The Law Office of Eden Rose Brown has experience assisting individuals and families with tax and charitable planning. A charitable plan can be set up as part of your revocable living trust planning, coming into existence at the time of your death, or as a stand-alone plan during your lifetime. Below are examples of techniques used in our tax and charitable planning process.
Charitable Lead Trust
The Charitable Lead Trust is a type of charitable trust that can reduce or virtually eliminate all estate tax on wealth passing to heirs. In order to accomplish this goal, you create a trust that grants to a charity or charities, for a set number of years, the first or ‘lead’ right to receive a payment from the trust. At the end of the term of years, your children or grandchildren receive the balance of the trust property’ which often is greater than the amount contributed, free of estate tax in most instances. The remainder interest ultimately passing to the heirs, however, will be affected by the performance of the trust’s investments.
Charitable Lead Annuity Trusts are particularly suited for hard-to-value assets (such as real estate or family limited liability company interests) and assets which are expected to grow rapidly in value.
Charitable Remainder Trust
The Charitable Remainder Trust (‘CRT’) is a type of trust specifically authorized by the Internal Revenue Code. These irrevocable trusts permit you to transfer ownership of assets to the trust in exchange for an income stream to the person or persons of your choice (typically you, your spouse or you and your spouse) for life or for a specified term of up to 20 years. With the most common type of Charitable Remainder Trust, at the end of the term, the balance of the trust property (the ‘remainder interest’) is transferred to a specified charity or charities. Charitable Remainder Trusts reduce estate taxes because you are transferring ownership to the trust of assets that otherwise would be counted for estate tax purposes.
A private foundation may provide a tremendous opportunity for donors to educate family members as to the donors’ philanthropic goals, and may also provide younger family members with a sense of responsibility and stewardship of family wealth. The private foundation may be structured to limit the scope of its charitable activities, by defining the permissible donees for charitable distributions, or may be structured to allow for unlimited charitable activities. Moreover, the private foundation may employ family members (subject to limitations as to reasonable compensation) to coordinate the foundation’s activities for generations to come.
A revocable trust provides no asset protection for the trust maker during his or her life. Upon the death of the trust maker, however, or upon the death of the first spouse to die if it is a joint trust, the trust becomes irrevocable as to the deceased trust maker’s property and can provide asset protection for the beneficiaries, with two important caveats. First, the assets must remain in the trust to provide ongoing asset protection. In other words, once the trustee distributes the assets to a beneficiary, those assets are no longer protected and can be attached by that beneficiary’s creditors. If the beneficiary is married, the distributed assets may also be subject to the spouse’s creditor(s), or they may be available to the former spouse upon divorce.
Trusts for the lifetime of the beneficiaries provide prolonged asset protection for the trust assets. Lifetime trusts also permit your financial advisor to continue to invest the trust assets as you instruct, which can help ensure that trust returns are sufficient to meet your planning objectives.
Additional Asset Protection planning solutions include:
Domestic Asset Protection Trusts
Retirement Plan Trusts
Limited Liability Company