Trusts and Estates Blog

Charitable Trusts Explained

Girl holding Thank You Sign XSmallOne of the major questions people have regarding estate planning is how to avoid taxes and other costs that would diminish the size of their estate. While there are several ways to avoid state and federal estate taxes, one way is through a charitable trust.

Charitable trusts are usually thought to be for the sole purpose of donors who wish to give to charities. While that is a main reason many people establish a charitable trust, the trust can also provide substantial tax and income benefits to the donor. The trust can be for any charity you wish to help, from helping children to helping find a cure for cancer.

Several variations of a charitable trust exist and each serve a certain purpose. Consider the following explanation of charitable trusts and their usefulness.

Charitable Remainder Trust. This trust is used to donate assets (especially appreciated assets) to a charity now, but with you receiving benefits for a set number of years or the remainder of your life. The trust holds the property and can sell it without added capital gains tax, and also gives the trust the ability to create a diversified portfolio in which it can invest. The donor will receive payment from the trust at least annually and upon death, the principal of the trust will be given to the charity free of income or estate taxes. (The trust owner will receive a current income tax charitable contribution deduction which can be substantial.) There are two types of Charitable Remainder Trusts, Charitable Remainder Annuity Trust and the Charitable Remainder Unitrust.

Charitable Remainder Annuity Trust. The most common of the two Charitable Remainder Trusts, the Charitable Remainder Annuity Trust pays the trust owner an annual amount based on annuity payments (a fixed percentage of the initial value of the assets contributed, i.e. 5% initially).

Charitable Remainder Unitrust. A Charitable Remainder Unitrust makes annual payments to the trust owner based on a fixed percentage of the value of the assets owned by the trust each year, i.e., 5% of the trust assets each January 1st. This trust is most often used when assets are easily valued (such as publicly traded stocks) rather than used for assets that would require a formal appraisal (real estate, closely held businesses).

Charitable Lead Trust. Assets are given to the Charitable Lead Trust. The trust owner can establish one or more charities to receive annual annuity payments. When the trust ends (or upon death), the trust owner’s heirs will receive the principal of the trust. Again, this helps the estate planner avoid substantial gift or estate taxes when transferring assets to heirs. There can also be a substantial income tax deduction when the assets are transferred to the trust. If the entire income tax deduction cannot be used in the first year, the deduction can be carried forward an additional 5 years. There are also two types of Charitable Lead Annuity Trusts, and Charitable Lead Unirusts and Charitable Lead Trust. These will be discussed in more detail in another article.

Antelope Valley estate planning law firm Thompson Von Tungeln (TVT) offers sophisticated estate planning and administration for the affluent, discriminating client. As Board Certified Specialists in Estate Planning, Trusts and Probate as certified by the State Bar of California Board of Legal Specialization, partners Mark E. Thompson and Kevin L. Von Tungeln are expertly equipped to serve these clients with the creative, effective and custom solutions they demand. For more information, contact TVT at 661-945-5868 or visit their websites at and

Retirement Account Beneficiary Forms

Estate Plan - WordleIf you’ve every filled out an IRA, Pension Plan, 401(k) plan, or other retirement plan form, you realize the complexity that is involved in the process. But don’t allow the complexity to distract you from one very important question that affects your estate planning in a major way.

One section of the form asks who you’d like to name as beneficiaries of your retirement plan should you not receive the benefits.

Such estate planning is handled via contract (the application form) and is not subject to probate should you die without a will. The retirement benefits do not enter probate because you are not technically the holder of the assets. The bank, pension fund, or other fund holds the assets and appropriates them to you when the time comes. Should you be unable to collect the benefits, the bank or fund will pay the named beneficiaries.

Many forms require that you state the beneficiaries name, address, social security number, relationship to you, and percent of benefits received. Whether you name one beneficiary or more, the total percent received should always equal 100%.

Most retirement forms will also require you to list primary beneficiaries and contingent beneficiaries. The primary beneficiaries are people who will receive the benefits. The contingent beneficiaries are “back-ups” in case one of the primary beneficiaries are unable to receive the benefits.

Just as you would update your will or estate plan after a divorce, remarriage, spouse’s death, or other change in your family, so you should update your retirement beneficiary information. Updating is necessary so that upon your death, the benefits will pass to the person to which you intend.

If you would like more information concerning your estate planning options, is a comprehensive online resource for personal wealth management solutions through wills and revocable trusts. Whether your estate planning goals are immediate or long-term, a California certified estate planning specialist will be able to counsel you on the best options available to you to meet your individual needs.

When Should You Update Your Will or Trust?

Happy family holding Christmas gift.While some people may not have taken time to create a will or trust (and we suggest you do so promptly), others have had a will or trust for many years. But how can you be sure your will or trust is current enough to cover any life changes that may have happened since its creation? Ask yourself the following questions to determine if your estate plan needs updating.

–Was the will or trust reviewed by your attorney within the past two years? If not, have your attorney review the document.

–Is your list of beneficiaries current? If you need to change one or more beneficiaries, have an attorney help update them.

–Was your will or trust written before 1982?
Many wills and trusts established before 1982 contains a limited marital deduction clause that can be removed upon updating. Consult your attorney.

–Have your properties owned changed? Buying or selling properties should be reflected in your estate plan.

–Has your spouse passed on, been divorced, or have you remarried? Has one of your beneficiaries changed marital statuses? Be sure your beneficiaries are current to the current marital statuses of your family.

–Has your family expanded through the adoption or birth of a child/grandchild? Be sure to include all family members you desire in your succession plan.

–Has your health deteriorated? Most estate plans contain provisions for your care when your health does not permit it. Be sure such sections of your plan are current to how you desire to be cared for.

–Have your assets appreciated since the initial writing of your documents? Keep up to date records of the worth of your assets including homes, properties, investments, and such.

–Have you changed life insurance companies, pension plans, or another retirement benefit program since establishing a will or trust? Current records of these changes will eliminate later hassle after you are gone.

–Have you moved to another state since writing your will or trust? Have your attorney review the estate plan and update any necessary tax information current to your present states’ tax laws.

Overall, having an attorney review your will or trustevery two years or so is a wise practice as tax laws, property values, and other factors can change with little notice. Keeping your estate plan current will help your family avoid court proceedings or other hassles after you’re gone.

If you would like more information concerning estate planning, contact Antelope Valley estate planning law firm Thompson Von Tungeln (TVT) at 661-945-5868 or visit their websites at and is a comprehensive online resource for personal wealth management solutions through wills and revocable trusts. is a comprehensive online resource for long term nursing home care for the middle class. As Board Certified Specialists in Estate Planning, Trusts and Probate as certified by the State Bar of California Board of Legal Specialization, partners Mark E. Thompson and Kevin L. Von Tungeln are expertly equipped to serve clients with the creative, effective and custom solutions they demand.

Trusts and Estates Blog