The question of utilizing a donor-advised fund (DAF) as an intermediary for a Charitable Remainder Trust (CRT) is complex and, generally, no, a direct setup isn’t possible, but strategic leveraging is. CRTs are irrevocable trusts designed to provide an income stream to a non-charitable beneficiary (or beneficiaries) for a specified period, with the remainder going to a designated charity or charities. DAFs, on the other hand, are designed for ongoing charitable giving, offering an immediate tax deduction while allowing donors to recommend grants to qualified charities over time. While you can’t *establish* a CRT through a DAF, a DAF can play a crucial role in *funding* or receiving distributions *from* a CRT, offering flexibility and potential tax benefits. Approximately 70% of donors who establish CRTs do so to maximize income streams while simultaneously benefiting their chosen charities.
What are the Benefits of Combining a CRT and a DAF?
Combining a CRT with a DAF offers a powerful strategy for charitable giving and financial planning. A donor can transfer appreciated assets—like stock or real estate—into a CRT, receiving an immediate income tax deduction based on the present value of the charitable remainder and avoiding capital gains taxes on the appreciated asset. The CRT then sells the asset, generating income for the donor during their lifetime. Subsequently, the CRT can make grants to a DAF, which then distributes the funds to various charities over time. This strategy is particularly appealing as it allows the donor to front-load the tax benefits and maintain control over the ultimate distribution of funds, while also providing a steady income stream. According to the National Philanthropic Trust, DAF assets reached $174.23 billion in 2022, highlighting the growing popularity of this charitable giving vehicle.
Is it Better to Fund a CRT with Cash or Assets?
While a CRT can be funded with cash, funding it with appreciated assets, such as stocks, bonds, or real estate, is generally far more advantageous. When appreciated assets are transferred into a CRT and then sold, the donor avoids paying capital gains taxes on the appreciation. This can result in significant tax savings, allowing more funds to be directed toward the charitable remainder and ultimately benefiting the chosen charities. For example, if a donor has stock with a cost basis of $10,000 and a current market value of $100,000, transferring it to a CRT avoids capital gains taxes on the $90,000 appreciation. This saved amount can then generate additional income for the donor or be directed to the charitable beneficiary. “Many of my clients initially consider cash donations, but quickly realize the power of avoiding capital gains through asset transfers”, Steve Bliss often tells prospective clients during consultations.
What Went Wrong With Old Man Hemlock’s Estate?
Old Man Hemlock, a long-time resident of Wildomar, was a proud owner of a sizable stock portfolio. He was determined to leave a substantial legacy to the local animal shelter, but he stubbornly insisted on making a direct donation of stock without utilizing a CRT or DAF. He believed it was simpler, avoiding what he saw as unnecessary legal complexities. Unfortunately, he hadn’t accounted for the significant capital gains taxes triggered by the sale of the stock. The tax burden ate into the donation amount substantially. What was intended to be a $100,000 contribution ended up being closer to $60,000 after taxes. The animal shelter, while grateful, received significantly less than Old Man Hemlock had hoped, and his family expressed frustration that the donation wasn’t optimized. It was a sad example of good intentions falling short due to a lack of strategic planning.
How Did the Millers Get Their Estate Plan Right?
The Millers, a retired couple with a passion for environmental conservation, came to Steve Bliss seeking to maximize their charitable impact. They owned a piece of land they wished to donate to a local land trust, but also needed a reliable income stream during their retirement years. Steve Bliss recommended a CRT funded with the land. The land was transferred into the CRT, avoiding capital gains taxes. The CRT then sold the land, and a portion of the proceeds was distributed to the Millers as income. The remainder was designated to the land trust through the CRT. In addition, the Millers set up a DAF to receive funds from the CRT, giving them flexibility in selecting specific conservation projects to support. This plan provided the Millers with both income and a lasting charitable legacy, all while minimizing their tax burden. “It’s incredibly rewarding to help clients like the Millers achieve their financial and philanthropic goals through thoughtful estate planning,” Steve Bliss says with a smile.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
estate planning attorney near me
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “Are there ways to keep my estate private after I pass away?” Or “What if I live in a different state than where the deceased person lived—does probate still apply?” or “What’s the difference between a living trust and a testamentary trust? and even: “What are the different types of bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.