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Giving
Charity Helps Donors and Recipients
Last year,
individuals contributed $161 billion to charity — that’s roughly 76 percent
of all contributions made.1
As the holiday season approaches, you may be wondering how a charitable donation
from you could best be used to benefit others — and yourself. Charitable
trusts can help you increase the value of your donation by reducing your costs
in capital gains, income, and estate taxes.2
Charitable Remainder Trusts
A charitable remainder trust (CRT) is an irrevocable trust whose beneficiary is
a charitable organization. Throughout his or her lifetime, the donor receives
regular payments (fixed or variable) from the trust. When the donor dies, the
charity receives the remaining principal.
Assets donated to a CRT are not subject to capital gains taxes and, if eligible,
will not be included in the donor’s taxable estate. In addition, the donor may
take an income tax deduction (subject to certain limits) on the value of the
assets during the year in which the trust is created.
 Charitable
Lead Trusts
A charitable lead trust (CLT) is almost the opposite of a CRT. With a CLT, the
charity receives regular income generated by the trust throughout the donor’s
lifetime. When the donor dies, his or her heirs receive the assets in the trust.
Pooled Income Funds
A pooled income fund is an irrevocable trust to which several donors may
contribute. Funds are administered by a charitable organization and pay donors
regular income for life. When a donor dies, his or her contribution to the fund
becomes the property of the charity. With this type of fund, donors are not
subject to capital gains taxes and can reduce their current taxable income and
estate.
This time of year gives many people an inclination to help others and
potentially improve their tax situations. If the season has kindled your desire
to give, consider how charitable trusts can help both you and the recipient make
the most of your donation.3
1) USA Today, June 20, 2002
2) Bear in mind that not all charitable organizations are able to use all
possible gifts. It is prudent to check first. The type of organization you
select can also affect the tax benefits you receive.
3) Before taking action, be sure to consult with your tax professional for
specific information pertaining to your situation.
© 2002
Emerald Publications
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