Living Trust Shows Benefits Now And Later

A simple plan helps one family give by supplementing income.

There are many ways to plan for a comfortable retirement while continuing current levels of giving, even arranging an eventual “once in a lifetime” gift.

How the Turners planned

John and Helen Turner make gifts of cash each year. Both in their mid-fifties, they feel they should be setting more aside for retirement years. The Turners’ children are well-established and are provided for in their parents’ estate plans.

The Turners have a multi-faceted retirement plan: Social Security benefits; IRAs; company-provided pensions; life insurance and disability insurance; and other investments, such as stocks and mutual funds.

John and Helen hope to enjoy a comfortable retirement without substantially reducing their charitable gifts.

The solution for them

Through a simple device known as revocable living trust, the Turners’ CPA suggested a way to achieve their goals.

Such a trust removes property from the often expensive and time-consuming probate process through which a will must pass.

The first step is to have their attorney create the document. John and Helen decide to serve as their own trustee to eliminate management expense, then transfer their investment assets into the ownership of the trust.

The Turners’ name a local financial institution as a secondary trustee in case they are ever unable to serve.

Vehicle for charitable giving

When John and Helen set up the trust, they provide that all or a portion of the income will be paid each year to their favorite causes as they direct. The amounts given are income tax deductible as charitable gifts.

When they retire, they plan to again use some or all of the income for themselves.

John and Helen decide that after their lifetimes most of the trust assets will go to the philanthropies they enjoy supporting.

The Turners still own the assets in the trust and also have full access to its earnings, if needed. The income from the trust is reported on their joint income tax return and is deductible as a charitable contribution. In most cases, a separate tax return is not needed.

Neither the author, the publisher, nor this organization is engaged in rendering legal or tax advisory service. For advice or assistance in specific cases, the services of an attorney or other professional advisor should be obtained. The purpose of this publication is to provide accurate and authoritative information of a general character only. Watch for tax revisions. State laws govern wills, trusts, and charitable gifts made in a contractual agreement. Advice from legal counsel should be sought when considering these types of gifts. NTA2-9 ©1999RFS&Co.