200 E 5th Ave #123, Naperville, IL 60563
(630) 428-3311

Charitable Trusts

Philanthropy and charitable contributions are great ways of spreading goodwill and supporting worthwhile causes. In fact, the charitable gifts that you leave behind have the potential to change the world. The Internal Revenue Service (IRS) seeks to encourage charitable behavior through the establishment of complex tax breaks. Through the help, management, and guidance of an experienced Naperville estate planning attorney, establishing a charitable trust as part of your estate plan can provide you with significant income and estate tax benefits.

At the Homer Law Firm, P.C., our experienced attorneys will provide comprehensive guidance on how you can make the most out of your charitable gift, both for the organization as well as for you and your family. Because setting up a charitable contribution in your estate plan can be quite complicated, depending on the specific type of trust you establish, it is not advised to go about this process on your own. If you are thinking about establishing a charitable trust,  contact the Homer Law Firm at (630) 428-3311 to schedule an appointment.

Understanding Charitable Trusts and Planning in Naperville, IL

A charitable trust is foremost a gift to non-profits, foundations, or charitable organizations. Under Illinois law, charitable organizations are required to register each year with the Attorney General’s office. According to the Charitable Trust Act, Section 480.20, gifts for charitable purposes can include any number of funds that are applied for the benefit of an indefinite number of people to provide them with the following:

  • Education,
  • The benefit of religion,
  • Relief from poverty, sickness or disease,
  • A means of establishing themselves in life,
  • Public building or recreational activities, or
  • Services which lessen the burden of government.

Charitable trusts can use the full scope of estate planning tools as well. For example, your life insurance policies, retirement accounts, trusts, and other assets are valued in how they are distributed while you are alive, as well as through the directions provided in your will. In other words, the various types of charitable trusts allow donors (such as yourself) to sell assets without incurring capital gain or to reduce taxable income.

Types of Charitable Trusts

In the state of Illinois, you have several options when establishing your charitable trust, all of which retain various donation methods, benefits for the trustee, and benefits for the donor.

Charitable Remainder Trust: the charitable remainder trust (CRT) is considerably effective for donors with low basis, appreciated assets such as stocks or real estate. In this type of estate plan, the trust pays you first and the charity second, hence the “remainder” part of the title. By funding this type of trust, the donor can sell assets without incurring capital gain, making CRTs an efficient means of transferring property, benefiting from charitable income tax deductions, and reducing estate taxes while still enjoying the benefits of the assets. Charitable Remainder Annuity Trusts (CRAT) and Charitable Remainder Unit Trusts (CRUT) are two types of CRTs available when donors want to provide a non-charitable beneficiary with income over a period of time.

Charitable Lead Trust: the charitable lead trust (CLT) is highly useful when reducing a current taxable income. Unlike the CRT, a CLT pays the charity first and the family or beneficiaries second. The trust is often given to the charity, and after a certain period of time, such as when all taxes are reduced, the remainder of the trust transfers to the trust beneficiaries. Therefore, beneficiaries face lower gift taxes and estate taxes, and it also allows you to bypass your charitable deduction AGI limit.

Other charitable trust options available to donors include charitable gift annuities, charitable life estates, donor advised funds, and private foundations or family foundations.

How the Homer Law Firm P.C. Can Plan Your Estate

Determining the most beneficial way to utilize your assets and give to both family and charity can be quite complicated, and it takes the experience of an acclaimed estate planning attorney to make sure that your assets are handled in the most efficient, productive manner. As a Certified Financial Planner (CFP) with a legal career spanning over 30 years, attorney Thomas J. Homer has served many clients in Naperville, DuPage and Will counties, as well as Chicago, and he has provided his clients with effective wealth accumulation and wealth preservation strategies. Stephen Sotelo, a respected attorneys at the Homer Law Firm, has extensive experience with charities such as the Make-A-Wish foundation in Illinois.

Making a charitable trust decision is not easy, as it takes comprehensive tax and wealth accumulation knowledge as well as insight into the various charities around Illinois. At the Homer Law Firm, we provide a personal approach with our estate planning strategies, working with you every step of the way to make sure your estate is handled properly.

We welcome any questions you may have about charitable trusts. Please contact us at (630) 428-3311 to arrange an appointment.