Planned Giving Frequently Asked Questions
If a trust agreement is established as irrevocable, it means that it can't be
revoked (broken) except under unusual circumstances. Why would anyone
want an irrevocable trust?
There are always specific reasons for making an irrevocable trust agreement.
Perhaps it involves a family business where some of the family members are getting
on in years and the family wants to make certain that management continues to
run smoothly even if hindrances, such as senility, enter the picture.
Many times the reasons for an irrevocable trust involve estate and/or income tax
avoidance. In order to be successful in such avoidance, the trustor must not have
any direct or indirect power or control over the trust property or income. The Internal
Revenue Code and the accompanying Regulations should be carefully followed
when considering irrevocable trusts.
What is the difference between a charitable remainder unitrust and
a charitable remainder annuity trust?
The major difference is in the valuation of the assets of the trust, which establishes
part of the calculation for the determination of the amount of income received by
the income beneficiary(-ies). The annuity assets are valued at the time the assets
are placed in the trust and are never revalued. Annual payments remain the same,
whether the assets appreciate (increase in value) or decline (lose value).
The assets in the unitrust are revalued annually. If the trust assets appreciate,
the payment to the income beneficiary(-ies) will increase. If the trust assets depreciate,
the payment will decrease.
What happens to my assets in a trust for a charity if the charity goes
out of business before the expiration of the trust?
Your trustee is authorized to name a substitute, if that is the sole charity.
Should I name a charity as trustee of my charitable remainder trust?
This is often done if the organization is qualified to so act under local law.
The organization's representatives can satisfy you in that regard.
Often they will serve without fee, which is an additional incentive.
How often should I update my will or trust?
These documents should be updated any time your financial or your family
circumstances change. As laws vary from state to state, if you move you should
have an attorney licensed in and familiar with the new state's laws review your will
or trust agreement. It is always wise, even if there are not any significant changes
in your circumstances, to periodically review these important documents. You
should also review your will if there are any significant changes in law.
Can I use my insurance to benefit charitable organizations?
Yes. This is an area overlooked by many. You can name one or more charities as
alternate or as primary beneficiary. Furthermore, if you no longer need the policy
proceeds in your estate for use now, you can transfer ownership of the policy to
the charity or charities. If the policy has cash loan value, the charity can draw this
out and use it. In this case, you not only receive a charitable gift deduction, but
any additional premiums you pay are tax deductible for you now. And, on your
death, the charity receives the balance of the policy proceeds and none of it is
included in your estate for tax purposes.