Creation Date: 04/19/2008
From the executive summary of the FPA Journal's online paper Comparing Split-Interest Charitable Trusts:
- Split-interest charitable trusts allow an asset to benefit both charitable and noncharitable beneficiaries, while providing significant tax savings. This article describes charitable lead trusts (CLTs), charitable remainder trusts (CRTs), and pooled income funds (PIFs).
- CLTs make periodic payments to a charity for the trust’s term. At termination, the trust assets are transferred to a noncharitable beneficiary. Donors can deduct the present value of payments to be made by qualified CLTs in the year the trust is funded.
- CRTs provide payments, at least annually, to the donor or a noncharitable beneficiary for a term not to exceed 20 years or an individual’s life. The charity receives the trust assets at termination. In a CRT, the donor receives an income tax deduction for the present value of the remainder interest in the year the trust is funded. Trust annual distributions are taxed to the recipient using a four-tiered approach.
- PIFs are managed by large charities and permit multiple donors to combine their contributions. The donors, or a named beneficiary, receive income from the fund for the remainder of their lives. After the donor’s death, the donated property becomes the property of the charity. In the year a donor contributes to a PIF, the donor can deduct the fair market value of the property for income and gift taxes. All payments received from the fund are taxable as ordinary income.
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Some providers of donor-advised funds also offer split-interest giving options, such as Fidelity's PIF and Schwab's CRTs.
Comments (1)
Ken Schwartz said
at 3:01 pm on Apr 21, 2008
This article is a placeholder. It needs to be rewritten by a legal expert.
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