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Oregon Estate Planning - Charitible Trusts
Grantor Retained Annuity Trust (GRAT)
A GRAT is another tax-favored trust designed to allow you to transfer more property to your heirs without gift or estate taxes. To establish a GRAT, you transfer chosen assets to an irrevocable trust. The trust is required to pay you an annuity for a specified term of years in exchange for the assets - At the expiration of the term of years, the GRAT terminates and the assets in the GRAT are distributed to your beneficiaries free from estate or gift tax. Under current tax laws the annuity is much less than the value of the assets transferred to your beneficiaries. Therefore, you are able to effectively increase the amount you can give to your heirs tax free.
Similar to the QPRT, all appreciation in value of the assets from the date the trust is established escapes gift or estate tax. Also, as with the QPRT, the GRAT results in tax benefits only if you outlive the chosen term of the GRAT.
Charitable Trusts
Estate planning can also include transfers for the benefit of a charity. You can make transfers to a charity either during your life or at death. The gifts can be outright or can be given in a manner which allows you to retain the right to future income or principal. Lifetime transfers to charities provide you with an immediate income tax deduction which is generally equal to the present value of the interest to be received by the charity.
Charitable Lead Trust
A charitable lead trust provides a charity with the benefit of income from property for a chosen term of years, and at the end of the term, the property is returned to you or your heirs.
Charitable Remainder Trust
The charitable remainder trust holds property for a period of time measured either by a term of years or for the lifetime of specified beneficiaries, and generates income for you or your chosen beneficiaries. At the expiration of the chosen period of time, the property goes to a charity.
The charitable trust is generally not subject to income tax on its earnings, thereby making it an attractive tax savings device for highly appreciated assets which you want to sell. By transferring highly-appreciated assets to a charitable trust, the subsequent sale of the assets by the charitable trust results in no income tax on the gain. The use of a charitable remainder trust can actually result in greater earnings to you and your heirs than if you sell the assets outright. Particularly when coupled with insurance policies, you can pass greater amounts to you heirs than possible without the use of a charitable remainder trust.
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