Philanthropy

Private foundations can be a great way to involve the whole family in charitable giving. Each private foundation is a tax-exempt organization, so its formation and operation must meet all the requirements to qualify for tax-exempt status. We advise the client through all of this, and we look carefully at how the foundation will be funded, whether that will happen during lifetime or at death, to determine the tax benefits and confirm that the foundation will qualify as tax-exempt. We also have experience in preparing the filings with the IRS to qualify the private foundation as a tax-exempt entity after formation.

If a client wants to make gifts to charity but also wants to benefit family members from the same property, a split-interest gift might be a great option.  There are two types of split interest gifts, one where the charity receives the remainder of the property at the end of a term, which is referred to as a “charitable remainder trust” and another where the charity is the initial income beneficiary and the remaining property passes to individuals at the end of the term, which is referred to as a “charitable lead trust”.  These trusts qualify for certain charitable deductions, so they can provide great tax leverage on gifts to individuals while also serving the greater good.  Both of these split interest structures are discussed below.

With a charitable remainder trust (“CRT”), the income generated by the trust is distributed to non-charitable beneficiaries (for example family members) for a term and at the end of the term, the remaining property goes to charity.  At the time of establishing and funding a CRT, the donor receives an income tax charitable deduction for the current value of the remainder interest that will pass to charity.  The term for a CRT can be for a period of years or for an individual beneficiary’s lifetime. There are multiple versions of a CRT, such as a CRAT, CRUT, and a NIMCRUT, each of which has its own characteristics, including how the payment amounts to the individual beneficiary are calculated.  We can advise on which version would be best for you depending upon your specific goals.

With a charitable lead trust (“CLT”) the charity receives the income generated by the property held in the CLT and at the end of the term, the reminder passes to the non-charitable beneficiaries of the trust.  This option is often popular with clients who want to see the charity immediately benefit from the CLT and are able to forego the interest associated with the gifted property for the trust term.  The charitable tax deduction (income, gift, or estate) available to the donor establishing and funding a CLT will depend upon how the trust is structured.  Like CRTs, CLTs also come in multiple versions with their own characteristics, such as CLAT and CLUT.  We can advise on which version would be best for you depending upon your specific goals.

When a Donor Advised Fund (“DAF”) is anticipated to last for many years and involve multiple generations of the family as advisors, a Family Mission Statement (“Statement”) can be both a useful tool and an uplifting family endeavor.  The purpose of a Statement is to put in place a written document for future generations that clearly outlines to charitable goals of establishing members of the family.  The Statement can range from specifically stating the charities or the charitable areas that the DAF is intended to benefit to a broader statement of how the DAF is to be used by the family to give back.  Whether you wish to involve multiple family members in the drafting of the Statement or to draft it as a Statement in your voice to guide your descendants, we can help with the process including advising on matters that you may wish to specifically provide guidance on to make your goals clear.