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30January

Charitable Trusts: a Smart Idea for Any Philanthropist

Why a Charitable Trust is the Perfect Way to Avoid Capital Gains Tax

Charitable Trusts: a Smart Idea for Any Philanthropist

Charitable trusts are a smart approach for anyone seeking to increase philanthropy while simultaneously lowering their tax burden. You can give more to your desired charity without worrying about a high tax bill on a sale of assets: rental property, second home, a business or similar event.

Charitable trusts allow you to move assets to a trust that you can direct for the good of a charitable organization. The assets are protected against capital gain taxes, allowing there to be more assets to produce income. You can direct the income to yourself, family or others while the asset base continues to grow.

These contributed assets might be rental properties, private residences, or business holdings.

Since 1969, tax code has allowed capital gains to be split or redirected to good causes, reducing your level of taxation.

In effect, you choose if your money goes to the tax coffers or to a meaningful cause you wish to impact.

Before you sell your asset, you can create a charitable trust (you can be the trustee) through the help of your wealth management and tax advisors. You then can transfer your asset to this new trust.

There are a number of charitable trust vehicles for accomplishing this. Several of these trusts are where you can receive income and make social impact at the same time and get near-term tax relief.

According to current law, any trust can qualify as charitable as long as it meets one of these goals:

  • to relieve poverty
  • to advance education
  • to advance religion
  • to promote health
  • for government or municipal purposes
  • Another purpose that, if accomplished, would benefit the community

For Bravas in particular, this topic is particularly relevant.

One of the owners discussed the possibility of achieving a goal of starting major funding for a multi-million dollar live-in care facility for sex-trafficked victims in San Diego County– a cause well worth supporting.

By moving real estate and business ownership into an LLC that ultimately funds the trust, a owner is able to meet long-term income goals and providing a basis for developing a Ranch setting devoted to assisting victims of sex trafficking.

The trust allows over 35% of the gain (about the normal taxes in this situation) to be used in the basis for the trust.

The result of that exploration was profound to say the least. We encourage you to ask your wealth management advisors what they see in this for your situation and favorite cause or charity.

If you have a cause that you want to leave a legacy with, this is the perfect time to dig deeper into the possibilities.

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Posted in Philanthropy, Life

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