As you know from our recent articles in the Bulletin, the Planned Giving Committee is actively exploring the many creative ways that congregants can maximize the impact of their charitable gifts to TIC. There are many tax advantaged techniques that can enable you to donate more to TIC while retaining many of the benefits for yourself and your family. You may be surprised how “painless” it can be to donate to TIC.

Two of the most effective ways for you to donate to TIC are the Charitable Lead Trust and the Charitable Remainder Trust. In addition to providing you with potentially substantial immediate tax deductions, these two techniques can be coordinated with your personal estate plans to enable you to transfer gifts to family members on a “discounted” basis.

A Charitable Lead Trust(CLT) is created by transferring cash or other assets to a trust. The trust provides that TIC receives a fixed annuity payment from the trust each year for any number of years you specify. At the end of that term, all of the assets remaining in the trust are transferred to the non-charitable remainder person (or persons) that you specified when you set up the trust. The assets remaining at the end of the term will depend on the size of the annuity and the investment performance of the trust assets.

One of the biggest advantages of a CLT is that you receive an immediate (and potentially substantial) income tax deduction. The deduction is equal to the present value of the payments to TIC. In the subsequent years you pay income tax on the income earned by the trust (but paid to TIC). The acceleration of the charitable deduction can be extremely effective if your tax bracket is particularly high in the current year or if you anticipate that your bracket is likely to go down in future years.

Another significant benefit of a CLT is that it allows a “discounted” gift to family members. This is because the gift to the noncharitable beneficiary of the trust assets is discounted since the assets will not be received by them until some years in the future.

In summary, a CLT is an excellent charitable technique if you are looking for a large current tax deduction (e.g. you expect a particularly large amount of taxable income in the current year) and you also want to leave some of your assets to children or grandchildren on a tax advantaged basis.

A second excellent technique is the Charitable Remainder Trust(CRT). A CRT is also created by transferring cash or other assets to a trust. However, for a CRT, the trust provides that either you, your spouse or some other noncharitable beneficiaries receive a fixed annuity payment from the trust each year for the number of years you specify. At the end of that term, all of the assets remaining in the trust are transferred to TIC. The assets remaining at the end of the term will depend on the size of the annuity and the investment performance of the trust assets.

As in the case of the CLT, establishing a CRT will also provide you with an immediate (and potentially substantial) income tax deduction. The deduction is equal to the present value of the amount anticipated to be received by TIC at the end of the trust term. A CRT also enables you to gift an income stream to a family member(s) on a “discounted” basis.

A very substantial added benefit of the CRT is that it can be funded with substantially appreciated property. The lifetime benefits of a CRT may relieve much of the tax “burden” associated with these kinds of assets resulting in even more benefit for you and for your family. For example, a CRT is an excellent and tax efficient way to create immediate cash flow for yourself if you have significantly appreciated stock that is not yielding income (ie. it’s not paying a dividend).

For individuals who are not comfortable parting with substantial assets during their lifetimes, each of these techniques can also be incorporated in a Will to take effect only at death.

The table below illustrates sample benefits of a lifetime CLT and CRT.

Members of the Planned Giving Committee have agreed to donate their services to prepare the necessary trust documents and tax returns at no cost to the donor. Of course, congregants are also urged to consult their professional advisors when considering planned giving transactions.

For further information, please contact Stephen Galowitz

Illustration of Charitable Trusts
	Charitable Lead Trust	Charitable Remainder Trust
Amount Put in Trust	$50,000	$50,000
Trust Term	10 Years	10 Years
Annual Payout During Term	8%	6%
Immediate Tax Deduction	$32,444	$26,145