Charitable Split Interest Trusts: Case Study

Mary and Jack, a high net worth family, were asking an advice from White about the tax implications if they provide charitable gift each year and whether to donate the proceeds from the sale of the stock or donate the stock to charity directly. The Bradleys’ own a $50 million estate comprised of $40million in securities, $7.5 million of multiple properties and $2.5 million of cash. Their expected wages for the year was $10 million. In 2013, The Bradleys’ has incurred expenses of $1.2 million in item of deduction but were subject to limitation on itemized deduction and their deduction was reduced by $291,000. The Bradleys’ was thought about how they want to dispose their $50 million estate. Two years ago, their daughter has diagnosed with breast
A donor can subdivide their assets into claims on income and claims on principle. One claim could be given to the charity and other claims can be given to their beneficiary. Charitable Split Interest Trusts take on two primary forms which is Charitable Remainder Trust and Charitable Lead Trust depending on which claims provided a charity and which is retained. White was considering structuring their $3million donation into a single-life Charitable Annuity Trust with Jack as the beneficiary. Charitable Remainder Trust was depending on the beneficiary as it could give or estate tax implications. If the sole beneficiaries was named after the donor or his/her spouse, the trust will not give any taxable gifts because a taxpayer could not provide gift to himself and the spouse usually have their own deduction for marital. If the trust was named after any other non-charitable beneficiaries, it can be a taxable gift in the year equaled to the present value of the assets. If the Bradleys’ wishes to provide a dependable lifetime income for his family as well as future support for a specific charitable organization, and minimize estate taxes upon their death, a Charitable Remainder Trusts was a very good