If there is an organization or charity that you support financially, as a Cary trusts lawyer, I would urge you to consider setting up a charitable trust.  A charitable trust allows you to give money to an organization whose work you admire and support, but there is also an additional benefit in that you may be able to reduce your estate taxes.

One way that people use charitable trusts is to set aside assets to produce income while they are alive, with the remainder going to charity when they pass away.  This allows them to receive tax benefits while they are still living from a gift that will be made when they die.  In this scenario, both the donor and the charity will benefit.

There are two main types of charitable trusts.  They are:

• Charitable lead trust. You can use a charitable lead trust to make a series of payments to a charitable organization while you are alive.  At some point in the future the remaining assets in the trust either given back to you or transferred to someone that you select as beneficiary.  In a way, the donor is lending the assets to the charity for a period of time during which the charity can use the income produced by the assets.

• Charitable remainder trust. In this type of trust, you set up two sets of beneficiaries called income beneficiaries and remainder beneficiaries.  The income beneficiaries, typically the trust owner and/or his or her family, receive income from the assets in the trust during their lifetimes.  When the beneficiaries pass away, all remaining assets are given to the charity who is the remainder beneficiary.  This option has the added benefit of missing estate taxes entirely.

The rules for these types of trusts are very complex.  If you are interested in charitable trusts, I encourage you to seek out a qualified trusts attorney and tax advisor who can guide you through the process.

There are a variety of reasons that people in Cary seek out a qualified estate planning lawyer.  There’s the need to provide for your heirs or to protect them from tax penalties, for example.  But, many people are discovering that an estate planning lawyer can also help them develop the legacy they wish to leave behind.  Planning now can help you ensure that your beliefs and values are not only upheld, but even advanced by the choices you make for your estate.

While creating a plan is important for your family, there are many other ways to use your worldly wealth.  In an age when people are becoming more introspective and choosing to live their ideals, it is comforting and even exciting to know that you can continue to do so after you are gone.  It’s not just about donating money to a good cause, it’s about knowing that your life has made an impact on those people and ideals that are most important to you.

Creating a legacy with the help of your Cary estate planning lawyer also affects those who knew you in life.  Children, grandchildren, and other significant people are able to see your example of grace and generosity.  They will remember your actions with pride and will hopefully follow in your footsteps to support your cause or to take up one of their own.  That is the true meaning of a “legacy.”

Defining Your Legacy

While a skilled estate planning lawyer will be able to help with the details, creating a fitting legacy certainly begins with you.  The first step is to take a look at your own values and interests.  What are you passionate about and why?  Perhaps you are an animal lover or a cancer survivor or a bicycle enthusiast.  The most important aspect of creating a true legacy is to choose a cause that truly speaks to your heart.

Your contribution, no matter how large or small, may not be enough to find a cure for a disease or eradicate animal cruelty, but by honing in on your cause, you can find ways to make a significant impact.  Perhaps you have enough material wealth to donate a piece of cutting-edge medical equipment to your hospital’s oncology department.  Or maybe your wealth will allow you to pay for new infrastructure to support the expansion and growth of your favorite cause.

Of course, you may have a smaller contribution to make, but it can still be put to amazing uses.  Offsetting the cost of adoption for a few animals at the local shelter may not seem like a “grand gesture,” but for the families and pets adopted, it will mean the world.  If you are an enthusiast or collector, how could your physical assets benefit others?  Could you contribute your prized art collection to a museum or donate your bike collection to a nonprofit that provides them to low-income children?

Setting up a legacy with your Cary estate planning lawyer does not need to be all about money.  It’s about preserving part of your spirit and passion in ways that you are able.  It’s about knowing that you’ve done something important with your life.  It’s also about being someone that future generations will remember with pride and respect and inspiring them to create legacies of their own.

As a wills lawyer in Cary, it is always gratifying to see clients who are both able and willing to use their assets to support their favorite cause or charity through a will or trust.  Even small gifts can have a large impact, and many people are taking this into consideration during their estate planning these days.  Working with a reputable wills lawyer in Cary can help you ensure that you are meeting the necessary requirements so that your gift, no matter the size, will have the most impact.

