Bay Area Estate And Tax Planning Law Firm

The main types of tax incentives for charitable remainder trusts

On Behalf of | Sep 21, 2022 | Blog, Estate Planning, Trusts |

Estate planning allows you to take care of your assets and beneficiaries in California. Some people want part or all of what they leave behind to go to charities. If you plan on donating a considerable amount of money to charity, it’s good to know about charitable remainder trusts and how they may be able to save you money on tax-related expenses.

Saving money on capital gains taxes

For most people, an essential part of estate planning involves stocks and other similar assets. In most cases, selling stocks for profit means that you’ll also have to pay capital gains taxes. But that’s not the case with a charitable remainder trust. This type of trust lets you convert non-income-producing assets with no capital gains taxes.

No estate taxes

Some families pass down property through multiple generations. However, you can also donate this property to charities. The advantage of donating property through a charitable remainder trust is that you won’t have to pay estate taxes on these properties.

Spreading a deduction over multiple years

To soften the blow of tax expenses, it can be wise to spread deductions out over multiple years. With a charitable remainder trust, the IRS lets you deduct this trust’s stored assets at fair market value minus income for beneficiaries. This benefit alone can provide considerable savings, especially if you’re a large donor. Do keep in mind, however, that charitable trusts are often irrevocable, so once you establish this trust, you cannot make changes.

A properly established charitable remainder trust isn’t only a smart way to donate to charity; it also helps you and your beneficiaries avoid large tax bills.