Many of our clients wish to benefit beloved charities and do good works during their lifetime and after death. Littleton Legal PLLC has extensive experience utilizing various advanced legal tools to accomplish your charitable objectives. The most common mechanisms are discussed more fully below, but please contact us to further discuss designing and implementing an estate plan that fits your unique needs and goals.
The private foundation is a charitable entity, commonly used among our high net worth clients. Alternatives include donor advised funds, charitable trusts, and outright gifts.
A private foundation is a private charity, usually run by the family to carry out the family’s charitable goals, minimize taxes, and set their children up in the community as valued and contributing members. Serving on the board helps instill children with a sense of responsibility and stewardship of family wealth.
Often tax planning and charitable planning go hand-in-hand; thus, the private foundation serves as the beneficiary of charitable trusts, business entities, and individual contributions. And, though the well-known Bill and Melinda Gates Foundation is a private foundation, you don’t have to have billions to set up a private foundation. In fact, most foundations are funded with less than $1 million dollars.
Littleton Legal PLLC helps clients like you identify charitable goals and set up a charitable vehicle. If a private foundation is right for you, we’ll draft the charitable mission statement, set up the foundation as a non-profit entity under state law, and obtain tax-exempt status on the federal level as well. We’ll guide you through its establishment, funding, and management.
Certain tax laws give each of us a gift tax exclusion that can be used annually, and there is no gift, estate, or generation-skipping tax when certain transfers are made. Experienced attorneys like those at Littleton Legal PLLC help make the most of your gifts while keeping an eye on the latest tax codes.
Keep in mind, also, that you don’t have to wait until you die to pass assets along to loved ones as gifts. If you’re a parent or grandparent with extra assets, you may want to watch your family enjoy your gifts.
Lifetime gifting provides that opportunity and removes assets from your estate for federal transfer tax purposes.
- Each person can give $15,000 per year to as many individuals as he or she likes.
- Married couples can give $30,000 per year to as many individuals as they’d like.
- Assets which can be discounted leverage the annual gift tax exclusion.
- Life insurance trusts can be funded using the annual gift tax exclusion.
You can actually give much more than the $15,000 without paying any gift tax. Here’s how:
- Superfund 529 plans with 5 years’ worth of exclusions. That’s $75,000 per person or $150,000 per couple at one time.
- Pay tuition directly to an educational institution.
- Pay medical bills directly to the medical provider.
- Use your applicable multi-million-dollar lifetime gift exclusion amount
That’s a lot of gifting and – as you might have guessed – you can give an unlimited amount of assets every year to qualified charities, including your own family foundation.
While we don’t suggest you give any assets away that you might need, if you do have more than you’d like to use yourself, gifting programs are a fun way to reduce taxes and see your loved ones enjoy your generosity.
One of the best ways to minimize or eliminate federal estate and generation-skipping taxes is to use charitable trusts in your estate plan. The Charitable Lead Trust (CLT) is typically used by high net worth families to benefit both charity and the family – and to avoid paying more taxes than necessary.
The benefit of a CLT is that taxes are greatly reduced or eliminated, a favorite charity or perhaps your private foundation is benefited, and your loved ones receive assets tax free. The downside is that there is a delay in getting the assets to your loved ones. That’s the price you pay for the tax benefits.
To avoid a delay in beneficiary access to assets, CLTs are often partnered with their near opposites, the Charitable Remainder Trust (CRT). A CRT is very similar to the CLT, but you or your loved ones receive the income stream for a period of years or an individual’s lifetime first and, then, the lump sum goes to charity. When used together, the family benefits and federal transfer taxes can be minimized or even eliminated, depending on the balance of your goals.
Charitable Lead Trusts (and charitable remainder trusts) can be set up during your lifetime or they can be set up at your death. If they come into being at your death, their provisions are included in your revocable living trust and they are called a “testamentary charitable lead trust” or “testamentary charitable remainder trust.”
All Charitable Lead Trust planning must be done during your lifetime, even if we only create the trust provisions and not the trusts themselves.
The attorneys at Littleton Legal PLLC will help you decide which family, asset protection, tax, and charitable planning is right for you.
Are you volunteering to pay the federal estate and generation-skipping taxes? What about extra income taxes?
If you haven’t incorporated a combination of tax planning and charitable planning into your estate plan, the answer is yes.
One of the best ways to minimize or eliminate such taxes, especially on highly appreciated assets, is to use charitable trusts in your estate plan. The Charitable Remainder Trust (CRT) is used, typically, by high net worth families to benefit both charity and the family – and to avoid paying more income, estate, and generation-skipping taxes than necessary.
The benefit of a CRT is that taxes are minimized, a favorite charity or perhaps your private foundation is benefited, and your loved ones receive an income stream. That income stream lasts for an individual’s lifetime or a period of time, up to 20 years. Then, at the end of the trust term, a lump sum goes to the charity of your choice, not your loved one. That’s the price you pay for significant tax benefits such as a tax deduction upon trust funding and a tiered income stream, reducing total taxes paid.
Often CRTs are paired with their near opposites, the charitable lead trust (CLT). A CLT is very similar to the CRT, but instead of receiving an income stream for a lifetime or a period of years, you or your loved ones receive the lump sum at the end of the trust term. When used together, the family and charity are benefited and taxes are minimized or even eliminated, depending on the balance of your goals.
Charitable Remainder Trusts (and Charitable Lead Trusts) can be set up during your lifetime or they can be set up at your death. If they come into being at your death, their provisions are included in your revocable living trust and they are called a “testamentary charitable remainder trust” or “testamentary charitable lead trust.”
All Charitable Remainder Trust planning must be done during your lifetime even if we only create the trust provisions and not the trust itself.
Littleton Legal PLLC is here to help you decide which family, asset protection, tax, and charitable planning tools are right for you.
Going Through Probate in Tulsa County: What to Expect
If you're serving as a personal representative for a loved one's estate, or if you're…
Before You Go: Estate Planning Peace of Mind for Summer Travelers
This time of year, we start hearing from a familiar group of clients. They have…
What Families and Business Owners Risk When Asset Protection in Oklahoma is Overlooked
Most people assume asset protection is something only the ultra-wealthy need to think about. In…
