Charitable Planning in New Jersey
Serving Families and Individuals in Princeton, NJ and the Surrounding Areas
At Van Dyck Law Group, LLC, we encourage and assist the tradition of giving to charitable causes. Donating to worthy causes can not only provide you with a personal sense of satisfaction and accomplishment, but it also enables you to access helpful financial deductions for income taxes. Some charitable giving strategies also minimize capital gains taxes, increase income, and provide you, or whomever you designate, with an income for life. Additionally, these types of gifts may provide an estate tax deduction — an important consideration in estate planning and anticipating the legacy you wish to leave behind.
Engage with us to discuss your goals, philanthropically and financially. Depending on the outcome you wish to achieve, we may recommend one or several charitable giving arrangements. We can then provide assistance with the setup and management of these arrangements, all while ensuring you remain in compliance with state and federal laws.
Start the conversation, and learn how you could be achieving as much as you intend while receiving the most benefit from tax deductions and other financial considerations. Schedule a consultation with no obligation when you call (609) 293-2621 or contact us online.
Making the Most of Your Charitable Giving in New Jersey
If given the choice between paying taxes (involuntary philanthropy), or making a charitable gift (voluntary philanthropy), most people would choose the latter, because it gives them the choice of who the money will benefit and how it will be used. The same cannot be said for money paid to the U.S. Treasury. We help clients make charitable gifts and practice good stewardship in the most tax-efficient manner.
Most Common Types of Charitable Gifts
There are many different ways to make charitable gifts. The optimal one(s) to select depend on your goals, the amount you intend to donate, how often the donation may recur, what tax benefits you wish to receive, how much control you want to have over how the money is spent, and other such factors.
Charitable Remainder Trust
Charitable remainder trusts are irrevocable trusts funded with cash gifts or other gifted property. The value of the gifts are immediately deducted from income upon trust formation, and the trust can provide an income stream to the donor or their spouse tax-free. Another preferred party can be designated to receive income, instead, which would count as a taxable gift. This income stream will last a set term of years, or it can be provided throughout the lifetime of the recipient.
Capital gains taxes for assets transferred into the trust are deferred until the assets are paid out as income, allowing donors to spread out their tax burden. Assets remaining in the trust will be donated to the charitable organization of choice upon expiration of the term of years set or the death of the recipient.
Charitable Gift Annuity
A charitable gift annuity is similar to a charitable remainder trust in that an irrevocable donation is made to an entity from which income can be paid out to up to two annuity recipients. The primary difference from a remainder trust is that the charitable gift is made directly to a 501(c)(3) organization, and the organization determines the amount of the annuity based on actuarial calculations. A charitable gift annuity arrangement also allows the charity recipient to access a portion of funds immediately. Like a charitable remainder trust, the donated amount can qualify as an itemized income deduction. There are also other tax benefits available when the gift annuity is funded with cash.
Charitable Lead Trust
A charitable lead trust acts in many ways the opposite of a charitable remainder trust. An irrevocable trust is funded with a cash gift or other gifted property, and then the value of the trust funds an income stream to a named charity for a select term of years. Once the term expires, the remaining assets held in trust are distributed to non-charitable beneficiaries.
Placing funds in a charitable lead trust can allow for deductions to their income, gift taxes owed, or estate taxes pertaining to items donated to the trust. Making this arrangement is an excellent way to provide for a charitable cause now and then someday have the remainder of the funds transferred to your children or other preferred beneficiaries, without any estate tax or gift tax consequences.
A donor-advised fund involves a charitable donation to a third-party charitable organization, which can then release the funds via grants to the charitable organizations you recommend. Through this arrangement, an individual can make regular contributions to nonprofits, churches, endowments, and other qualified organizations on a monthly or weekly basis in order to maximize income tax savings.
Donor-advised funds are aggregated into trusts and accounts from thousands of contributors, reducing the administrative overhead and costs compared to a private foundation or single-purpose trust. A donor-advised fund can also be made the recipient of income from a charitable lead trust or property in a charitable remainder trust, allowing the donor to maintain some control over how donations are granted despite the funds being placed in an irrevocable trust.
A private foundation offers you considerable freedom to control how donations are granted and for what purpose those funds are to be used. Private foundations can be a nonprofit organization or a trust, funded solely by an individual, family, or enterprise. The foundation will be headed by either trustees or a board of directors. The foundation can directly control charitable operations, or it can provide grants to other operational charities and nonprofit enterprises. While they can involve considerable administrative overhead and costs, private foundations represent the pinnacle of charitable advocacy and offer the ultimate means to preserve a legacy involving a specific vision for the future.
Charitable Planning and Estate Planning
Charitable planning can provide immediate gains in the form of tax savings, deferred taxes, and the arrangement of income, gifts, or annuities with minimized tax penalties. Individuals interested in charitable giving should think about their future estate, as well, since charitable arrangements can preserve significant parts of the estate while ensuring donated funds have the maximum desired impact on the individual’s causes of choice.
In other words, charitable planning and estate planning go hand in hand. Without proper estate planning, assets held in an estate can be subject to gift taxes, inheritance taxes, creditor claims, and other effects that can significantly diminish their value. Placing assets in trust can, instead, shield assets from certain claims and taxes while allowing the assets held in trust to bypass probate.
Irrevocable trusts, such as a charitable lead trust or charitable remainder trust, can have the maximum desired effects in terms of providing to charitable causes while also providing income or inheritances to the desired parties. Donors can, therefore, achieve the best of both worlds in this life and the next by retaining the value of their assets to the extent possible while taking advantage of deductions and donating to a cause for which they hold considerable passion.
Contact Charitable Planning Attorneys in New Jersey to Help Your Vision Come to Life
The information above provides a brief overview of some of the most common options available for tax-advantaged charitable donations. Making the right choice depends on your funding sources, charitable goals, and the tax-saving strategies you wish to maximize.
Van Dyck Law Group has extensive experience with helping individuals donate to, establish, or operate charitable causes. We assist our clientele in helping them specify their goals, navigate their options, and then execute their plans so that they can have the maximum benefit for both charitable causes and their own tax savings.
Make your dream for the future happen, and help provide for yourself and your family through tax savings and income/annuity/gift arrangements that make the fullest use of our state and federal tax systems. Get started when you schedule a confidential consultation with no obligation by calling (609) 293-2621 or by using our convenient form to contact us online.