Charitable trusts can be a smart and meaningful way to give back to your community and support the causes you care about. They can also offer a number of financial benefits, including reducing capital gains tax and estate tax.

What is a charitable trust?

A charitable trust is a legal entity that is created to manage assets for the benefit of one or more charities. The assets in the trust can be used to support a variety of charitable causes, such as education, healthcare, environmental protection, and the arts.

Why use a charitable trust?

There are many reasons why you might want to consider using a charitable trust. Some of the most common benefits include:

• Tax breaks: Charitable trusts can provide you with significant tax breaks. When you donate assets to a charitable trust, you may be able to deduct a portion of the donation from your income taxes. You may also be able to reduce the amount of estate taxes your heirs owe when you pass away.

• • Capital Gains - charitable trusts can help you to reduce your capital gains tax liability. When you donate assets to a charitable trust, you may be able to deduct a portion of the donation from your income taxes. This can be especially beneficial if you are donating long-term appreciated assets, such as stocks or real estate.

• • Estate Tax - charitable trusts can also be used to reduce your estate tax liability. When you create a charitable trust, you are essentially removing assets from your estate. This can help to reduce the size of your estate and reduce the amount of estate taxes that your heirs owe when you pass away.

• Estate planning: Charitable trusts can be used as part of your estate planning strategy. By transferring assets to a charitable trust, you can reduce the size of your taxable estate and help ensure that your assets are distributed according to your wishes.

• Legacy building: Charitable trusts can be a way to create a lasting legacy and make a real difference in the world. By supporting the charities you care about through a charitable trust, you can help to ensure that their important work continues for generations to come.

Types of charitable trusts

There are two main types of charitable trusts: charitable remainder trusts (CRTs) and charitable lead trusts (CLTs).

• Charitable remainder trusts (CRTs): A CRT is designed to provide you with income for a specified period of time or for the rest of your life. After the income period ends, the remaining assets in the trust are donated to your chosen charities.

• Charitable lead trusts (CLTs): A CLT is designed to provide income to one or more charities for a specified period of time. After the income period ends, the remaining assets in the trust are returned to you or your beneficiaries. A charitable lead trust (CLT) is a type of charitable trust that is designed to reduce estate taxes. A CLT is created with the intention of giving a specific amount of money or assets to a charity for a set period of time, after which the remaining assets are returned to the donor or their beneficiaries.

CLTs can be a very effective way to reduce estate taxes because they allow donors to remove assets from their estate for a period of time without giving them up forever. This can help to reduce the size of the donor's estate and reduce the amount of estate taxes that their heirs owe when they pass away.

Which type of charitable trust is right for you?

The best type of charitable trust for you will depend on your individual circumstances and financial goals. If you are looking for a way to generate income while also supporting your favorite charities, a CRT may be a good option for you. If you are looking for a way to make a significant gift to charity without reducing your current income, a CLT may be a better choice.

How to create a charitable trust

Creating a charitable trust can be a complex process, so it is important to consult with an experienced estate planning attorney. The attorney can help you to choose the right type of trust for your needs and draft the necessary legal documents.

Orange County, California charitable trusts

By way of example (some of these might be from much larger estates), Orange County is home to a number of charitable trusts that support a wide range of causes. Some of the most notable charitable trusts in Orange County include:

• The Orange County Community Foundation
• The Irvine Foundation
• The James Irvine Foundation
• The Argyros Foundation
• The Segerstrom Foundation

Case example:

John Doe is a successful businessman who has owned a private company for many years. The company has grown significantly over the years, and John's assets in the company are now worth $1 million. John is considering selling the company, but he is concerned about the capital gains tax liability he will face.

John decides to create a charitable remainder trust (CRT). He transfers $500,000 of his assets in the company to the CRT. The CRT will provide John with an income for the rest of his life. After John passes away, the remaining assets in the CRT will be donated to his favorite charity.

The CRT allows John to reduce his capital gains tax liability by $100,000. He is also able to avoid paying estate taxes on the assets in the CRT. Further, John uses a Wealth Replacement Trust (WPT) to ensure the amount that goes to charity is replaced to his heirs and delivered tax free to them.

The Law Office of James Burns

The Law Office of James Burns is a leading estate planning law firm in Orange County, California. Attorney James Burns has extensive experience in helping clients to create charitable trusts and other estate planning vehicles. If you are interested in learning more about charitable trusts, contact the Law Office of James Burns today at 949-305-9642.

Conclusion

Charitable trusts can be a smart and meaningful way to give back to your community and support the causes you care about. If you are considering using a charitable trust, be sure to consult with an experienced estate planning attorney to discuss your individual needs and goals.

Here are some additional thoughts on the benefits of using charitable trusts, that an Orange County or California resident could consider:

• Charitable trusts can help you to support the local charities that are important to you. Orange County is home to a wide range of charitable organizations, from those that focus on basic needs such as food and shelter to those that support the arts, education, and environmental protection. By creating a charitable trust, you can ensure that your assets are used to support the causes that you care about most.

• Charitable trusts can be a way to reduce your tax burden. When you donate assets to a charitable trust, you may be able to deduct a portion of the donation from your income taxes. This can help you to save money on taxes and increase the amount of money that is available to support the causes.

Charitable trusts can be a smart and meaningful way to give back to your community and support the causes you care about. They can also offer a number of financial benefits, including reducing capital gains tax and estate tax. If you are considering using a charitable trust, be sure to consult with an experienced estate planning attorney to discuss your individual needs and goals.