Hello and welcome to trusted. This is the podcast where we can talk about anything that involves trusting others. We especially like to focus on those transactions, working with attorneys. And I’m your host, Blake Johnson Trust Attorney Las Vegas. I am an estate planning attorney. I am a golf enthusiast and, um, I also, uh, love to go to the gym. So that’s me. And welcome to the show. Uh, today we’re gonna talk about charitable giving and charitable planning, um, as it relates to the estate planning realm. So a couple of different areas that we can focus on. Um, the four main ones are, uh, doing outright gifts. There is donor advised funds, there is a charitable remainder trusts or there’s a whole different categories, different ones of that, but charitable trusts. And then, uh, we have a nonprofit or private foundation. So those are forming categories we’re going to go over today.
So let’s start with outright gifting, uh, in, uh, anytime you make a gift, uh, if it’s under $15,000, the federal government says you can give that for free. We’re not going to tax you for giving it. We’re not going to tax the individual for receiving that gift. And so that’s why people give money all the time. Now if you give over $15,000, technically you’re supposed to file a gift tax return. What does that mean? Well Trust Attorney Las Vegas, it means that, um, you need to file a form with the federal government. Most likely you’re not going to owe any tax because what the federal government’s sit on the estate tax side, you have a right now in 2019 up to, um, you know, over $11 million per person before you have to pay a state taxes and what the government says, we’re, we have what’s called a uniform unified gift tax.
You can give that away when you die or you can give it away while you’re living, but you have that much to give away sometime just you decide when you want to do that. And so you need to file that return while you’re living. Um, cause it reduces that amount that you have for the estate tax, um, or the exemption on the estate tax when you die. So that’s why the federal government wants to keep track of it. Now it’s $15,000 per person. So if you are extremely wealthy and you will feel extremely generous, you can go ahead and give $15,000 to everybody that you want to and you’d never have to file a return. Okay? So that’s one way to really reduce your state. Now let’s say you’re a couple and you want to give a $15,000 to each of your kids, great. Each of you can then give 15,000.
So really you’re looking at $30,000 per couple that you can give to the kids, and then you have their spouses. So you could give 30,000 to the, to your kid, 30,000 to their spouse. So you’re getting 60,000 out without having to file a gift tax return or do anything like that. And so you go through, that’s how we can get money out of your estate. Um, and you can give it outright. That’s the first option. Um, now if, if you’re doing charitable planning Trust Attorney Las Vegas, you can also just give it outright, um, to that charity. And you don’t even have to file a gift tax return. Um, you know, same thing if it’s under that amount. Now, if you’re F if you’re giving more than that, you should still file the gift tax return it. If it’s a charitable gift, it does not reduce, um, your exemption amount because the federal government says we want people to give to charities.
And so it’s not gonna hurt you in that respect Trust Attorney Las Vegas. And so give it away during your lifetime, you get the immediate income tax reductions, which is a benefit, helps reduce your income tax liability. Um, and then it also, uh, you know, helps reduce your estate. Now the next step in the charitable estate planning realm would be what’s called a donor advised fund. And what this is, is this is, um, you know, a fund that is set up that you can set up with, um, many, uh, in, um, investment companies, uh, fidelity as one that I’ve worked with before. And basically you set up this fund, you make a huge donation and the ultimate beneficiary of that account is going to be a qualified five oh one C3. That is the designation in the IRS tax code for a charity. And, uh, or a nonprofit organization, I should say we call it charity, but in, in their own what’s called a nonprofit organization.
And you can take a, that, that money that’s generated from that investment. You can take a certain percentage of the income from it and use it while you’re living and then when you die, the rest of whatever’s left over goes to the charity Trust Attorney Las Vegas. Now there are requirements, a certain percentage does need to be given to charity each year, but that’s how you can do your charitable plenty. You can get a big deduction upfront depending on how you structure it. You can may even be able to pull income. And then, um, you can also give to different charities throughout the year. So it’s all dependent on how things are structured. Um, but that one’s, you know, the most, you know, it’s more than an outright gift. You still have some control. You get to pick the investments, how things are doing. You can, you know, switch up the charities you give to during your lifetime.
