At a glance
- The deadline is mechanical: the account must be funded before year-end for the client to claim the deduction this year.
- The column's example is a $1.5 million charitable remainder trust funded on New Year's Eve in the early 1990s, with the share transfer clearing only before the brokerage office closed.
- For a charitable lead annuity trust, the income tax deduction can reach 100% of the contribution.
Rushing a charitable trust into year-end can cost the client the deduction, WealthManagement.com reported, because the benefit depends on a completed transfer before the year closes.
The deadline is mechanical: the account must be funded before year-end for the client to claim the deduction this year. Clients calling in November and December are usually offsetting a business sale, a large bonus or cashed-out company stock.
The column's example is a $1.5 million charitable remainder trust funded on New Year's Eve in the early 1990s, with the share transfer clearing only before the brokerage office closed. A CRT, a pooled income fund or an outright gift of appreciated stock can still be done this year, but drafting a trust document or moving a complex asset between institutions at the last minute stays risky.
For a charitable lead annuity trust, the income tax deduction can reach 100% of the contribution. The trust pays a fixed amount to a charity for a set term or the donor's life, then passes the principal to the grantor or family.
Reported by the Tax & estate planning desk from WealthManagement.com. Published . Corrections