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How to avoid estate tax and give to charity

On Behalf of | Jun 26, 2015 | Inheritance And Estate Tax |

Many New Jersey families have amassed a considerable amount of wealth. When considering estate planning options, many of these families are looking for ways to minimize their estate tax obligation while also allowing their wealth to have a positive impact, both for their heirs and for society in general. One option that meets both of those objectives is the creation of a family foundation funded by a charitable trust.

With the right structuring, a charitable trust can be created that has a predetermined period of viability. The trust is funded in much the same way as any other trust — by means of cash, stocks, bonds or other assets. The trust pays the foundation annually in the form of an annuity. The family foundation, which is created at the same time as the funding trust, is tasked with determining how the charitable distributions will be made. At least 5 percent of the trust’s assets must be distributed to various charitable organizations.

When the trust expires, any assets remaining are distributed to the named beneficiaries. Those assets pass free from any form of income, gift or estate tax. Because the family members have an interest in the foundation, they are encouraged to take part in the charitable efforts. In this way, the entire family can be taught the importance of charitable giving, money management and responsible philanthropy.

A family foundation, in conjunction with a charitable trust, is a good solution for New Jersey families who are interested in passing down more than just wealth. By involving one or more generations in the management aspects of charitable giving, philanthropy can become a family tradition. In the process, families can pass down wealth without incurring income, gift or estate tax obligations.

Source: thestreet.com, “Why Charitable Donations Are Great for Your Retirement and Estate Planning“, Jason Notte, June 12, 2015