A common goal of estate planning to avoid estate and gift taxes. A charitable lead trust (CLT) is one tool that can accomplish this objective. Although less familiar than charitable remainder trusts, CLTs can meet many of a donor’s tax, financial, and non-financial goals all in the context of making a charitable gift. For example, a CLT may be used to accomplish one or more of the following:
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This is Part 3 of a 3-part series.
This is Part 2 of a 3-Part series on Charitable Gifts of Life Insurance. (Catch-up with Part 1). In this post, we will focus on policy suitability and claiming the charitable deduction and then wrap up with a Case Study. Part 3 will describe a client who gave an existing policy and a client who gave cash to a charity, which then purchased a new life insurance policy.
The winds of change blow constantly across the philanthropic landscape. Legislation, donor transparency, even social media, have swept through the industry at different times to shake-up the status quo. Here at Renaissance we decided it was time to kick-up a little dust for a cause we strongly believe is not getting the attention it deserves: the hyphen.
- DAFs are easy to create (most DAFs are created by completing a brief application);
- DAFs are flexible;
- Most organizations that sponsor DAF programs accept contributions of not only cash, but also marketable securities and may accept real property and closely-held business interests;
- Many DAF programs offer an array of investment options and support a variety of grantmaking approaches;
- Unlike grants from private foundations, grants from a DAF can be truly anonymous;
- Donors frequently contribute appreciated assets because they are allowed a deduction for the full value of the gift while avoiding recognizing the capital gain when the Sponsor sells the contributed assets; and
- A gift to a DAF is a gift to a public charity, which qualifies for maximum deductibility.
Suitability Key to Utilizing a CRT to Sell a Business
In Part 1 of this two-part series, we met a business owner confronted with the need to reduce the tax bite arising from implementing an exit strategy from his family business. We introduced a CRT as a component of an overall strategy to avoid capital gains and net investment income tax, create a significant income tax deduction, provide the business owner with income for life, and fund a significant charitable gift at death. In Part 2, we will discuss four suitability considerations in creating a CRT and explore ways to avoid the two most common hazards encountered when using a CRT to sell a business.