Charitable Opportunities

     Who will forget the year 2001? Do you remember where you were that morning of 9/11? The terrorism of that day sent shockwaves throughout America that continue to reverberate. Despite the evil of others, Americans remained generous in the midst of their suffering, giving an estimated $212 billion that year to charity.
     Are you a gracious giver, perhaps even a philanthropist? If you are a taxpayer, then the answer is yes. How, you ask? During your lifetime, your wealth is subject to taxes in a variety of forms. Income taxes levied on your wages, interest and dividends, and capital gains taxes extracted on the sale of your appreciated assets may tend to make April 15th one of your least favorite days each year.

Voluntary Taxes

     Our tax system is voluntary in its form, but the civil and criminal penalties for noncompliance make the process involuntary in its substance. Thankfully for our national defense and other essential programs of the federal government, most taxpayers voluntarily comply with the Internal Revenue Code (IRC) and pay their fair share.
     Beyond the essentials of government, however, are there any programs funded by the federal government you personally consider nonessential and perhaps even wasteful? If there are, then you are an involuntary philanthropist by your financial support of such causes as selected by Congress and the White House.
     Perhaps there are private sector charities you deem more worthy of your tax dollars? Chances are you already support these charities. If so, then you really should know about IRC § 664 and how you may turn your involuntary philanthropy into tax-savvy voluntary philanthropy.

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The Trifecta Challenge

     In the world of high-stakes wagering on horse races, winning the Trifecta is a most noteworthy achievement. To win, you must pick not only the winner of the race, but also the second and third place finishers. When it comes to gracious giving, most taxpayers would prefer to benefit their charities first, themselves second, their loved ones third … and the IRS dead last. This Charitable Planning Trifecta can be achieved through a carefully coordinated financial and legal strategy that includes both a Charitable Remainder Trust (CRT) and a Wealth Replacement Trust (WRT).

The Trifecta Challenge

     The creation of a CRT helps your charity finish first, with you (and your spouse) a close second. Before the charity inherits the assets held in the CRT upon your death (or upon the death of your spouse, if later), you (and your spouse) enjoy a lifetime income from the CRT and valuable charitable tax deductions. However, when the charity inherits the assets held in the CRT, they are forever unavailable to your loved ones. That is where the WRT comes in.

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