Charitable Remainder Trust

Alternatives to Living Trusts

Published on: April 7, 2022 | by Ettinger Law Firm

You might have considered utilizing a living trust. Often, these trusts are a good idea if a person wants to maintain assets for loved ones without subjecting assets to significant taxes or probate.

In reality, however, people often forget a whole range of other types of trusts including revocable and irrevocable living trusts. The type of trust you utilize can make a big difference in the outcome of your estate. Pick the right type of trust and you can really simplify the estate planning process. Pick the wrong trust and you can end up facing a range of complications.

Revocable means revisable, while irrevocable means a person cannot later changes a trust’s terms barring a few exceptions. A revocable trust lets the trust creator modify the trust at some later date. With irrevocable trusts, a person lacks the ability to modify the terms of the trust.

What Ochse v. Ochse Means for Trust Planning

Published on: January 22, 2021 | by Ettinger Law Firm

In the November 2020 case of Ochse v. Ochse, a Texas court heard a case that could potentially have a ripple effect on how trusts are interpreted. In this case, a mother established a trust that provided the trustee was authorized to make distributions to both the trustee’s son as well as the son’s spouse. At the time the trust was executed, the son was married to his first wife, but later divorced and married a second wife. The son’s children then initiated legal action against the son for breaching fiduciary duties as trustee and joined with the first wife who is also the mother as necessary parties. The first wife and son then filed competing summary judgment motions addressing whether the first or second wife was the son’s “spouse” as referenced in the trust. The trial court then held that the second wife was the correct beneficiary at the time of the suit. The first wife subsequently appealed.

What the Case Involved

The second wife and son argued that the use of the word, “spouse”, in trust documents did not mean the first spouse’s actual name. Instead, these parties argued that the term referred to the class of whoever was currently married to the son. The court of appeals, however, disagreed. The first wife argued that in the absence of contrary intent, a gift to a “spouse” of a married individual must be construed to mean the spouse at the time of the document’s execution instead of a future spouse. The first wife further argued that the terms “primary beneficiary’s spouse” as well as “son’s spouse” referred to the first wife because she was the son’s spouse at the time that the trust was executed. Both interpretations requested the court to view spouses as either statuses or class gifts.

Removing a Trustee in New York

Published on: May 21, 2017 | by Ettinger Law Firm

Selecting the right trustee to administer your estate is a crucial part of ensuring that your assets are distributed according to your wishes and that your estate is settled correctly. While many people can and should put a great deal of thought into selecting a trustee to administer their estate, the process of selecting a trustee often stops there. Whether a trustee is a financial institution, attorney, or close family friend, you need to include a mechanism to remove that trustee if the need to do so arises. An experienced estate planning attorney can help you design this type of mechanism, which could help your loved ones avoid the often-lengthy legal process of removing a trustee in the absence of formal instructions.

When can a trustee be removed?

There are many reasons you may wish to revise your estate’s trustee. Perhaps you originally selected a family member that has become estranged because of divorce. You may have selected a sibling that has predeceased you. If you nominated a financial institution, it could have been bought out by another company that you don’t want to deal with. Whatever the reason for wanting to remove a trustee, New York law states that the following constitute some legal reasons for a court to remove a trustee:

Understanding Donor Advised Funds

Published on: May 5, 2017 | by Ettinger Law Firm

Many individuals want to make sure that part of their estate is dedicated to their favorite charitable causes, and many make the move to guarantee this during their lifetime. There are several ways to do this. Some individuals may consider structuring an endowment while other may choose deferred gifts or planned giving. Another vehicle to ensure your charitable wishes are carried out can include the creation of a private foundation. However, for some people, the best option for charitable donations during one’s lifetime and after might be to create a donor advised fund.

The Basics of a Donor Advised Fund

When we give to various charities, their tax status allows us to take advantage of a tax deduction. However, in order for our donations to qualify as tax deductible, the organization must typically be registered as what is known as a 501(c)(3) organization. These types of organizations must comply with certain rules established by the IRS, including restricted political and legislative activity while following other important guidelines. The IRS defines a donor advised fund as a fund or account that is maintained and operated by a 501(c)(3) organization known as the sponsoring organization.

Donating Real Estate to Charity

Published on: March 27, 2017 | by Ettinger Law Firm

When people begin the process of estate planning or take time to review their existing estate plan, they have many tax considerations to think about. How they distribute their assets will determine what taxes, if any, will apply to their estate. They may consider creating a trust for their children, they might want to “gift” some of their assets to take advantage of evolving tax law, and/or they may choose to donate some of their assets to charity. If you are considering donating real estate to charity as part of your estate plan, it is important to be aware of the possible tax consequences doing so might have.

Charities vs. Foundations

Both public charities and private foundations can be nonprofit organizations if they have applied for and been granted 501(c)(3) status, which means that contributions to such organizations can qualify for tax deductions. However, when real estate is involved, the tax deduction for a donation can vary depending on what type of organization it is.

The Charitable Estate: Charitable Remainder Trusts

Published on: December 11, 2016 | by Ettinger Law Firm

Properly planning and structuring of charitable contributions and gifts can be a huge part of the overall estate plan. There are good and bad ways to give. Ensure that your gift is properly funded and distributed per your wishes by planning ahead of time. This planning may include using charitable remainder trusts.

Charitable Remainder Trust Basics

This estate planning tool is often considered a “split interest trust” which allows both the owner and the charity to benefit. Once a charitable remainder trust (CRT) is drafted and assets are transferred into the trust, the owner will begin receiving income for life from the trust. Upon the death of the owner of the CRT, the remaining trust property passes directly to the charity.

