According to Giving USA Foundation, Americans donated $358 billion to charity in 2014. For Ohio residents who are looking to balance their own financial needs with the desire to give to charity, it may be worthwhile to set up a charitable remainder trust. As with any other trust, assets are transferred into it and managed by a trustee with the goal of generating income or otherwise increasing its value.
The income beneficiary is the grantor and has the right to receive any income generated by the assets in the trust. If a married couple creates such a trust, both parties will have an interest in it while they are both alive. When all beneficiaries have passed away, what remains in the trust is then donated to the designated charities. In addition to providing an income stream, it can also present some unique tax advantages.
First, the IRS allows individuals to take a tax deduction immediately even though the assets are not transferred to the charity until after death. Second, the trust in most cases doesn’t pay tax on capital gains and income generated from those assets inside of it. One common strategy individuals use is to put stocks with large unrealized gains into the trust to avoid a large tax hit when they are sold.
These types of trusts may be an important estate planning tool for anyone wishing to give to charity after they pass on. Those who are interested in creating such a trust may wish to contact an estate planning attorney to determine the trust’s best structure. Consulting with legal counsel may also make it easier for the trust to conform to IRS rules, which may allow individuals to reduce their tax burden while they are still alive.