Charitable Trusts

A charitable trust lets you donate generously to charity, and it gives you and your heirs a big tax break. First, you can take an income tax deduction, spread over five years, for the value of your gift to the charity. Second, when the trust property eventually goes to the charity outright (at your death or the end of the payment period you specified), it’s no longer in your estate — so it isn’t subject to federal estate tax. Third, with a charitable trust you can turn appreciated property (property that has gone up significantly in value since you acquired it) into cash without paying capital gains tax on the profit.

For a free, confidential consultation to discuss the benefits of building a charitable trust, contact a San Francisco attorney at The Evans Law Firm at 415-441-8669 or 888-50-EVANS or info@evanslaw.com.

Oakland Attorneys, Advising on Creation of Charitable Remainder Trusts

Charitable trusts require that that you give up legal control of your property, and charitable trusts are irrevocable — once the trust becomes operational, you cannot change your mind and regain legal control of the trust property. The most common type of charitable trust is called a charitable remainder trust. First, you set up a trust and transfer to it the property you want to donate to a charity. The charity must be approved by the IRS, which usually means it has tax-exempt status under the Internal Revenue Code. The charity serves as trustee of the trust and manages or invests the property so it will produce income for you. The charity pays you (or someone you name) a portion of the income generated by the trust property for a certain number of years or for your whole life — you specify the payment period in the trust document. Then, at your death or the end of the period you set, the property goes to the charity.

Furthermore, when you set up a charitable remainder trust, there are two basic ways to structure the payments you will receive. First, you can receive a fixed dollar amount (an annuity) each year. That way, if the trust has lower-than-expected income, you still receive the same annual income. Once you set the amount and the trust is operational, you can’t change it. Second, it’s common to set your annual payment as a percentage of the value of the current worth of the trust property. Because you receive a percentage, not a flat dollar amount, if inflation (or wise investment) pushes up the dollar value of the assets, your payments go up accordingly. Under IRS rules, you must receive at least 5 percent of the value of the trust each year.

Irrevocable Trust Lawyers Serving Sacramento and Other California Communities

To discuss how our lawyers can help you to avoid paying unnecessary estate tax, please call 415-441-8669 or contact us online via e-mail. Located in San Francisco, we accept cases in Oakland and communities throughout California.