Charitable Trust Planning for Highland Residents

Clarify who benefits and what goes to charity

A charitable remainder trust is irrevocable and can provide payments to noncharitable beneficiaries before a charitable remainder. That structure brings two goals together: payments for people you name as beneficiaries and an intended remainder for charity. Before deciding whether it fits, describe each goal separately and consider how you want them to work together.

Start with the people you hope to benefit and the charitable purpose you have in mind. Consider what matters most about the payments and what you want the charitable remainder to accomplish. These priorities can help frame a planning discussion; they do not predict a particular result.

• Who do you want to receive payments, and what purpose would those payments serve?
• What charitable purpose do you want the remainder to support?
• How does the irrevocable nature of this trust fit with your planning preferences?

Compare the goal, not just the name of the arrangement

Before choosing a charitable remainder trust, describe the outcome you want in plain language. Is your central aim to provide payments to people before a charitable remainder, to support a charitable purpose in another way, or to balance several priorities? Those are useful questions for comparing approaches; they do not establish how any alternative would work or which one is right for you.

Compare what you want to happen, who you want to benefit, and what continuing responsibilities you are prepared to take on. A charitable purpose alone does not establish a tax deduction or make income payments tax-free. Tax reporting and compliance obligations continue for a charitable remainder trust, and income payments can have tax consequences. Do not choose based on an assumed tax result.

• Write down the outcome that matters most and the people or charitable purpose it is meant to benefit.
• Ask what tax reporting, compliance and payment-related tax consequences you need to understand before deciding.

Bring asset information and administration questions

As an optional preparation step, make a list of assets you are considering and gather records you already have that help identify them or explain ownership. Note uncertainties instead of guessing. This can make it easier to discuss which assets you have in mind; it does not mean a particular asset or record is required.

Consider the ongoing work alongside the intended benefits. Tax reporting and compliance obligations continue, and income payments can have tax consequences. Ask what administration and reporting would involve for the arrangement under consideration, who would handle the tasks, and what professional support may be appropriate. The answers can help you decide whether the continuing responsibilities fit your priorities.

• Bring an optional asset list and note questions about any information you are unsure of.
• Prepare questions about continuing administration, reporting and the tax consequences of income payments.

Use your priorities to decide what to discuss next

A practical next step is to bring together your intended beneficiaries, charitable purpose, asset questions and concerns about ongoing responsibilities. Use those points to compare the trust’s defining features with the outcome you want: it is irrevocable, can provide payments to noncharitable beneficiaries before a charitable remainder, and carries continuing tax reporting and compliance obligations.

Codi M. Dada Law Office P.C. has one in-person office at 802 Grant Ave, Novato, and provides virtual services throughout California, including for Highland residents. You can use a planning discussion to clarify your goals and identify questions that need answers before choosing an approach.