Many New Jersey entertainment fans were probably saddened when actor James Gandolfini passed away at age 51 in 2013, but there were future surprises ahead for his family as around 80 percent of his estate was subject to federal and state estate taxes due to faulty planning. One way for people to protect their assets and limit estate taxes is with an irrevocable charitable trust.
One can establish a charitable lead trust while alive or have plans for one in a will, and giving while alive results in a federal income tax deduction while giving after death results in an estate tax deduction. With this trust, a designated charity receives money for a certain number of years. After this period is up, the principal in the trust reverts to a donor or beneficiaries. Donating to charity can help one reduce the estate taxes beneficiaries face.
A charitable remainder unitrust is also an option, and this allows a benefactor to make money while having assets go to a charity after death. A donor profits off the donated assets while alive and does not have to pay capital gains taxes on the transfer of an appreciated asset to the trust. There are also income tax deductions for donating to charity.
There are many estate planning options depending on one’s situation and what one wants to accomplish, and an attorney could help a client find the right type of trust based on his or her particular needs. Trusts are also helpful because they are typically not subject to the probate process. A comprehensive estate plan can also include powers of attorney that allow a trusted individual to make financial or health care decisions if the principal is unable to do so due to incapacity.