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Each year, as the holidays approach and the year comes to a close, the spirit of the season calls us into action to help those in need. For those fortunate enough to give to others, there may be advantages in addition to the altruistic and goodwill benefits. By incorporating charitable giving into your estate plan, any charitable contribution given to a charity of your choice may provide you with a steady stream of income and potential tax benefits.
There are several different methods for setting up charitable contributions through your estate plan. It is important to remember that charitable contributions are one hundred percent deductible from estate taxes. Often times, the most basic method of giving involves a simple bequest through your will. You should always make it clear which charity you want to receive your gift with as many specifics as possible.
While charitable giving through a simple will is an easier option, there may be a more financially beneficial method. A Charitable Remainder Trust (CRT) offers flexibility, an income stream for a number of years, and significant tax benefits to you and your heirs. A CRT is an irrevocable, tax-exempt trust in which you place assets to provide income for you during a specific time (i.e. your lifetime). At the end of that period, the remaining assets will be turned over to the charity of your choice. The trust can be funded with a wide assortment of assets, including bonds, mutual funds, stocks and real estate. Put another way – a CRT lets you convert a highly appreciated asset like stock or real estate into lifetime income.
So how does a CRT actually work? You, acting as the Grantor, transfer an appreciated asset into an irrevocable trust. This removes the asset from your estate, so no estate taxes will be due on it when you die. You also receive an immediate charitable tax deduction. The trustee then sells the asset at full market value, paying no capital gains tax, and re-invests the proceeds in income-producing assets. For the rest of your life, the trust pays you an income. When you die, the remaining trust assets go to the charity or charities you have chosen. There are two choices for receiving your income: a fixed percentage of trust assets or a fixed income. The correct choice depends on your specific situation. You also have an option to postpone taking any income until later. You should consult with an attorney or tax professional before making any CRT decision.
There are multiple benefits to establishing a CRT, including no capital gains taxes on assets transferred to a CRT and the potential to generate income for the donor. A CRT reduces your income taxes now and estate taxes when you die. An important point to consider is that CRTs are irrevocable; meaning, you forgo the rights to any assets placed in the trust. Your trustee, who remains in control of the assets while you are living, must follow your instructions or you retain the right to change the trustee. Choosing a trustee and clearly stating your intentions in the trust document and to the trustee is extremely important. You also may consider selling the asset yourself and re-investing. This is an option, but you pay far more in taxes and there is less income to you. This option offers no protection from creditors and no charitable income tax deduction is available. With this in mind, you may ask yourself: what kind of assets are suitable for a CRT? The best assets are those that have greatly appreciated in value since you purchased them, specifically publicly traded securities, real estate, and stock in some closely-held corporations.
To set up a simple will, CRT, or other form of charitable trust you will need to work closely with an attorney, a financial professional, and the charity of your choice. The use of trusts involves a complex web of tax rules and regulations. By talking with a financial caregiver or estate planning attorney, you can determine what option is right for you. Taking the time to plan your charitable gifts allows you to take advantage of some unique tax benefits while also giving substantially to others, creating an ideal set-up this holiday season. The team at Family Wealth Guardians can help you set-up estate planning tools like these and help with many other aspects of personal finance management. Take advantage of our knowledgeable and experienced staff to better plan for your future.
Ryan King, Esq. – President & CEO
Ryan graduated from the University of Florida’s Levin College of Law. He completed the Florida Bar Exam and was duly admitted by the Supreme Court of Florida to the Florida Bar in 2013. Prior to joining Family Wealth Guardians, Ryan worked as an attorney and legal advisor serving clients with Accountants and Business Advisors, Inc. in Gainesville, FL where he assisted clients with a variety of legal issues. Using his experience in estate planning and corporate law, he continues to further his legal education in an effort to better serve the needs of all clients of Family Wealth Guardians.
Ryan completed his undergraduate work at the University of Florida with a bachelor’s degree in Sport Management and a minor in Business. While working on those degrees at Florida, Ryan was a member of the Florida men’s basketball program. He spent nearly five years working under Coach Billy Donovan and his staff as a team manager and graduate intern. His time with the Gators included two national championship rings from the 2006 and 2007 season to go along with a lifetime of experiences. Outside of work, Ryan remains passionate about sports and spending time with his family. He devotes much of his free time to playing golf and visiting different stadiums and venues to watch his favorite teams.
Tina Pratt – Financial Caregiver & Office Manager
Tina recently completed her AA in Business Administration as well as an AS in Health Services Management, and is currently pursuing her bachelor’s degree in Health Services Administration at Santa Fe College.
Tina brings 25+ years of accounting and administration experience to the Family Wealth Guardians team. She particularly enjoys her time spent visiting with clients in their homes and making sure they remain informed about, and secure with, their personal finances.
Tina remains very active in her community by volunteering with the Florida Chapter of The ALS Association. Over the past year, she served as the volunteer walk coordinator for Ocala’s first Walk to Defeat ALS, the signature fund raising event for The ALS Association. She is hoping to develop another fundraising walk in Ocala in the near future, as well as one in The Villages. When not at work or volunteering, she spends a great amount of time with her three beautiful grandchildren.
Family Wealth Guardians
3300 S.W. 34th Avenue – Suite 124A
Ocala, FL 34474
352-443-1799
www.familywealthguardians.com