Uh, so it gives you a little bit more flexibility, but you don’t have a whole lot of outlay or expense to set it up. So kind of that next level. Now if you’re really wanting to do some planning, um, especially if you have a real estate that has, uh, increased in value, uh, quite a bit. The next is a charitable trust. Now there’s many different kinds of kind of charitable trusts and you know, this is where you need to seek an advisor. You know, you’re talking about, uh, you have the CRT, the, the, the crap, the clot. Um, you know, the, the crap, there’s all these different ones that, um, you know, the fall into that realm. So I’m talking in generalities here with, uh, as far as charitable trusts go. Um, but the basic idea for the, the most basic one is, let’s say you have a real estate that is, you know, increased in value from what you bought it for and you don’t want to pay the capital gains tax.
So you donate that property into this trust and the trust then sells. It, gets all the income Trust Attorney Las Vegas. Um, that’s from that. And because it’s the ultimate beneficiary of that trust is a charity. You don’t have to pay the capital gains right away. You can pull income from that trust while you’re living and you would pay a little bit of the capital gains tax every time you pull that income. And then, um, when you die, the whatever’s left over goes to that charity. Now this is one way you could really utilize this as if you’re not even super charitably inclined, is when the income that’s generated, since you reduce your tax liability, you go into buying life insurance policy and that replaces the income or the money that’s going to be lost. When it goes there, it goes to a charity when you die, but you don’t have to pay the capital gains tax while you’re living.
So, you know, interesting strategy there and even if you’re not charitably inclined, but if you are treating inclined, it does ultimately benefit the charity of your choice. Um, you know, it is an irrevocable trust. So once you set up, you can’t change the terms of it, uh, usually. Um, but that’s kind of that next level of, of charitable planning. And then the last one is setting up your own personal nonprofit or private foundation. So they’re both considered five oh one [inaudible]. But there’s different levels there with, um, a private foundation. What you’re saying is, um, you know, you’re going to put money in here, uh, and you get the income tax deduction when you put the money in there. So it reduces your income right now. And that money eventually is earmarked to go to a charity. And the private foundation says that each year you have to give away at least 5%, um, of the, the net income, um, or there’s different calculations or the, the total value of the, the money that’s in there to another qualified five, a one c three.
So this is one that they’re not actually doing the work. You know, it’s not like the red costs cross going out and actually helping people. Um, but it’s a foundation that gives money to things like the Red Cross or the American Cancer Association or you know, different things that, um, that do a lot of good in the world and are as long as they’re a registered qualified five oh one C3, it meets that, that designation a little bit more expensive to set up. Um, but not terribly hard to manage. You know, this is a good way to get your kids involved with charitable giving cause you can make them members of the board of directors. And so each year you meet and decide where the money’s going to go and, um, you know, show you what the show your kids, what things you value. Now on the other end, you can actually create that actual nonprofit that goes out and does the work, goes to Guatemala and sets up and digs wells for people, goes to Mexico and builds houses, goes to Africa, um, to help the pygmies.
And, you know, whatever the case may be, that’s, that’s what the nonprofit does. It’s a little bit harder qualifying process because you’re there actually distributing the funds. Um, but that is the, the ultimate charitable aspect is to actually go out and do that and meet those qualifications. So that’s charitable estate planning in a nutshell. We do, you know, you have the outright gifting to individuals or charities. You have donor advised funds, you have charitable trusts, all different types, and you have a private foundation or a nonprofit. So any of those can work. Uh, you may do more than one. Um, there’s no restrictions on that. So hopefully that gives you a good idea of, of charitable estate planning. And, um, you know, as always, if you have questions or think that I missed something, please let me know. I’d be happy to discuss that with you. Um, and help give you more information about that. Thank you for listening and have a great day.