Charitable Planning

Wichita Charitable Planning Attorney

We Help Your Giving Nature!

Are you known for your giving spirit? Whether you donate your time to help people in need or give a portion of your income to benefit those who could use a windfall, giving is just in your nature. Have you ever heard of a charitable trust? This style of trust is invaluable to the philanthropist, it allows you to continue helping those in need long after you are gone and happens to have certain benefits that your family will appreciate when managing your affairs after you are gone.

We at The Law Office of Andrew Rowe can help you understand the ins and outs of a charitable trust, as well as help you with other important estate planning goals.

What is a Trust?

To understand a charitable trust, it helps to first understand what a trust is. All trust must have the following players when created:

  • A grantor or donor is the person who creates the trust and transfers personal property and assets into it.
  • A trustee is a trusted person who manages the trust and can administer its property and assets when necessary, according to the wishes of the grantor.
  • Beneficiaries are those the grantor would intend to benefit from the assets and property within the trust.

In most instances, the person who creates the trust can act as both the grantor and the trustee. They can create guidelines of succession, meaning if they were to become incapacitated or die, a new trustee would take on management of the trust.

Trusts play many roles in the estate planning process. They can lessen the impact of the probate process, help care for minor children, and are more private, as probate is a public affair while trusts are not.

What is a Charitable Trust?

A charitable trust is a structured legal entity that provides you with a way to support a charity while also benefiting yourself. It involves the same players as above, with the “grantor” being called the “donor” instead.

There are two main types of charitable trust, each with their own subclasses. They are as follows:

  • Charitable remainder trusts provide income to you and the beneficiaries for a period of time and then distribute the remaining assets to the charities you choose. It has two subtypes:
    • Charitable remainder annuity trust (CRAT), which pays a fixed annuity to the beneficiary each year.
    • Charitable remainder unitrust (CRUT), which pays a fixed percentage of the trust assets to the beneficiaries each year.
  • Charitable lead trusts provide income to the charitable organizations of your choice for a period of time, and then the remaining assets are distributed to you or other beneficiaries. It also has two types:
    • Charitable lead annuity trust (CLAT) pays a fixed annuity amount to the charity each year.
    • Charitable lead unitrust pay a fixed percentage of the trust assets to a charity each year.

Charitable trusts are typically irrevocable, meaning once they are created and assets are placed in them, they can not be easily undone or changed. The assets within the trust will be permanently dedicated to those charitable purposes.

What Are the Benefits of a Charitable Trust?

Besides the benefits that such trusts bring to the charitable organizations for which they are created, there are also benefits that you and your family may experience.

Tax Benefits

You can see immediate benefits from tax deductions based on the current value of the assets within the charitable trusts you create. You can actually bypass capital gains taxes when you place certain assets into the trust.

Asset Protection

When you place assets into a charitable trust and abide by the rules around that trust, you can benefit from a level of asset protection by removing those assets from your estate. Assets in charitable trusts are often shielded from creditors because they must adhere to strict legal guidelines.

Estate Planning

You maintain minor control over the assets within the trust and can dictate terms of income distribution and charitable beneficiaries through the trust agreement. This allows you to transmit wealth to your heirs in a tax-efficient way.

Charitable Growth Within Your Community Foundations

Your legacy is more than your wealth and family; it is how you are remembered and respected in your community. When you and your family are recognized as philanthropists, it can cement your place in your community as helpers and givers. You will inspire your community, and your community will rally around you!

What Are Some Drawbacks?

Creating a charitable trust that follows all of the legal guidelines can be a complex process that requires diligence to ensure it always adheres to the strict guidelines that monitor these types of trusts.

Charitable trusts are often irrevocable trusts, which means that once you create and move assets to the trust, you will not be able to change your mind. Doing so can result in legal issues that can incur costs.

One of the major benefits of a charitable trust is the tax benefits. But these benefits take time, and you and your beneficiaries may not see the total value of such tax benefits for a long time. Even worse, when this type of trust is mismanaged or inaccurately reported, or violates tax law, it can result in bigger tax liabilities.

It is important to remember that in order for a charitable trust to be valid, it can only make donations to qualified charities, limiting your choices of beneficiaries.

How Can You Ensure Compliance?

If you are interested in continuing your contributions to a charity after you are gone, or you see the inherent value that a charitable trust offers but are weary of the legal implications involved, then you should call The Law Office of Andrew Rowe to find out how we can help you get the ball rolling, and make sure you giving nature benefits who you want it to!

The Law Office of Andrew Row has the experience necessary to help you create a trust that benefits the public and private charities you wish while alleviating some of the tax burdens you and your family have to pay for your estate.

Call 316-330-4110 to schedule your consultation and find out how charitable giving can actually benefit your estate planning goals!