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What are the Benefits of Creating a Charitable Remainder Trust?

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Many philanthropists and volunteers give their time, resources, and money each year to various charitable organizations. As many people know, charitable donations to nonprofits, religious organizations and health nonprofits like St. Jude’s during the previous calendar year are not taxed. In fact, people are able to claim charitable donations as a tax deduction in the following year. But charitable donations are only tax-free when gifts are made while the grantor (sometimes referred to as trustor or settlor) is still living. If the grantor wants to make a large charitable gift to a charity or nonprofit from their estate after they pass away or if they wish to avoid capital gains tax on their investment gains, it is recommended that they create a charitable trust as part of their estate plan.

How to Create a Charitable Remainder Trust

A charitable remainder trust has several tax and estate planning benefits.  Setting up a charitable remainder unitrust allows the settlor to receive a percentage of the value of their initial trust contribution each year. This allows the settlor to gain non-taxed income similar to an annuity.  A charitable remainder annuity trust pays the settlor a fixed amount each year, again as non-taxable income, similar to a fixed annuity. Often this form of trust is used for clients who have large sums of investment shares who want to avoid paying capital gains tax. Routing the investment through a charitable trust avoids capital gain tax, allows the settlor to draw income while still living, and also allows the settlor to donate a substantial sum of the trust remainder to a charitable organization upon their death. It is also crucial that a charitable trust be created to conform with Florida law. The nonprofit beneficiary must be able to receive income distributions from the trust. The grantor can designate a trustee as well as a substitute trustee to manage the trust while the grantor is still living and after they pass. Our attorneys at Bubley & Bubley, P.A. can review additional charitable trust options with you and help you to select a trust that best meets your individual needs.

Challenges to Charitable Allocations in a Will  

Unfortunately, children and beneficiaries of the decedent (the person who passed away) often challenge the provisions of a will when they learn what their allocation is, and believe it is less than what they “deserve”. Some people contest a will based on its validity, and if the grantor was of sound mind and capacity when drafting it. That’s why if you know you want to leave a substantial portion of your estate to a charity, church or nonprofit organization, or if you have concerns regarding your assets and capital gains taxes,  it is a safer and more secure option to set up a charitable trust with your estate attorney. One option to secure future funds to be routed to a charity is to create an LLC or foundation specifically for funds to pass through.  Doing so makes it nearly impossible for a loved one to challenge allocations.

Let Us Help You Today

Whether you are just starting to contemplate estate planning, or if you need assistance creating an irrevocable, revocable or charitable trust, contact our Tampa estate planning attorneys at Bubley & Bubley, P.A. With decades of combined experience serving clients with end-of life planning needs, you can trust us to assist you in creating the estate plan you envisioned. Call today to schedule a consultation.

 

Resource:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0700-0799/0736/Sections/0736.0110.html

https://www.bubleylaw.com/sb-1070-potential-updates-to-estate-probate-law-in-florida/

 

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Bubley & Bubley, P.A. is located in Tampa, FL and serves clients in and around Brandon, Odessa, Tampa, Oldsmar, Land O Lakes, Thonotosassa, Valrico, Wesley Chapel, Lutz, St Petersburg, Plant City & Brooksville, Safety Harbor, Holiday, Trilby, Crystal Beach, Ozona, Apollo Beach, New Port Richey, Clearwater, Tarpon Springs, Port Richey, San Antonio, Spring Hill, Lithia, Pasco County and Pinellas County.

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