FINANCIAL FOCUS: Charitable giving can present desirable tax deductions

Published: Friday, November 29, 2013 at 12:00 PM.

Nonetheless, you can still work with your tax and legal advisers now to take steps to reduce any possible estate tax burden in the years ahead.

One such step might involve establishing a charitable remainder trust. Under this arrangement, you’d place some assets, such as appreciated stocks or real estate, in a trust, which could use these assets to pay you a lifetime income stream.

When you establish the trust, you may be able to receive a tax deduction based on the charitable group’s “remainder interest” — the amount the charity is likely to ultimately receive. This figure is determined by an IRS formula.

Upon your death, the trust would relinquish the remaining assets to the charitable organization you’ve named. Keep in mind, though, that this type of trust can be complex. To establish one, you’ll need to work with your tax and legal advisers.

Of course, you can also choose to provide your loved ones with monetary gifts while you’re alive. You can give up to $14,000 per year, per individual, to as many people as you choose without incurring the gift tax. For example, if you have three children, you could give them a cumulative $42,000 in a single year — and so could your spouse.

You should consult your estate-planning attorney or qualified tax adviser regarding your situation.

Joe Faulk is a financial adviser.



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