Blue Ash Charitable Planning Lawyers

Estate planning accomplishes a wide range of personal and financial goals, from setting up a last will and testament or living trust to specifying the medical care you do or do not want to receive if you become incapacitated. When it comes to making decisions about who should inherit your property and assets after you die, most people name their spouse, children, and other family members as the beneficiaries. However, some people also have strong ties to charitable organizations, including churches, humanitarian organizations, and other non-profit organizations, and feel strongly about implementing charitable planning strategies as part of their estate planning goals.

If you have questions about the estate planning process, including how to set up a charitable trust, it is highly recommended that you contact the Blue Ash charitable planning lawyers at Wolterman Law Office.

What Is a Charitable Trust?

A charitable trust is an estate planning tool that allows you to set up your assets in a way that benefits you, your beneficiaries, and the charitable organization you support. Charitable trusts are created in the same way as private express trusts. However, a charitable trust must be created for a charitable purpose, the beneficiaries of the trust must be indefinite, and the trust can continue as long as the charitable purpose exists. While there is a common misconception that charitable trusts are reserved for the extremely wealthy, even those with a more modest income can support a charitable organization by setting up a charitable trust. In addition to the legacy of goodwill that your charitable contribution provides, the following are additional benefits associated with setting up a charitable trust:

Financial and Tax Advantages: You can benefit from a tax deduction, which is based on the current value of the assets used to fund the charitable gift. When the assets are placed in the trust, they are no longer part of your estate. This can lower your estate tax liability through an income tax charitable deduction. You can also bypass capital gains tax when appreciated assets are placed in a trust.
Philanthropic Impact: By providing continuous support for a chosen cause or organization, you will create a lasting impact and ensure that the financial assistance continues over the long term. This also sets a precedent and encourages future generations to engage in philanthropic activities.
Enhanced Estate Planning: You maintain a degree of control over your assets and can dictate the terms of income distribution and charitable beneficiaries through the trust agreement.
Flexible Planning Options: Charitable trusts accept a range of assets, including cash, stocks, and real estate. There are multiple charitable trust forms available, which allows you to select a structure that aligns with your financial and philanthropic goals.
Legal and Financial Security: In most cases, the assets in a charitable trust are protected from creditors, which ensures that they are utilized according to your wishes. There are strict legal guidelines that charitable trusts must adhere to ensure that they are managed properly.
Community and Relationship Building: Charitable trusts not only support a charitable organization financially but also engage with charitable organizations in any way that actively supports the well-being and development of communities.

What Are the Different Types of Charitable Trusts?

If you are interested in donating money to a charitable organization, there are a number of charitable trust options you can consider. The following are the most common types of charitable trusts:

Revocable Living Trust: If you would like to set up a charitable trust within your lifetime, and tax benefits are not a major concern, this may be a good option to consider. This type of trust allows you to support a charity above all else. In addition, they are less time-consuming because they do not go through the probate process. You can also modify or cancel a revocable trust at any time.
Charitable Remainder Trust (CRT): This is highly recommended if you are concerned about getting the most out of the tax benefits. You set up a trust with a specific amount of money that you want to donate upon your death. You can continue to receive an annual income stream from the trust and benefit from yearly tax deductions since you have committed to donating money in the future. Keep in mind, however, that beneficiaries in a remainder trust must qualify per the IRS code. You cannot simply donate to a family member, friend, or unapproved charitable organization.
Charitable Lead Trust (CLT): Like a Charitable Remainder Trust, this allows you to donate money to an IRS-approved charity or organization and benefit from tax benefits. However, instead of providing income to the settlor, a CLT makes payments to a charity, and the payments continue for a designated period of time or until the settlor passes away. Any remaining funds will be returned to the settlor’s heirs. This type of trust may be a good option for people who want to support a charity while also providing for family members. The annual donations allow you to benefit from income tax benefits.

What Are the Different Types of Incomes from a Charitable Trust?

Once a charitable trust has been set up, there are two ways that income from the trust may be received, including the following:

Charitable Remainder Annuity Trust (CRAT): With this option, you receive a fixed dollar amount each year, regardless of interest rate fluctuations or if the trust gains or loses money. An experienced estate lawyer will help you determine the amount of the fixed annuity payments. The following factors will need to be considered:
- If the amount is too low, you will not receive the full benefit of setting up a charitable trust, and your income tax deduction will be more significant.
- If you set the amount too high, you could use up the principal of the trust and have nothing left to leave to the charity upon your death. In addition, income tax deductions decrease as annuity distributions increase.
- If the annuity is too high, the charity is less likely to agree to be a trustee, in which case the charity could end up with nothing when the trust is terminated.
Charitable Remainder Unitrust (CRUT): This is a more common option. It allows you to collect income while supporting a charitable cause. You will transfer assets to the trust, and the trust pays the beneficiary a percentage of the trust’s value each year. According to the IRS, this must be at least five percent of the value of the trust. When you die, the remaining assets go to the charity. There are a number of different types of Charitable Remainder units, including the following:
- Standard Unitrust: This provides a fixed percentage income that is determined when the trust is set up. The percentage must be between five and 50 percent of the fair market value of the trust assets.
- Net Income Unitrust: This pays the stated amount from the trust to the extent of income earned in the trust without invading the principal.
- Flip Unitrust: This is a net income unitrust that “flips” to a standard unitrust when a specified date or event occurs, including a birth, a death, or the sale of a hard-to-market property.

Blue Ash Estate Lawyers at Wolterman Law Office Help Clients Navigate the Charitable Planning Process

If you would like to set up a charitable trust as part of your estate planning process, it is highly recommended that you contact the Blue Ash estate lawyers at Wolterman Law Office at your earliest convenience. Charitable planning can be a complex process to navigate. To schedule a free, confidential consultation, call us today at 513-488-1135 or contact us online. Our office is located in Loveland, Ohio, and we serve clients in Hamilton County, Fairfield, Norwood, and Forest Park.