Both individuals and businesses make donations to charities. While donations are generally always welcomed, there are financial implications and considerations surrounding a donation that must be considered. A donation does not need to be an outright gift; there are other options available for donation purposes. It can be beneficial to set up a charitable remainder trust to donate to charity. A charitable remainder trust is an instrument that provides for donations to charity, while still allowing the donor to make income off of the property in the trust. A charitable remainder trust is an essential part of a financial plan that should be considered before making a large charitable donation or gift.
The Basics of Charitable Remainder Trusts
A charitable remainder trust is made by the settlor (the person setting up the trust) and transferring the property that is intended to be in the trust into the trust. The charity intended to receive proceeds from the trust is the trustee. The principal of the trust is invested and the settlor receives a portion of the trust in the form of an annuity. If the settlor dies, or the period of time specified for the trust elapses, the remainder of the trust is then distributed to the charity.
A charitable remainder trust is irrevocable, meaning that the trust cann ot be changed. When the property or assets are transferred into the trust, the trust is then the owner of the assets or property. Legal control of the property is transferred the trust. The charity must be an approved charity. Approved charities are usually those that are a tax-exempt organization under IRS definitions.
Types of Trusts
There are two main types of charitable remainder trusts:
- Charitable Remainder Unitrust: The annuity amount that is paid to the settlor is calculated annually as a percentage of the fair market value of the property donated in the trust.
- Charitable Remainder Annuity Trust: The annuity amount is a fixed percentage, meaning the settlor receives the same amount throughout the life of the trust
Benefits of a Charitable Remainder Trust
There are many reasons you might choose to set up a charitable remainder trust for donations.
- Tax Breaks: There are tax implications of a charitable remainder trust. The settlor is able to take a deduction over five years for the value of the gift being given through the trust. Additionally, there are no capital gains tax when the asset or property is sold.
- Receiving Income: The settlor is able to receive income over the life of the trust.
- Pursuing Philanthropic Goals: The settlor is encouraged to make charitable contributions, but is able to still generate income for themselves.
- Creditor Protection: Assets in the trust are generally protected from any creditors.
If you want to set up a charitable remainder trust, consult with an experienced attorney at the Law Office of Kris Mukherji. All of the benefits of the trust do not eliminate the complex process of setting up the trust. Contact us today to get your trust set up in the correct manner.Read More
An asset protection trust is a tool that is used to hold assets in a separate vehicle so that they cannot be taken by creditors. When an issue arises that could result in a lawsuit, the party seeking compensation will try to sue the party with the deepest pockets. An asset protection trust is an option for assets to be legally held in a separate tool so that the owner can still enjoy the benefits of the assets, but does not have direct ownership. There is both Domestic Asset Protection Trusts (DAPT) and Foreign Asset Protection Trusts (FATP). There are many advantages to an asset protection trust.
Legal Opportunity to Protect Assets
When facing a lawsuit and the possibility to paying a large sum of damages, there may be the temptation to conceal assets. This is illegal, and failure to disclose assets during a lawsuit could be considered perjury. An asset protection trust allows the owner to transfer ownership of their assets and avoid criminal charges. Creditors do extensive research to find assets. If you think that you will be able to successfully hide assets, you are wrong and will likely be caught. It is best to utilize legal means of asset protection.
Becoming a Less Favorable Subject of a Lawsuit
When someone is filing a lawsuit, they are likely going to target the party with the deepest pockets. When your assets are placed in an asset protection trust, you become a less favorable target for lawsuits. If the party being sued does not have assets that are available for creditors, the likelihood of being sued decreases. Plaintiff’s attorneys in civil lawsuits often work with a contingency agreement in place. This means that they do not collect money upfront for work to be completed, but instead will take a percentage of the damages awarded. The plaintiff’s attorney will likely conduct a preliminary search before taking on a case. If the attorney discovers the adverse party does not have assets to collect upon, then he or she is not likely to take the case.
The motivation behind most lawsuits is money. Having less money or fewer assets than other parties involved in a case may put you at an advantage. The less money you have, the less likely you are to be pegged an easy target to collect upon at the end of a lawsuit.
Hire an Experienced Asset Protection Attorney
We live in a litigious society. No one is immune to lawsuits. You do not have to be a billionaire to be concerned with protecting your assets and wealth. Speaking with an asset protection attorney can be a life-changing move. The attorney at the Law Office of Kris Mukherji is a member of the Asset Protection Council. This is a group of attorneys, CPAs, and Financial Advisors committed to asset protection. Contact us today to find out how we can help you protect your assets.Read More