|Charitable Lead Annuity Trust (CLAT)
Wealthy taxpayers with charitable intent may be interested in a charitable lead annuity trust (CLAT) to help meet their charitable goals. With the interest rate as low as it is, now is a great time for this strategy. Generally, the qualified charity serves as the current beneficiary and the remainder beneficiary (usually a family member) receives all the remaining assets in the trust after it terminates. The low interest rate results in a smaller taxable gift and larger charitable donation, with the added benefit of future asset appreciation occurring outside the estate.
Donating Highly Appreciated Stock
Donating highly appreciated stock instead of cash to a charity can greatly benefit both parties. The charity receives a valuable asset it can either maintain or sell. The taxpayer receives a charitable deduction for the fair market value of the security and avoids paying capital gains tax on the appreciation.
Donors intent on using this year’s charitable tax benefits should consider donor-advised funds. “Donor-advised funds”, operated either by investment firms such as Fidelity Investments or Vanguard Group or by national or local charities (often foundations), offer many givers the ability to make large contributions before year-end and get a full deduction, while allowing them to postpone decisions about recipients. In donor advised funds, the original gift then grows tax-free until the donor decides which nonprofits should receive all or pat of it, at which point there’s no deduction.