We provide advice on straightforward and creative methods to maximize our clients’ philanthropic goals. Whether advising an individual, family, private foundation, or other tax-exempt entity, we assist in developing the most effective and successful philanthropic plans possible.
Philanthropic planning is often connected to estate planning. There are several different strategies that can be used to accomplish philanthropic objectives, including making provisions in one’s will or living trust to provide for either a one-time gift or a continued stream of support. Establishment of a private foundation is another effective method for ensuring that gifts and ongoing support are handled according to a client’s wishes. Our attorneys provide thoughtful, creative counsel in developing and documenting these often-complex plans, drawing on our experience and insights as we take into consideration the interrelated issues involved in the areas of estate, tax, and philanthropic planning.
A charitable lead annuity trust (CLAT) is a trust that provides an annual payment to charity for a specified term. After the completion of that term, the remaining assets pass to descendants or trusts for descendants. The remainder interest is a current gift, but is valued on the premise that the beneficiaries will not receive the assets until some point in the future. Clients usually “zero out” these trusts so that the remainder interest is valued at zero, given current IRS assumptions. This is accomplished by increasing the annual payment to charity. Then, if the assets appreciate to a greater extent than the IRS expected, the assets pass to descendants or trusts for the descendants free of gift taxes.
We frequently draft wills with CLATs that drastically reduce or eliminate estate tax in cases where the client has a charitable intent and does not mind having his or her descendants wait several years before receiving certain assets.
A charitable remainder trust (CRT) is a trust that provides the grantor and/or another person with annual payments for life or for a term of years, with the remainder passing to charity. Clients receive an income tax charitable deduction for the remainder interest that passes to charity. Clients usually transfer appreciated property to these trusts, because the sale of the property within the trust is not subject to immediate capital gain, but is instead deferred until the gain is distributed in the annual payment.
Sometimes the best answer for charitable giving is one of the simplest: a donor-advised fund for a family, managed by a community foundation or financial institution. This option does not typically require significant legal work on our part, and we frequently discuss this alternative with clients.
Compliance with the U.S. Patriot Act means that making charitable gifts overseas can be difficult. Also, there is generally no U.S. federal income tax charitable deduction with respect to gifts made to foreign charities. We work with clients to comply with U.S. Patriot Act requirements and structure international philanthropy in a way that can enable them to obtain an income tax charitable deduction. We also work with foreign charities and foreign counsel to make international gifting possible and rewarding for U.S. individuals and charitable organizations. We help clients negotiate local jurisdiction requirements and logistical issues involving direct international charitable giving and utilize “friends of” organizations when appropriate.
A private foundation is an entity created solely to carry out a charitable purpose. It can be in the form of a trust or a corporation, and can be an operating foundation that carries out charitable activities, or a grant-making foundation that makes grants to other charities. On behalf of clients interested in creating private foundations, we draft organizational documents, prepare the entity’s tax-exemption application and provide ongoing legal support for issues a private foundation may encounter. Our attorneys regularly serve as general counsel to the entity or general legal advisor to the funding family.
While many people think of a public charity as a large charitable institution, it is actually a tax term meaning a charitable entity that derives a certain amount of its support from a sufficient number of donors. There are tax and administrative benefits to receiving public charity status from the IRS. Our attorneys can provide legal services to traditional, large public charities, but they can also work with smaller charitable organizations to help them attain public charity status.
Regardless of whether we created a given entity, we are fully prepared to provide ongoing legal assistance for tax-exempt entities with respect to coordination of state and federal tax and corporate filings, board resolutions, bylaws, employment issues, and litigation.
Charitable or other nonprofit entities obtain tax-exempt status by filing a tax-exemption application with the IRS. We prepare these tax filings and negotiate any issues that arise with the IRS during the application process.