Establishing a Charitable Trust as Part of Your Estate Plan

Published on: September 25, 2015 | by Ettinger Law Firm

Trusts can be used as a useful tool in your estate plan to accomplish a variety of goals. One example is establishing a split-interest charitable trust. These charitable trusts are an irrevocable trust established for a charitable purpose of your choosing, while at the same time featuring a benefit to a non-charitable trust beneficiary. In addition to tax benefits received under federal law, charitable trusts offer the person establishing the trust, also known as the “settlor,” a controlled process to effectuate their gift to a selected charity. Examples of charitable trusts include a charitable remainder annuity trust (CRAT), charitable remainder unitrust (CRUT), and a charitable lead trust (CLT).

CRATs, CRUTs, AND CLTs

Establishing a charitable remainder annuity trust includes the transfer of property to a trust that first distributes a fixed annuitized portion of the trust property to non-charitable trust beneficiaries, followed by a distribution of the remainder to the tax-exempt charity selected by the settlor. Similar to the charitable remainder annuity trust, a charitable remainder unitrust also includes the transfer of property to a trust that first distributes an annuitized portion of the trust property to non-charitable trust beneficiaries, followed by a distribution of the remainder to the tax-exempt trust beneficiary; however, the amount of the annuity fluctuates with the value of the trust assets. A charitable lead trust differs from the charitable remainder annuity trust and charitable remainder unitrust in that the settlor will designate that the charitable beneficiary will first received a distribution of trust assets at least annually for a set period of time, after which the non-charitable trust beneficiary will receive the remainder of trust property. Each of these three split-interest charitable trusts offer dual benefit to a designated charitable purpose and the settlor’s non-charitable trust beneficiary.

Donor-Advised Funds for Charitable Giving

Published on: December 18, 2012 | by Ettinger Law Firm

The holiday season is a popular time for charitable giving. It is helpful for those considering gifts–particular sizeable donations–to properly think through all of the tax and legal implications. There are smart ways to make contributions and clumsy ways. As always, an estate planning lawyer or similar professional can explain how any such decision is best carried out.

For example, the Wall Street Journal reported recently on the rise of “donor-advised” funds. The use of these tools is likely spurred by two tax uncertainties in the upcoming year. Will charitable deductions on taxes be limited in the future, counseling toward a large gift this year? Will income tax rates increase next year, counseling toward using the deduction next year instead of this year? It is a somewhat tricky problem, as no one knows for sure what lawmakers might decide.

That is where these donor-advised funds come into play. They are accounts managed by national charities and foundations. The basic idea is that a donor can give the gift this year–locking in a tax deduction–while waiting to actual disperse the funds to the charities as they see fit over time. The funds grow tax-free throughout this period.

Charitable Giving Tips: What to Consider

Published on: November 2, 2012 | by Ettinger Law Firm

Charitable giving is a critical part of many estate plans and not just for the super-wealthy. Many New Yorkers have worked hard their entire lives to ensure the financial well-being of their families. Besides passing on assets to loved ones, many local residents consider it an incredibly important testament to their values to share some wealth with charitable organziations that they hold dear. That does not have to mean donating enough money to have your name placed on the side of a new building. Instead, it often simply means providing a concrete indication of one’s commitment to having a goal beyond oneself and the merit of giving back to others.

However, it is important to be educated about some pitfalls in charitable giving and the ways to make the donations prudently. For example, a brief article from The Hill this month provided a helpful “Do and Don’t” list with regard to charitable donations. The issues shared in the story are worthwhile for donations made at any point in the year as well as long-term gifts like those crafted into estate plans. The underlying theme of the article is a basic checklist of tips to ensure the money you give actually acts to help the individuals that you hope it will and will be used in the manner you desire.

The story points to a list of “charity watchdog” groups that offer comprehensive analysis and recommendations to ensure that your donation is used as efficiently as possible. Those websites include: Charity Navigator, GuideStar, CharityWatch and The American Institute of Philanthropy.

The Sociology of Giving Back in Inheritance Planning

Published on: January 12, 2012 | by Ettinger Law Firm

On Tuesday we discussed a few ways that our New York estate planning lawyers incorporate charitable giving into strategies to reduce taxes during inheritance planning. Of course, for most local families who want to give some of their wealth away, the motivation is not just to save tax money for themselves or their heirs in the process. Instead, as an interesting new article discussing the matter in Financial Planning noted, there are many emotional connections behind giving back. A mix of empathy, gratitude, and the desire to make an impact for others are often behind philanthropic efforts included in New York estate plans.

One sociologist suggests that empathy is at the root of most charitable giving–the ability to actually experience the struggles faced by others. Many donors providing support to certain charitable causes see much of themselves, their children, parents, or other family members in those that they are helping. The ability to care for others as an extension of ourselves is one of the most valued human abilities, and many of our clients share that attribute, wanting to incorporate it as part of their long-term planning.

The time that many are conducting estate planning is usually a time when they are winding down their efforts to collect more wealth. As a result it is a natural opportunity to consider other objectives, goals, and wishes. A sociologist familiar with this time in life explained how residents “then face the question of how to live next and impart to their children a moral biography. Most will want to give back because giving is a natural source of happiness.” When reflecting on how far one has come in life, many consider that they themselves were helped along the way. Giving aid to others (financial and otherwise) is a way of returning the help one personally received at a time when it was needed most.