Consider Your Long-Term Goals

“The reason so much gifting takes place around the holidays is because around this time people feel philanthropic,” says Thomas J. Archer, founder of The Archer Financial Group,   a boutique life insurance advisory firm in Manhattan. However, it is important to consider your charitable goals for the long term, too, he says.

Many high-net worth individuals use a charitable remainder trust to benefit a charity when they pass away. Once you set up a charitable remainder trust with an attorney, you can transfer a highly appreciated asset to it. That may enable you to receive a charitable income tax deduction, based on the value of the gift to a charity or several charities.

“The trustee can then sell the stock or other asset and reinvest the proceeds in an income producing asset like real estate,” Mr. Archer explains. Donors may be able to receive taxable income for a set period of time, but no longer than 20 years. After that period, the remainder of the assets in the trust is donated to charity.

To make sure they can give generously to their heirs, too, some donors will use the income they earn through the trust to buy a life insurance policy that will be held in a different type of trust.

Of course, if you do elaborate planning like this, it is very important to do your homework on any cause that benefits from it. “You want to make sure the charity is bona fide and what you believe in,” Mr. Archer said.


December 7, 2014