Passing on assets to a charity has many different components and reasons behind it but the underlying goal is the same: to be able to support a charitable cause or organization that you care about. There are many different estate planning tools that can be used to accomplish this and in this blog we will explore three.
The first option is a charitable gift annuity, which is a formal contract between a charity and a donor. Under this charitable gift annuity, a donor makes a lump sum donation that is irrevocable and takes a partial income tax deduction.
The charity is then responsible for investing that donation and the annuitant or donor gets payments on a fixed schedule for life or for the term of the agreement depending on the specific terms of that agreement.
The charity receives the balance of the invested funds when the annuitant dies. The second option available to those who wish to give philanthropically is a donor advised fund, which allows you to invest, grow and donate assets to charity of your choice for a lasting impact.
This is a charitable giving account administered by a public charity usually sponsored by a community foundation or financial institution. The sponsoring charity has final discretion and decision making authority over the administration and management of the donor advised fund. The third option available to you is a charitable trust.
Charitable lead trusts and charitable remainder trusts are referred to as split interest trusts because they maintain both non-charitable and charitable beneficiaries. A CLT allows the charity to receive an income stream for a set period while the heirs get the remaining assets at the end of the term or when the creator passes away. A CRT, on the other hand, generates an income stream for other non-charitable beneficiaries and donors with the remainder of donated assets passing to the designated charity when the creator passes away.
Need support in deciding the right way to pass on assets to your loved ones and charities you care about? Our Pasadena estate planning law office can assist you in answering the key questions you have about charitable giving within your estate.