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Charitable Giving Is Easier than You Think in an Estate Plan- and May Offer Nice Tax Breaks

| January 02, 2019
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Charitable Giving Is Easier than You Think in an Estate Plan-
and May Offer Nice Tax Breaks

By: Jayne Di Vincenzo AIF ®, CEP ®, President
Lions Bridge Financial Advisors

Many reading this column are involved in our community: giving of time, talents and often mony. That said, yet too few realize that it giving in a different way may qualify for a nice tax break.

What if you still need income from your investments? Then maybe a charitable remainder trust (CRT) could be the right tool for you. These allow a donation of appreciated assets while generating current income. If you have highly appreciated assets (like long held stock or real estate), and are concerned about capital gains, gift, and estate taxes, you may want to consider a CRT. These can provide an income stream and potentially sizeable charitable income tax deduction while benefiting your favorite non-profit while eliminating capital gains taxes on assets placed in the CRT.

CRT are irrevocable, tax-exempt trusts in which you place assets to provide income for you during a specific period of time (e.g., your lifetime or a term not to exceed 20 years). At the end of that period, the remaining assets will be turned over to the charities of your choice.

It is important to note that by establishing a CRT, you are giving up your rights to the assets placed in the trust and your heirs will not inherit any assets placed in your CRT. Some donors offset their gift by purchasing life insurance for heir, which is often tax-free.

There are different options for setting up a charitable contribution through your estate plan. The easiest is a simple bequest through your will. Charitable contributions are 100% deductible from estate taxes.

A CRT must be designed in the form of an annuity trust or a unitrust. The main difference involves income and fair market value of the assets in trust.

Income from an annuity trust is a fixed percentage (not less than 5% or more than 50%) of the initial fair market value of the assets. This is best used with assets able to generate the required income and offer less fluctuation (often bonds). Income is fixed and will not grow as the asset base grows, so the downside is that income may not keep up with inflation.

A unitrust is more flexible, but riskier. Here a donor still receives a fixed percentage (not less than 5% or more than 50%) of the value of assets in the trust (valued annually). The donor receives a fixed percentage of the current fair market value. This may mean income grows, but there is no guarantee of growth. A unitrust allows for additional contributions, whereas the annuity trust does not. Ultimately, the choice between an annuity trust and a unitrust will be dictated by a number of factors best determined by your advisory team.

You might consider other gifting options: a Charitable Lead Trust (a CRT in reverse) or Private Foundation. Many IRA holders are designating a charity as a beneficiary or using required minimum distributions (RMDs) for their charitable donation. Each option should be considered in consultation with your advisor team to see which is best for your situation.
Kindness pays—so see if your generosity may offer tax advantages.


Jayne Di Vincenzo holds her Securities Registrations for the Series 24, 53, 7, 31, 65, 63 with LPL Financial, a Registered Investment Advisor. She also holds her life, health and long-term care licenses. Member FINRA/SIPC.  Jayne has served her clients with advice, financial planning, investments for over 20 years and has three offices in Hampton Roads and is licensed in 25 states. [email protected] or 757-599-9111 and online at

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