Innovations in Giving: Using Real Estate & Charitable Trusts TogetherSubmitted by American Endowment Foundation on August 4th, 2015
By Eric Kinaitis
A recent case study featured two topics that many never consider as being part of a charitable giving solution: real estate and a charitable trust combined together.
For definition, a charitable trust is a means by which a person can leave assets from their estate for charitable and tax saving purposes. There are many variations of charitable trusts to consider. The case study positioned a married couple as interested donors who wanted to achieve what might normally be considered opposing goals: using the value of an asset to support both their charitable wishes AND provide financial support to their heirs.
Here is how this can work through the concept of a double charitable trust. In the case study, a commercial building was transferred into a charitable lead trust (CLT) . The income generated from that commercial building (via rents paid by tenants) was distributed as income to charities of the trustor’s choice.
Once the end of the time span of the charitable trust is reached, the building can then be transferred into multiple charitable remainder unitrusts (CRUT) that can pay an income stream to the heirs of the original trustor. Once the end of the time span of the charitable remainder unitrust is reached, the value of the commercial building can then be donated into a donor advised fund to continue to perpetuate a charitable legacy on behalf of the original trustor who first transferred the commercial building into the CLT.
In fact, a donor advised fund (DAF) can be a partner throughout the entire process. A donor can use the same DAF as the recipient of the income stream from the CLT and also serve as the recipient of the remainder interest once the CRUTs reach the end of their timespan. The presence of the donor advised fund provides the original donor and their family the greatest flexibility available.
Of benefit to a financial advisor, the presence of the donor advised fund allows the advisor to bring an asset under management that they would never have access to before; in this case, the value of the commercial building.
Although the process can be can be complex, the ability to use a DAF in partnership with a double charitable trust can provide a donor and their family an innovative way to support their favorite causes AND provide financial support to their heirs. Contact us at American Endowment Foundation, or call at 1-888-660-4508 and let us discuss how we can have donors engage in giving in ways that are innovative and flexible.
Note: The information provided herein is for informational purposes only and should not be interpreted to constitute legal and/or tax advice. Donors should consult their legal and tax advisors regarding their specific situations.