Tax Planning Advantages of Charitable Trusts
State and federal tax laws change periodically, and it is critical that an estate planning attorney keep up to date with the laws that affect inheritance and gifts, as well as income tax consequences.
A charitable trust is a legal means to be charitable and achieve tax benefits at the same time. The Internal Revenue Service code is very specific about the ways in which a charitable trust should be formed and the ways in which it can be used.
I have been an estate planning attorney for more than 30 years, and have set up many charitable giving trusts as part of an overall estate planning strategy. If you understand the advantages and disadvantages, it can be an excellent tool to accomplish your objectives.
If you have estate planning and tax planning needs, contact San Jose charitable giving attorney Robert Froehlich or call 408-297-0700 for a free initial consultation.
Santa Clara County Charitable Trust Lawyer
Handling Tax Exempt Trusts and Family Foundations
Charitable trusts and family foundations work to keep assets or property within the family by establishing a charity that is controlled by the family. There are two ways in which a family foundation and charitable trust may work:
- Family foundation example: In 2011, each person is allowed to pass $1 million at death ($2 million for a couple with a properly drafted bypass trust.) If your estate is worth $4 million, a family foundation could be created which is controlled by the family. If your children elect not to inherit all of the money, some of it could go tax free into a corporation controlled by them (a private family foundation). The foundation could generate tax free income that could be used in a variety of ways to benefit both charity and the family.
- Charitable (tax exempt) trust example: If you have real estate worth $900,000 and sell it outright, you would pay capital gains tax on the sale. If you create a tax exempt trust and transfer the real estate to the trust, there are no capital gains taxes to pay. You would be entitled to receive a substantial income for your lifetime.
The tax benefits do not necessarily end when you die. They could go on indefinitely.
An old charitable trust may not take advantage of new tax laws. Contact our law office to have your existing trust reviewed.
More Than 30 Years of Estate Planning Experience
I focus my legal practice on estate planning, tax planning and probate, and would be happy to help you accomplish your legal objectives. Contact Robert A. Froehlich, Attorney at Law, for a free initial consultation or call 408-297-0700 to schedule an initial meeting.
