offer several advantages that a Will cannot when it comes to charitable gifting. For instance, you can retain a significant amount of control over how your designated charity uses the assets you gift through the trust terms you create as the Settlor of the trust. In addition, when you create a trust, you choose a Trustee who is responsible for managing the trust and protecting the trust assets, offering additional reassurance that the assets you gift will continue to grow and further your philanthropical goals.

    • What is a charitable lead trust?

    • A charitable lead trust is structured so that assets from the trust are distributed to at least one charitable beneficiary for a specified period first. At the end of that time, the assets remaining in the trust are distributed to at least one non-charitable beneficiary. For example, imagine that you established a charitable lead trust and transferred $1 million into the trust. The terms might direct distributions in the amount of $50,000 to be made to your chosen charity each year for ten years. The terms might further dictate that at the end of that 10-year period the assets remaining in the trust are to be distributed to your four adult children

    • What is a charitable remainder trust?

    • A charitable remainder trust works just like a charitable lead trust, but in reverse. Trust assets are first distributed to at least one non-charitable beneficiary for a specified period with the remainder assets being distributed to at least one charitable beneficiary at the end of the time period. Using that same $1 million, in a charitable remainder trust you might create terms that direct distributions of $20,000 to each of your four children for ten years. After ten years, the assets remaining in the trust would be distributed to your named charitable beneficiary (or beneficiaries). Keep in mind that the trust should be earning interest during the ten-year period of initial distributions as well.

    • Who should be the Trustee of my charitable trust?

    • As the Settlor of your trust, you can appoint anyone you choose to be the Trustee; however, given the complex nature of a charitable lead or remainder trust you may wish to consider appointing a professional Trustee. One of the most common mistakes settlor’s make is appointing a family member or close friend as their Trustee without considering whether the individual is well suited for the position. Given the duties and responsibilities of a Trustee, you should appoint someone who has more than a rudimentary understanding of financial and legal concepts, which is why a professional Trustee is often the best choice.

    • What is a donor advised fund?

    • A donor advised fund or annuity may also work for your gifting. It works by transferring gifted assets into the fund. Although you will no longer own the assets, you will be able to direct how the funds are used. If you gift to an annuity, you will also be able to choose the beneficiary who will receive the benefits from the annuity.

    • What is a family foundation?

    • Creating a family foundation is yet another way to include charitable gifting in your estate plan. This option, however, if best used when you have considerable assets to gift and the time to run the foundation once it is established. The benefits of using a foundation as your charitable gifting vehicle are numerous though, starting with the amount of control you will retain over how your gifts are used. In addition, creating a charitable foundation makes it much easier to involve your children and/or grandchildren in your philanthropic endeavors.  Running a foundation requires a considerable amount of your time and attention while you are alive though, particularly if you plan to grow the foundation by soliciting gifts from other donors as well. If you do create a family foundation, it can be an amazing gift to pass down to future generations.

Contact Us

For additional information about making charitable gifting in your estate plan, contact the Collins Law Firm by calling (310) 677-9787 to register for one of our FREE estate planning workshops.

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Client Review
August 19, 2020
    

“My mother told me about the Collins Law Group and I must say, the entire experience has been a real pleasure. Although I was nervous at first, the Collins Law Group staff put me at ease with their friendliness and knowledge. I didn’t realize how hard it could be on your family and loved ones left behind if you die without any planning or directions in place for them. My biggest concern was making sure my elderly mother would be provided for and taken care of if something happened to me. I have been a caregiver for her for 12 years, so this planning was crucially important. I had previously made a living trust for myself on Legal Zoom but there is no comparison to the level of service and professionalism that Collins Law Group embodies. Attorney Collins and her staff provides excellent service and it will take a large burden off of my family when they need guidance at the time of my passing.”

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