Gift Tax Planning
Pabian & Russell’s skilled attorneys are adept at helping clients make the most of their charitable contributions. Charitable trusts, donor-advised funds, and private foundations are just a few of the valuable income tax and estate planning strategies that charitably-inclined individuals should consider.
Charitable Gift Tax Strategies
Clients interested in making contributions to the charities they support are wise to consider the following charitable gift tax strategies designed to reduce taxable income and estate taxes while facilitating charitable giving:
Donor Advised Funds (DAFs)
Donor-advised funds have become an increasingly popular tool for individuals, families, and organizations looking to actively support the charities of their choice in a tax-efficient manner. A donor-advised fund offers the opportunity to create a flexible vehicle for charitable giving as an alternative to direct giving or creating a private foundation.
Private foundations are non-profit organizations established by an individual or business. These foundations are typically funded with a single primary donation from the donor, and their funds and programs are managed by its own trustees or directors. Although these organizations do not qualify as public charities by government standards, the bulk of their investment income is disbursed annually to desired charitable activities.
A charitable trust is an irrevocable trust established for charitable purposes that results in a reduction of estate taxes. Assets assigned to these trusts are held and managed by the charity for a set period of time. There are two basic types of charitable trusts:
- Remainder trusts
- Lead trusts
Charitable Remainder Trusts
A charitable remainder trust is a tax-exempt irrevocable trust established to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a set period of time and then donating the remainder of the trust to the designated charities.
Charitable Lead Trusts
Charitable lead trusts are designed to reduce a beneficiary’s taxable income by first donating a portion of the trust’s income to charities and then, after a set period of time, transferring the remainder of the trust to the beneficiaries.