There are countless reasons to designate a charity when planning your will.  In many cases, the individual simply wants to use some of his or her estate to further a cause that is near and dear to his or her heart.  This can come in the form of a financial contribution, the transfer of real estate, or even the donation of personal items that will further the charity’s mission.

From a more pragmatic point of view, some people choose this route in part because of the tax-exempt status of most nonprofit organizations.  They know that their gift will not be subjected to “death taxes” or other laws that would decrease the overall value of what they have to give.  What we have created or earned during life is a significant source of pride, and many people derive more satisfaction from knowing that it will pass fully to their charity of choice.

Some of the most common ways to remember a charity in your will include:

• A specific sum of money
• A certain class of property, such as stocks
• A specific asset such as an automobile
• A percentage of the “residue” after other items have been distributed to beneficiaries
• The remainder after debts, expenses, and bequests have been made
• A contingent bequest (if a beneficiary does not survive you, his or her portion would go to the charity)

There are specific rules and regulations that must be followed to guarantee that your gift will make it smoothly into the hands of the intended recipient.  For example, it is helpful, if not necessary, to identify the organization by its full legal name.  There is also some typical wording that can help make your wishes clear and easy to follow, as well.  Again, an experienced wills lawyer will be able to guide and direct you in the process.

The following article originally appeared in an issue of Planning Partners Press, a free newsletter provided courtesy of Carolina Family Estate Planning to Triangle-area financial professionals.  If you are a financial professional that would like to learn more, please click here to request a subscription.

Do you have a client with large income this year? The current low-interest rate environment is creating an opportunity for clients with charitable desires to “have their cake and eat it too” with Charitable Lead Annuity Trusts (CLAT).

In a CLAT, the client makes a transfer to a trust, the trustee then makes annual payments to a charity for a fixed number of years. After those years are up, what ever is left in the trust can go to the client’s family.

If the trust is set up as a Grantor CLAT, the client can take a charitable contribution deduction for a portion of the amount transferred to the trust. The deductible amount is the present value of the annual payments to charity. The current (November 2011) interest rate for the present value calculation is 1.4%. The CLAT is a grantor trust, so the client will be paying the income tax on any trust income in during the charitable distribution term with no reimbursement from the trust.

What does this mean in real-life terms? A Grantor CLAT with 15 annual payments of 4% of the amount transferred will result in a charitable deduction of 53.78% of the amount transferred.

A client could receive a $53,780.00 charitable deduction for $100,000.00 transferred to a trust with a $4,000.00 annual distribution to charity for 15 years. And at the end of the 15 years whatever is left in the trust can either come back to the client or go to the client’s children.

So, if the trustee can get 4% or better per year annual growth on the trust, $100,000.00, or more, will come back to the children. And the value of that gift to the children (for gift tax purposes) is $46,220. So this also presents an opportunity to leverage gifting to children.

If the annual charity payments go to a donor advised fund, the trust does not have to be locked into one charity. The client can use the donor advised fund to direct payments to different charities, when the client sees fit.

As the client’s trusted advisor, you could have an opportunity to partner with a local Community Foundation that has a donor advised fund. This could be a “win” for the client, the advisor, the local Community Foundation, and the communities where you all live and work.

This is a brief overview of the Grantor CLAT. If you have a client who might benefit from this strategy, you should get them together with a knowledgeable estate planning attorney who can confirm the numbers we have presented here, and who can help your client determine if it fits their particular situation.

As the holidays approach, I’d like to encourage everyone to take a few minutes to discuss your family’s philanthropic goals.  The holidays are a great time to start a new family tradition and to discuss the values important to each member of your family while sharing stories of how your parents, grandparents and other family members came together to help others in need.  By combining efforts, families can create opportunities for family giving that go beyond mere financial donations.  To help your family begin the process of creating a family giving plan, we’ve posted a downloadable Charitable Gift Multiplier Guide on our website.  Simply go to: www.CharitableGiftGuide.com and download the free Guide and we’ll help your family walk through the process of multiplying your impact with truly inspired giving.