Charitable Giving Strategies To Meet Your Clients Objectives
By John S. Budihas
There are ultimately only three possible “beneficiaries” of your clients estate assets: their heirs, their charity of choice or the Internal Revenue Service. Those who fail to plan risk forfeiting not only their right to choose their beneficiary, but may unintentionally pass their assets to the federal government.
Charitable gifting strategies may be a key ingredient in structuring a living estate plan for the owner of a multimillion-dollar estate who wants to achieve a multitude of objectives.
In terms of priority, most people are concerned with their own comfort and continued ability to control their assets. That means ensuring financial independence or the ability to maintain the accustomed standard of living for both spouses for as long as they may live.
The second priority may be wealth preservation or the desire to control and conserve those assets accumulated both during life and at death.
Third is the ability to distribute the right asset, at the right time, in the right amount, to the right beneficiary, and perhaps satisfy philanthropic desires either during life or at death.
And, last but not least is the desire to have adequate liquid dollars available to pay any and all taxes, indebtedness and estate settlement expenses at death–perhaps using an asset such as life insurance that may result in a larger lump sum for distribution.
The art of estate planning is to assist the client to attain most if not all of his or her prioritized objectives, even though some of those objectives may appear to be incompatible with one another. Charitable estate-planning techniques can help achieve most if not all of the above listed estate-planning objectives. Some of these strategies are as follows:
Charitable Remainder Trust (CRT). In addition to satisfying a taxpayers charitable intentions, a CRT can guarantee a supplemental annual income stream to enhance the comfort level and financial security of both spouses over their lifetime. This helps accomplish priority No. 1–financial security for your client.
A qualified CRT can also minimize current income taxes since the taxpayer who itemizes charitable deductions may generally deduct the fair market value of the charitys remainder interest in the CRT in the calendar year the CRT is funded.
The donors control instinct can also be satisfied if he or she is the trustee of the CRT. Family control can continue after the donors death if a family private foundation is named the charitable beneficiary of the CRT. Family members appointed as directors/managers of the foundation can sprinkle its assets among various charitable institutions of their choice over their lifetimes. Additional flexibility can be attained with contingency CRT provisions that terminate a beneficiarys income interest upon certain conditions.