Florida Estate Planning & Charitable Contributions

A trust is a very common estate planning instrument for people from all walks of life, but what many are unaware of is that there are many different types of trusts. The most common kind is the revocable or living trust, which is usually established by those who have assets they wish to go to a specific person upon their passing. However, another type of trust that is very often seen, especially among those with fewer potential heirs, is a charitable trust. With few friends or family, a person may decide to reward a charity with a significant bequest, and setting up a charitable trust is an efficient and economical way to ensure this happens smoothly.

Why And How

Generally, people choose to create charitable trusts because they believe in a charity’s mission and want to fund their work for the future. However, there are also more tangible benefits that can pass down to them, or at least to their estate. For example, a potential benefit that can come with establishing either type of charitable trust is that assets in trust are generally exempt from federal estate taxes. Depending on the amount of the trust’s value, there may also be gift tax and capital gains tax benefits as well.

In order to set up a charitable trust, the organization in question must qualify as a charity under Sec. 501(c)(3) of the Internal Revenue Code – in other words, it must be set up to benefit public interests, and no part of its proceeds can be for the benefit of any private individual or shareholder. This does mean that certain organizations, such as lobbying groups or private schools, cannot benefit under this type of trust – though you may be able to will assets to them under other means.

Different Varieties

A charitable trust can be created to follow two potential paths; these are referred to as remainder and lead trusts. The major difference between the two is the method by which any potential income is disbursed – in a charitable remainder trust, the income from the trust goes directly to the charity upon the passing of the settlor (the trust’s creator), while the settlor can sell assets during their lifetime. In a charitable lead trust, the charity gets both the income and the proceeds for when the assets are eventually sold. Either one may be appropriate for an individual’s specific situation.

There is also a specific type of charitable remainder trust known as a split interest trust; the most common form of this is when a settlor creates a trust that wills the income to their children or other family beneficiaries during their lifetimes, with the remainder to go to a charitable beneficiary afterward. It is important, if you elect to choose this type of trust, that you be aware that the fiduciary duties of a split interest trustee are also split – a duty is owed both to the settlor and to the charitable beneficiaries. This can land a trustee in hot water if that duty is breached.

Contact A Naples Estate Planning Attorney

If you have questions, concerns or just want to set up a complimentary consultation to discuss your personal legal issues in a confidential setting, contact James R. Nici, the Managing Partner of Nici Law Firm, a Naples estate planning attorney with almost 30 years of legal experience.  This may be the first step toward ensuring all is how you want it to be going forward. Contact our offices today via our website, or on the telephone at 239-449-6150, to schedule your complimentary consultation.

Resources:

flsenate.gov/Laws/Statutes/2018/0736.1203

irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations