Secure the Future with Trust Strategies

Physician's Money Digest, March15 2004, Volume 11, Issue 5

According to the American Associationof Fundraising Counsel(, if Americanscontinue to give as generously as theyhave in the past, charitable donationscould exceed $240 billion for 2003. Whilegiving can be both emotionally and financiallyrewarding, there are strategies thatcan increase the benefits of doing it. Thefollowing three trust strategies can helpincrease the value of your gift and maximizethe tax benefits you receive:


1) Charitable lead trust. When an individualtransfers assets, or principal, to acharitable lead trust, any income generatedby the principal goes to a designatedcharitable organization for the durationof the trust. Upon termination of thetrust, which typically occurs when thedonor dies, the assets pass to the donor'sbeneficiaries. This strategy can help reduceor, in some cases, eliminate estatetaxes on the assets in the trust. The income tax benefits of a charitablelead trust are rather modest.However, this strategy is especially usefulif the assets placed in the trust haveappreciated because there will be no capitalgains taxes.

2) Charitable remainder trust. In thiscase, an individual places assets in thetrust and names a charitable organizationas the recipient. The trust pays a lifetimeincome to the donor or to the donor andtheir spouse. After the donor's death, theassets in the trust go to the charitablerecipient and are no longer part of thedonor's estate. Because there are no capitalgains taxes due on appreciated assetsplaced in the trust, this strategy helps preservethe full value of the gift for the charityand also helps increase the incomegenerated by the principal. Typically, contributionsto this type of trust are partiallydeductible for income tax purposes.

How itworks:

3) Wealth replacement trust. Individualswho want to leave something fortheir heirs may want to consider using awealth replacement trust in conjunctionwith a charitable remainder trust. The donor designates the wealthreplacement trust as one of the beneficiariesof the charitable remainder trust. Thewealth replacement trust is funded with alife insurance policy on the life of thedonor. The premiums are paid with part ofthe income from the charitable remaindertrust. When the donor dies, the death benefitpaid to the wealth replacement trust isdistributed to the heirs.

Of course, there is at least one limitationon the use of these trusts that shouldbe considered. Donations to charitableremainder and charitable lead trusts areirrevocable. A donation cannot be takenback once it has been made. Before implementinga strategy involving trusts, youshould consult an experienced estateplanning professional. There are manyother factors to consider when setting upcharitable trusts, such as your tax circumstances,the amount you wish to donate,and the size of your overall estate.


Using the appropriate strategyfor your situation may help increasethe effectiveness of your gift.

Scott J. Kleiman is the president of Apollonia Financial Services inElkins Park, Pa. All securities offered through Linsco/PrivateLedger, member SIPC. Past performance is no guarantee of futureresults. The information presented is the opinionof Scott J. Kleiman and not Linsco/Private Ledger.Mr. Kleiman welcomes questions or comments at800-242-1760 or