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Charitable Gift Annuity

It allows the donor to provide a gift to charity in exchange for a lifetime annuity. The CGA also creates a current income tax deduction for the value of the gift less the present value of the annuity payments. The contributed property is not included in the donor’s gross estate and the donor is guaranteed a specified annual income for life. The gift does qualify for the gift tax annual exclusion. There are two forms of a Charitable Gift annuity. They are a current gift annuity and a deferred gift annuity. The current gift annuity provides payouts that usually begin within a year. The deferred gift annuity provides a payout at a specified time usually ten years of more. Both techniques qualify for a current year tax deduction. The deferred technique generates future income when the annuitants tax bracket may be lower.

Charitable Remainder Annuity Trusts

These trusts offer flexibility, an income stream for life or a term of years and significant tax benefits. This is an irrevocable tax exempt trust in which assets are placed to provide income during a specific period of time, usually life time or a term not to exceed twenty years. At the end of the period the remaining assets are turned over to a specific charity. Income from the trust is usually a fixed percentage of the fair market value of the assets. This type of trust is very popular because annuities will be able to generate income and will not fluctuate greatly in value like stocks and bonds. The benefits include no capital gains taxes on assets transferred to and sold through the CRAT, the potential to generate substantial income for the donor, flexibility in creating the trust and it creates income tax deductions to the donor.

Charitable Lead Annuity Trusts

Allows the donor to provide a gift to charity while reserving the remainder interest personally. It is an effective way to preserve the contributed asset for future generations and to reduce the donor’s estate. In some situations the CLAT creates a current charitable income tax deduction. This trust requires that a specified income be paid to the designated charity for a specific term. The payment period may be for a specified term or for the life or lives of one or more individuals, usually husband and wife. There are no payments made to any non-charitable beneficiary while the charity is entitled to payments and at the expiration of the payment period the remainder interest is paid back to the donor or his or her estate.

The Irrevocable Life Insurance Trust

It effectively removes the death benefit amount from the total estate value at death if it is set up properly. The word irrevocable does indicate that "all incidents of ownership in the policy must be given up including the cash value.

A-B Trusts

May be used by married couples in cases where their estates are valued greater than $675,000. Essentially, the A-B trust is set up when $675,000 is set up in trust that will be used by the second spouse when the first spouse dies. When the second spouse finally dies $675,000 is exempt from federal estate taxes. The total in this case that has been sheltered from estate taxes is $1,350,000 or the $675,000 exemption for both husband and wife.

Living Trusts

Can help you while you are still alive. There are thousands of people in this country each year that are diagnosed with Alzheimers and other debilitating diseases. A properly designed trust will help manage your assets and make the lives of caregivers, usually children, that much more simple. Consider a case where a parent becomes incapacitated and has several children with different educational backgrounds and personalities. Ideally, each child will have his or her own view as to the method and degree of care you would receive as well as different views and ideas on how to manage your estate and assets. In cases like these it is too often that relationships between siblings are often destroyed and never repaired. If set up properly, a living trust is a very invaluable tool in planning for the future security for yourself and loved ones.

In most cases when the child reaches maturity, at 18 or even 21 years of age they will more than likely mismanage the funds. There have been horror stories of even siblings who when left with a lump sum of cash from a loved one for the benefit of the deceased's children have mismanaged funds through drug and gambling habits. The use of a trust would have prevented such from happening as disbursements from the trust would be made according to your very clear instructions. For example, you may state in the trust that once your child reaches 18 make available a certain sum to pay for college.

Today, many people feel that only the rich and famous need to worry about estate planning and trusts. That is the furthest thing from the truth. Trusts have become an essential part of everyday life for numerous reasons. Trusts when used effectively can help reduce estate taxes, provide for the care of young children and can be used for charitable purposes for the benefit of those in need.

Charitable Gift Annuity

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