The irrevocable charitable lead trust is a trust that cannot be amended, revised or cancelled, and it might have been a good idea for preventing James Gandolfini’s estate from being “whacked” by estate taxes. Financial website thestreet.com took a closer look at this powerful estate planning tool in “How to Protect Your Estate From Getting ‘Whacked’ Like James Gandolfini’s”.
This trust provides a stream of income for a designated number of years to a specified charity or charities. At the end of that period, the property held in trust reverts back to the donor or to the donor’s designated beneficiary. When the donor makes the gift under a charitable lead trust, he or she immediately receives a federal income tax deduction equal to the present value of the future income stream. But it is important to note that the donor is taxed every year on the value of the income interest payable to the charity.
A donor may create a charitable lead trust during his or her lifetime, or state in his or her will that it be established at death with the property returning years later to the designated heirs. When the donor’s estate plan establishes the trust at death, his or her estate receives an estate tax deduction instead of an income tax deduction.
The goal in creating a charitable lead trust is simple: reduce taxes on the estate you leave to your heirs when you pass away. This is done by donating to charities from the estate until all taxes are reduced. Once this is accomplished, the estate is subsequently transferred to your beneficiaries.
Don’t let your estate get whacked! Work with a qualified estate planning attorney to ensure that you put a plan in place that will provide for your children and grandchildren way into the future. This may mean you need to work on minimizing your estate tax bill. Talk with an estate planning attorney to see what estate planning techniques will be the best fit for your circumstances.
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Reference: thestreet.com (November 8, 2015) “How to Protect Your Estate From Getting ‘Whacked’ Like James Gandolfini’s”