While there are a number of estate planning options for those who wish to make charitable gifts, sometimes estate planning tools must address multiple objectives. Charitable lead trusts provide an effective tool for accomplishing the diverse goals of providing a gift to favored charities, leaving a legacy for family, and reducing tax liabilities. While there are a number of forms of charitable trusts that involve gifting the principle assets to the charity, this form of estate planning device provides a stream of income to the selected charitable organization while preserving the principle for one’s loved ones. We have provided answers to common questions about this form of estate planning device.
What is a charitable lead trust?
This form of estate planning tool involves transferring property into the trust which then provides annual or periodic payments to the designated charitable organizations for the duration of the trust. When the trust term expires, the property placed in the trust reverts back to the trust creator or specific parties designated by the party who set up the trust.
Does the fact that I may get the assets back mean that I forfeit tax benefits when using this type of trust?
Since the income payments that are paid out by the trust are distributed for charitable purposes, this form of trust can reduce estate tax, gift tax, and income tax obligations. Even if you have the assets in the trust revert to you when the trust term expires, you may receive a federal income tax deduction in the amount of the payments made from the trust during the tax year that the charitable lead trust is created. Although the income payments from the trust to the charitable organization may be spread over a period of years, you can take advantage of the income tax benefits at the time the trust is set up.
Can I set up a charitable lead trust without an attorney?
While there are non-attorney options for setting up this estate planning mechanism like using standardized forms or relying on computer programs, these approaches are unreliable. The advantage of working with an experienced estate planning lawyer is that you will receive advice tailored to your specific situation about whether this estate planning option is best suited for your purposes. Another benefit of using a proven New Mexico estate planning lawyer is that the trust agreement will be customized by a professional who also can assist you with follow-up steps like properly funding the trust.
The above information is provided to illustrate general principles of law and should not be interpreted as a specific legal opinion on an individual case. You should contact experienced legal counsel to get specific legal advice that is based upon your specific circumstances.
If you have questions about charitable gifts or other estate planning issues, our New Mexico Attorneys at Life Leaf Legal Group, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your specific situation. Call us today to schedule your free consultation at (505) 856-3591 to learn about your rights and options.