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Raleigh NC Charitable Planning

Charitable estate planning combines philanthropic, financial, estate and tax planning. It is a process that can help you make gifts to causes dear to you, often with dramatic tax and financial rewards. All of us have a cause that is close to our hearts. Whether it is finding the cure for a disease, building a school, hospital, or library, seeking ways to slow global warming, bringing theater to town, or providing shelter for the homeless, there are charities in your community making a difference.

Charitable Lead Trusts

A Charitable Lead Trust is a trust that makes annual payments to a charity for a certain number of years, after which the trust assets will pass to non-charitable beneficiaries designated by the donor (typically children or grandchildren). The annual payments to charity can be either a fixed annuity amount or a fixed percentage of the fair market value of the trust each year. A Charitable Lead Trust that pays a fixed annuity amount is called a Charitable Lead Annuity Trust (CLAT); a charitable trust that pays a percentage each year is called a Charitable Lead Uni-trust (CLUT).

At the time a charitable lead trust is created, the donor is deemed to have made a gift to charity and a gift to the non-charitable beneficiaries. The gift to charity qualifies for the gift tax charitable deduction. The gift to the non-charitable beneficiaries is considered a taxable gift, for which the donor must either apply the donor’s unused estate and gift tax exemption (currently $1,000,000) or pay gift tax.

The amount of the gift tax charitable deduction depends on the length of time payments will be made to charity, the size of the payment to charity, and the rate prescribed by the IRS to calculate the present value of the charitable payments (the “section 7520 rate”). In addition, the asset is removed from the estate, reducing subsequent estate taxes.

While the contribution is irrevocable, the grantor may have some control over the way the assets are invested, and may even switch from one charity to another (as long as it's still a qualified charitable organization).

Charitable Remainder Trusts

A Charitable Remainder Trust is an arrangement in which property or money is donated to a charity, but the donor (called the grantor) continues to use the property and/or receive income from it while living.  A Charitable Remainder Trust that pays a fixed annuity amount is called a Charitable Remainder Annuity Trust (CRAT); a charitable trust that pays a percentage each year is called a Charitable Remainder Uni-trust (CRUT).

In the Charitable Remainder Trust, beneficiaries receive the income and the charity receives the principal after a specified period of time.  Through this transaction, the grantor avoids any capital gains tax on the donated assets, and also gets an income tax deduction for the fair market value of the remainder interest that the trust earned.

The amount of the gift tax charitable deduction depends on the length of time payments will be made to the grantor, the size of the payment to grantor, and the rate prescribed by the IRS to calculate the present value of the charitable payments (the “section 7520 rate”). In addition, the asset is removed from the estate, reducing subsequent estate taxes.

While the contribution is irrevocable, the grantor may have some control over the way the assets are invested, and may even switch from one charity to another (as long as it's still a qualified charitable organization).


Based in Raleigh, North Carolina we assist clients throughout Wake County, NC and Johnston County, NC as well as the cities of Cary, NC, Morrisville, NC, and Clayton, NC.


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