Effective tax and estate planning is often about accounting for trade-offs. Depending on what is included in your particular estate, charitable giving may offer a trade-off that maximizes benefits for you and your family. It is necessary to use the right legal instruments if you intend to make a positive difference in the world while also protecting your estate.
One question that often comes up in this kind of planning is whether or not to create a charitable remainder unitrust, often called a CRUT, or make a lump sum donation to a nonprofit. The tax implications of each of these options depends on the details of your particular estate. A tax and estate planning attorney can assess your situation and help you decide whether it makes sense, in terms of tax savings and positive results for benefit recipients, to pay for the administration of a trust or make a lump sum donation.
Setting up a private foundation is another option for meeting your philanthropic goals while also protecting your estate from tax obligations. However, creating a private charitable foundation involves costs that must be accounted for now and in the future, and it is important to have skilled legal and accounting guidance before embarking on such an endeavor.
If your assets include securities which you intend to sell to fund a charitable trust, then you should consult with a legal professional about the implications of the capital gains tax.
Tax law attorney Connie Yi offers guidance in all legal and accounting aspects of charitable planning in California. To learn more, please visit our Charitable Planning overview.