Charitable giving is an honorable undertaking that many Californians commit to in their lifetimes. Providing necessary funding for critical causes in our communities and around the world allows for the betterment of the world we live in, which is precisely why there are tax benefits to such a commitment.
Structuring your charitable contributions in a way that allows you to take advantage of available charitable tax deductions leaves more wealth to you and your loved ones for additional giving or to take care of your own needs. Tying your charitable lifestyle to your estate plan through a revocable living trust is one such option, but there are specific mechanisms that must be in place to take full advantage of those deductions that could save you and your loved ones thousands of dollars.
Designating Income of a Revocable Living Trust for Charitable Contributions
When you establish a revocable living trust with the intention of using income generated by assets held within the trust, you must expressly say in trust documents that all funds intended for charitable purposes are to come from income generated inside the trust. You can’t take funds out of accounts or assets held within the trust and transfer those funds—again, it must be the income generated by those assets.
For example, if you are like Betty White and care deeply about animal-related causes, you may consider donations to the local SPCA or other animal shelter. If you want $5,000 from the trust to go to this cause, you would specifically write into the trust that $5,000 of income generated by assets in the trust are to be put aside and sent to the cause of choice.
If there is no income generated by the assets in the trust, then any charitable contributions made by the trust will not be eligible for the charitable deduction. Assets that frequently generate income within a trust include rental properties, California real estate holdings, or even business interests with income owed to the trust.
Charitable Giving in Life and Death with Dahl Law Group
At Dahl Law Group, we take pride in helping our clients in Northern and Southern California establish estate plans that fit not just their own needs but also their biggest desires. Your plan should support your lifestyle today while also leaving behind a legacy of your choosing. For individuals who wish to have an estate plan that works in lockstep with lifelong charitable giving, contact Dahl Law Group today.
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