News for Professional Advisors

As we navigate the evolving landscape of planned giving, it is crucial to explore the strategic advantages of Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs).

Charitable Lead Trusts (CLTs) and Donor Advised Funds (DAFs)

A CLT is an irrevocable trust where the donor transfers assets to a trust that generates a current income, or “lead,” payable to one or multiple charities. The remainder interest either reverts to the donor or passes to another non-charitable beneficiary, often the donor’s heirs. Utilizing a Donor Advised Fund (DAF) as the lead beneficiary of a CLT can streamline the charitable giving process and provide several advantages:

• Flexibility in Grantmaking: By designating a DAF as the lead beneficiary, your clients can recommend grants to various charities over time, allowing for adaptability in their philanthropic goals and the ability to respond to current needs
• Administrative Ease: A DAF simplifies the administration of charitable distributions, ensuring compliance and efficient management of the trust’s charitable interests.
• Enhanced Impact: The Community Foundation’s expertise in local charitable needs can help direct funds to high-impact areas, aligning with the donor’s values and intentions.

Charitable Remainder Trusts (CRTs) and Testamentary Agreements

CRTs are powerful tools for clients looking to convert appreciated assets into a lifetime income stream while deferring capital gains taxes. A testamentary CRT, established through a client’s will, can be particularly effective. This deferred approach allows clients to update their charitable intentions over their lifetime, ensuring their legacy reflects their evolving philanthropic priorities.

• Tax Efficiency: CRTs provide a charitable deduction during lifetime and defer capital gains taxes, making them attractive for clients with highly appreciated assets.
• Income Stream: Clients receive a steady income stream, which can be particularly beneficial in retirement planning.
• Legacy Planning: A testamentary CRT allows clients to make adjustments to their charitable beneficiaries, ensuring their legacy remains relevant and impactful.

Integrating DAFs with CLTs and utilizing testamentary CRTs offers a robust strategy for planned giving. These approaches provide flexibility, tax efficiency, and the ability to adapt to changing philanthropic goals. As professional advisors, guiding your clients through these sophisticated tools can significantly enhance their charitable impact and financial planning.