Preserving Assets, Planning for the Future
A Trust is a very personal and carefully designed document. It may be the best solution for addressing the complexities associated with preserving assets while providing for the future benefit of your heirs and furthering God's work through GFA World.
Under certain circumstances, a Trust can help you:
- Take advantage of tax credits available to you, your estate, and your beneficiaries
- Maximize the assets available for distribution to your beneficiaries
- Direct the distribution of assets to specified individuals or ministries like GFA World
- Secure the continued care and financial support of loved ones who are elderly, disabled, or financially inexperienced
- Provide for loved ones in a way that reduces complexity and cost to them
- Minimize court and legal involvement
- Ensure ongoing management of assets should you become unable to do so while still living
- Maintain privacy
- Achieve giving goals to further the Lord's work
We generally recommend that trusts be considered only if at least $100,000 is available to fund them. Below that amount, administrative expenses are likely to negate much of the benefit.
The Revocable Living Trust (RLT) contains language to distribute assets at death, just as a Will does. A RLT is set up during your lifetime, and all your assets are transferred into it. These assets are then managed and controlled by you. Like a Will, the RLT can contain language to set up other Trusts, should these be desired. The Revocable Living Trust has several advantages over a will, however. The most notable is that it allows you to avoid probate.
The Revocable Living Trust also has the advantage of being private—none of it is subject to public record. In addition, it is much harder to contest successfully.
For a married couple, a Revocable Living Trust works as follows:
- An attorney prepares the Trust. It contains language to direct, exactly as you desire, the disbursement of funds or property at your death or at the death of your spouse, if your spouse survives you.
- Upon creation, ownership of all your assets, except qualified retirement plans, is generally transferred to the Trust.
- A simple Will is prepared for both spouses, which at death merely transfers any assets that were previously overlooked into the Trust.
- For tax planning purposes, the Revocable Living Trust also contains language to create a second Trust called a Bypass Trust. This Trust is not funded initially but can be funded at the death of the first spouse to reduce future estate taxes.
- Both spouses serve as Trustees of the Revocable Living Trust during their lifetimes, managing the assets. At the death of the first spouse, the surviving spouse serves as sole Trustee of the RLT and can also serve as Personal Representative of the estate.
Charitable Remainder Trust
A Charitable Remainder Trust (CRT) can be funded with cash and/or other assets, now or at your death. It provides income of a percentage of the value of the Trust at the end of each year for the rest of your life, the life of a loved one or for the number of years you determine. After that, the remainder will go to GFA.
When funded with IRA and retirement account assets, a CRT eliminates the IRD tax your heirs would need to pay if those assets went directly to them. You select the payout percentage (five percent or more) and a period of time for the CRT to make distributions to you or your beneficiaries. Actual payments are determined by this payout percentage and the value of the assets in the CRT. It is revalued each year, and you may make additional contributions to the CRT.
Many donors choose a period of time that will pay out to family members an amount equal to the initial value of the assets used to fund the CRT. For example, a CRT that pays seven percent for 15 years will pay income to family members approximately equal to the initial fair market value of the assets. By this method you can double the total benefits from the assets, once to loved ones through income payments, and once to GFA World through distribution of the principal after all income payments are completed.
One advantage of the Charitable Remainder Trust is that the amount remaining in the Trust grows tax-free. For example, if a person selects a six percent payout Trust, and the Trust investments earn eight percent, there will be two percent tax-free growth each year. This tax-free growth can substantially increase the value of the Trust over time. And since the selected six percent payout is based on this value, distributions to you and the beneficiaries increase proportionally.
The ability of the CRT to increase both in principal and income payments over a period of years is frequently referred to as an inflation hedge. However, the reverse scenario is also possible. In the above example, if the growth in the Trust falls short of the payout (six percent in this instance), then income payments to you and the beneficiaries will decline with time.
Testamentary Charitable Remainder Trust
With a Testamentary Charitable Remainder Trust (TCRT), assets at death are transferred to the Trust, which will pay out a set percent of the initial fair market value of the assets to heirs for a period of years. The percent and duration is determined in the estate documents with pre-determined guidelines. At the conclusion of the time set to pay heirs, GFA World will receive the remainder of the assets in the trust. The Testamentary Charitable Remainder Trust gives the estate an estate tax deduction on a portion of the assets that go into the trust.
Charitable Remainder Annuity Trust
A Charitable Remainder Annuity Trust (CRAT) pays a fixed amount annually to a non-charitable beneficiary, with the remainder going to GFA World. You cannot make additional contributions to this type of Trust.
Charitable Lead Trust
A Charitable Lead Trust (CLT) provides for annual or morefrequent payments to GFA for a term of years. The payments are a fixed percentage of the fair market value of the Trust property, as revalued annually. At the end of the designated term of years, the remaining Trust principal is distributed to designated beneficiaries.
Charitable Lead Annuity Trust
A Charitable Lead Annuity Trust (CLAT) provides fixed payments to GFA each year for a pre-determined period of time. The amount of the payments does not change over the period. At your death, or at the end of the designated period of time, the remaining Trust principal is distributed to designated beneficiaries.
Questions? Use this contact form, email email@example.com or call us at 1-800-946-2742.
All gifts are subject to GFA World's Gift Acceptance Policy.
DISCLAIMER: This information is designed to provide information and illustration of the subject matters covered. It is not intended, nor should it be used as legal, accounting or other professional advice. It is always a good idea to seek legal and tax advice from your professional advisor(s).