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Giving Back to the Community
According to a
recent poll, an impressive 90 percent of small-business owners contribute to
their communities.¹
As a small-business owner, you probably receive a number of requests to lend
support to worthy causes throughout the year. And if you're a typical business
owner, you've given your time and/or money to one or more of these causes.
Most business owners give back to their communities for personal reasons, but
businesses reap many other benefits from these contributions; enhancing the
business reputation, creating a better business climate, and free publicity, to
name a few.
One way to reap even greater rewards is by implementing a charitable giving
strategy. If structured properly, this approach can result in a reduction in
income taxes and, potentially, estate taxes. A reduction in your tax liability
could also help free up more of your assets to donate to charity.
A Better Strategy
Two popular methods for structuring charitable giving involve
setting up a trust.
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Charitable remainder trust (CRT): When
a CRT is established, the donor names a beneficiary to receive the assets in
the trust upon his or her death. The donor may receive income generated by
the trust during his or her lifetime, while the trust assets are typically
excluded from the donor's estate. Any assets transferred to the trust may be
partially tax deductible and are exempt from any current capital gains tax.
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| Charitable lead trust (CLT):
When you set up a CLT, income generated by the trust assets is
directed to the charity of your choosing. This can help reduce any current
income taxes due on trust income, and the remaining trust assets can be
passed to heirs upon your death.
As you review these strategies, also consider whether to donate personal or
business assets. The appropriate choice will depend on a number of factors,
including how your business is structured, your estate conservation
strategy, and current level of giving.
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. The use of trusts
involves a complex web of tax rules and regulations. You should consider the
counsel of an experienced estate conservation professional before
implementing such strategies.
Before you write another check, consider the additional benefits that a
structured giving strategy can provide. Call today to learn more.
1)
National Federation of Independent Business, 2005
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