February 2013 – Are We Philanthropists???

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Parvati Hansen

The Proof is in the “putting.”
The word “Philanthropy” has its roots in two Greek words which, when translated, mean “love of man” in the sense of caring for, nourishing, improving and enhancing the quality of life for human beings.

You prove yourself to be a philanthropist when you “put” your financial resources behind this “love of man” and support the causes you sincerely believe in.  Therefore, we can accurately say “The Proof is in the Putting.”

We at Ananda and the Janaka Foundation believe that all our donors are philanthropists. Your financial support of the many outreach programs which define our mission and what we stand for qualifies you to regard yourselves as such.

Just as our donors come in many shapes and sizes, so do the ways of financially supporting our programs come in different forms. The Janaka Foundation came into being so that our donors could have the opportunity to support those programs they truly believe in through gifts from their estates.

Trusts for All Reasons
Our November 2012 newsletter dealt with the basis for all estate planning, our wills, and some of the issues we need to be mindful of.  In this issue we will consider the use of trusts, their different forms and uses.

Most estate planning professionals regard the use of trusts to be superior to the simple will for several reasons. Foremost is their reliability: the trust can and will accomplish what you intend to do once you are no longer able to personally do it yourself.  Once it is stated in writing, the language of a trust document is extremely difficult to defeat.  Historically – all the way back to Roman times – courts have upheld a properly executed trust to be unchallengeable, unlike the very vulnerable language of a will.

Flexibility is another feature of trusts. Whatever the grantor (the donor creating the trust) wants to accomplish, it usually can be done simply using the proper language and directives. As a result, retaining a lawyer with the required education, training and experience in this field is a necessity. Such desired benefits do come with a price.

Split – Interests
For a trust to accomplish its charitable purposes, the several interests in a trust must be split:
First by time – present and future interests
And by value – interest and remainder interests.
The time factor is determined by the lives of the beneficiaries or a term of years; the value factor is determined by the amount of money passing to the beneficiaries and what amount is projected to remain after the income interests have expired.
When the grantor (donor) desires to benefit one or more favorite charities and receive a charitable deduction, the regulations of the IRS must be strictly followed.  The I’s must be propertly dotted, the T’s evenly crossed and all the proper language used. Then, and only then, will the Beltway (Washington DC) Watchdogs be kept at bay.

If a donor wants to support favorite charities through the most valuable portion of his or her assets – the accumulation of a lifetime of earnings and savings – he will quickly learn that the use of trusts is the smart thing to do.  And if that same donor felt he still needed the income from those assets to maintain his lifestyle and that of his family members, then he would soon be made aware of the Charitable Remainder Trusts.

The key operative word here is “qualified.” Our US government wants to encourage generous Americans to support work in our communities. Many feel that the voluntary support of worthy causes by all Americans is what makes our country so unique among the family of nations.

Singularly blessed Americans would do well to give serious considerations to these financial benefits which Congress has attached to those Charitable Remainder Trusts which “qualify” for charitable deductions:
*Avoidance of Long-Term Capital Gains tax on the gift portion of the asset funding the trust.
*The LTCG tax on the non-gift portion of the asset is spread out to the income beneficiaries until it is distributed entirely.
*A charitable deduction for the gift portion of the transfer as it is computed using IRS calculations.  If funded with appreciated assets, the deduction is limited to 30% of the grantor’s annual income.  If funded with cash, the limitation is 50%.
*The value of the deduction is determined by the number and the ages of the income beneficiaries, or the term of years.
*The entire value of the gift is removed from the estate and is not subject to the estate tax upon the gift of the grantor (donor). Plus, the assets funding the trust are removed from probate and its attendant cost, which is a significant savings.
*A legacy of life-time values memorializing your, and your family’s, support of one or more charitable causes. Such a legacy gives a bold statement to everyone that these causes are worthwhile during your lifetime and will always remain so.

These trusts which reward their grantor/donors in such ways are the Charitable Remainder Annuity Trusts and Uni-trusts. To use a human analogy, these trusts may be twins, but they certainly do not act alike. Which one to use depends entirely on the unique circumstances, needs and wants of the donor.  An experienced estate and gift planner can custom fit the trust to the satisfaction of the grantor/donor.

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While the less complicated Living (inter vivos) Trust does not have the above financial benefits, it should be remembered that a grantor/donor can designate charities as beneficiaries of the remainder of a Living Trust, as long as they are capable of doing so.

For futher information…
Give us a call  –  530-478-7695
…. to discuss your situation. Schedule an appointment with your legal and financial advisors so you can choose what is the best way for you to fulfill your lifetime support of Ananda.