The California CHARITABLE TRUSTS is a unique type of Trust that suits the purpose of individuals in need a of a tax deduction who also hold assets that have appreciated significantly that are not going to be passed on to family members. It is less flexible than a Living Trust, however in those cases where a portion of the estate is not earmarked for specific person , it may be very useful to those who plan on making including a gift to a charitable cause in their estate planning. Sometimes life insurance is purchased to make up for the money which is not given to family members.
A Charitable Remainder Trust allows the owner of property usually highly appreciated property is utilized to contribute such property to a self-controlled nonprofit Trust. The creators of the trust have the right to draw income from the Trust during their lifetimes, After which the assets will go to their favorite charity. Fortunately in Carlsbad we are blessed with a regional and local community rich with many worthy charitable causes.
During the lifetimes of the owners, there are no taxes until the income is withdrawn by the owners.
The common applications of Charitable trusts are as fallows:
A. owners hold low cost stock on which the capital gains tax will be high. To avoid the tax event the owners contribute the asset to a Charitable Trust. The owners then manage the Trust, investments and assets, ultimately selling those assets tax free.
B. owners set the percentage of income they want, at 5% or more per year, as public policy as in california dictates that the money be released at least at that minimum rate.
C. The creator pays tax only on the money taken out of the Trust each year
As with other types of trusts the creators of the trust are allowed to be the continuing managers. However, the terms of the Charitable Trust are pretty much cast in concrete other than very limited exceptions. There are public and private foundation rules that should be further discussed with your lawyer to determine which type of trust fits a particular donors desires.
Another advantage is a charitable deduction is allowed on current income tax returns for transfers to a Charitable Trust. The deduction is based on your life expectancy and income taken out
The drawback to Charitable Trust is that it cannot be changed even in a dire emergency.
Gifts to the American Diabetes Association
At the law office of Rickard L. Borg we have a policy of making a cash gift to the American Diabetes Association or City of Hope for every trust or will that leaves a significant donation to either diabetes or blood research as several members of the Borg family have experienced blood disorders.
Mr. Borg is a type 2 Diabetic who has taken his diabetes from the time of diagnosis with an A1c score of 9 to a current score of 5.3 as of December 2010. Mr. Borg comes from a long line of medical professionals and is a supporter in the fight against diabetes
Mr. Borg as a member of the board and a supporter of the Carlsbad Library and Arts Foundation