Download the following support material:

Transamerica's Guide to Estate Planning

Why It Matters:
  • December 31 is the deadline for charitable contributions.
  • Your estate planning clients may have charitable giving goals.
  • Your knowledge about charitable planning can help strengthen existing client relationships.

As the year draws to a close, many investors turn their attention to charitable giving. Now is a great time to guide your clients to think about a charitable trust or private foundation as part of their estate planning and charitable giving plans. In addition to helping charities prosper, donors can get a tax break. And, research shows that spending money on someone else, such as when giving to charity, can actually lower blood pressure and increase positive emotions while decreasing negative ones. In other words, when your clients give to others, it’s good for their wealth and health.

Here are three charitable giving strategies to help your clients satisfy their desire to make year-end gifts while giving you tools to grow your business.

1. Charitable Remainder Trusts (CRTs)

What: These offer a popular method of deferred charitable giving. For example, the donor gives a charitable donation of property to a trust. Usually this asset has appreciated significantly in value, which would trigger a hefty tax to the donor if sold outright. By putting the asset into the CRT, the trust can sell the property without incurring a tax on the gain. The trust can then purchase income-producing assets that can provide an income stream to the donor for their lifetime, or a fixed number of years (not to exceed 20). When the donor dies, or at the end of a fixed term, the trust assets transfer to the selected charity.

  • Helpful for donors wanting to dispose of highly appreciated assets without incurring a tax on the gain.
  • Produces a steady cash flow to your clients.
  • Provides an income-tax deduction.
  • Does not incur a gift tax liability.
  • Potentially decreases estate tax exposure.

Clients who want to make a charitable gift, but also want to retain an income stream from the trust assets for life or a fixed period of time.

2. Charitable Lead Trusts (CLTs)

A CLT pays an annuity income to your clients’ chosen charity for a fixed number of years, or the life of the donor. Income generated by the trust assets fund the charitable payments. After the death of the donor (or the satisfaction of the trust’s term), the remaining assets can be distributed to the charity or to a donor’s family.

  • Beneficiaries can receive the assets inside the trust at the end of the trust term, free from gift-tax liability.
  • Charities collect a reliable income stream for the term of the trust.

Who: Clients with sufficient sources of income to maintain their standard of living, who would prefer to provide income to a charity while alive, and would like the trust assets to return to their heirs when the CLT terms end.

3. Private Foundation

Private foundations are tax-exempt and controlled by a donor, donor’s family, or business. When starting a foundation, a donor can formalize a strategic gifting legacy, which continues well beyond the donor’s lifetime.

  • Offers donors more control over the investment of charitable assets.
  • Provides numerous tax benefits.

Clients with substantial net worth. However a private foundation is typically expensive to establish and operate. Interested donors should evaluate the time and resources required to move forward with this option.

Be sure to use these three tactics to begin a year-end discussion with your clients about how they can give back in a significant way this year as well as receive a nice tax deduction in 2018. Don’t forget to show them the research that shows how beneficial giving can be for their physical health as well as their wealth.

You clients will need to work with a qualified estate planning attorney to determine if a trust is appropriate and if so to draft the trust document.

Private foundations are complex legal entities and should only be established after careful consideration and an engagement of a qualified attorney.

Things to Consider:
  • Remind clients that giving can reduce holiday stress and increase their positive emotions.
  • Start the discussion that can give you insight into clients’ favorite charitable causes.
  • Discuss charitable giving as a beneficial financial strategy.

Neither Transamerica nor its agents or representatives may provide tax, investment or legal advice.  Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.