Memphis TN Charitable Planning Lawyers

There are several charitable planning strategies that permit the charitably-inclined client to obtain substantial tax savings. Below is a list of some strategies our estate planning and tax attorneys commonly use in our Memphis and Nashville offices. A summary of each strategy follows the list, or you may click on a strategy to be taken directly to its summary.

OUTRIGHT DISTRIBUTIONS TO CHARITY

Outright gifts can be restricted, such as those directed to a building fund or endowment fund, or unrestricted gifts with no “strings” attached and can be made during lifetime or at death. The charity receives an immediate benefit and the donor is entitled to an income tax deduction, subject to deduction limitations, or the decedent’s estate is entitled to a charitable estate tax deduction. No capital gains tax is due when the asset is subsequently sold by the charity.


CHARITABLE GIFT ANNUITIES

When utilizing a charitable gift annuity, the donor makes a lifetime gift to a charity, but retains the right to income, based on a percentage amount of the gift, for a term of years or for lifetime. The charity receives an immediate benefit and the donor is entitled to an income tax deduction for the present value of the charity’s remainder interest, subject to deduction limitations. The amount contributed is not included in the donor’s taxable estate at death. No capital gains tax is due when the asset is subsequently sold by the charity. Our tax attorneys will assist you with this.


CHARITABLE REMAINDER TRUSTS (CRTs)

A Charitable Remainder Trust allows you to convert a highly appreciated asset into lifetime income without paying capital gains tax when the asset is sold. Since you get a charitable income tax deduction when you fund the trust, it reduces your income taxes now. Since you get a charitable estate tax deduction at death it reduces estate taxes when you die. Also, a charity that has special meaning to you will be helped.

 

You transfer an appreciated asset into an irrevocable trust. This removes the asset from your estate so no estate taxes will be due on it at your death. The trustee then sells the asset at full market value, paying no capital gains tax, and re-invests the proceeds in income producing assets. For the rest of your life or over a certain term, the trust pays you an income. When you die, the remaining trust assets go to the charity, or charities, you have chosen.

 

You can be your own trustee, but you must be sure the trust is administered properly; otherwise, you could lose the tax advantages and/or be penalized. Most people who name themselves as trustee have the paperwork handled by a qualified third party trustee. Some charities are also willing to serve as trustee.


CHARITABLE LEAD TRUSTS (CLTs)

When a Charitable Lead Trust is established, you transfer cash or other assets to a trust. This removes the asset from your estate so no estate taxes will be due on it at your death.

 

A charity you select receives income payments from the trust for the term of the trust. The term of the trust is set by you when the trust is created and can be based on a specified number of years or on your lifetime. When the trust ends, assets in the trust will revert back to your family tax-free.

 

You can be your own trustee, but you must be sure the trust is administered properly; otherwise, you could lose the tax advantages and/or be penalized. Most people who name themselves as trustee have the paperwork handled by a qualified third party trustee. Some charities are also willing to serve as trustee.


PRIVATE FAMILY FOUNDATION

A Private Family Foundation is a charitable organization that receives its funding only from your family. The foundation can make grants for charitable purposes to other non profit organizations rather than conducting its own programs.

 

There are many reasons for forming a Private Family Foundation. A donor may desire to establish a Private Family Foundation to promote philanthropy and to teach future generations about the importance of a commitment to philanthropy. Also, a foundation may create jobs for members of the donor’s family, while enabling the family to become involved in the community. The payments for staff salaries and other necessary expenses incurred in connection with the running of a grant making program would not necessarily be deductible by a donor for tax purposes, absent the use of a Private Family Foundation.

 

The use of a Private Family Foundation provides the donor with more control over the entity than the use of other charitable entities. Because the donor is able to maintain so much control, there are many detailed rules that must be followed in order to not jeopardize the tax exempt status of the foundation.