Prime Fund Management - Alternative Investments

Charitable Giving

Individual Clients | Wealth Management | Financial Planning & Advisory | Charitable Giving | Products and Services

Leaving Your Legacy

You have worked hard throughout your life and enjoyed the bounty of your hard work. Now you'd like to share your good fortune with organizations that are dear to your heart. There are several planning tools designed to facilitate the transfer of various types of assets from you to the qualified charitable organization or organizations of your choice. Different types of planning tools allow for the transfer of assets, have carry multiple tax benefits and allow for varying amounts of control over the assets.


In addition to the use of trusts, gifting strategies may be used as a means of distributing your estate and effectively reducing estate taxes upon death. In many cases, gifting has the dual advantage of not only removing the asset itself from your taxable estate, but also removing the appreciation on that asset as well. In general, the transfer of property during the time that you are living can be subject to gift taxes depending on the type of gift and its value.

Under the Annual Gift Tax Exclusion, an individual can give away up to $12,000 to each of any number of recipients without incurring a gift tax or any gift tax impact. You can make this type of gift to as many people as you want each year as long as you do not exceed $12,000 per recipient. Gifts in excess of this amount will first reduce your applicable exclusion (and ultimately your applicable credit) before being subject to tax. An effective gifting strategy can allow you to significantly reduce overall estate taxes that may be due on death.

Other gifting strategies which can be used involving gifting to charities, including religious organizations, community organizations, museums, universities, hospitals, etc.

Is a charitable giving vehicle in which the donor contributes cash or assets into the fund, with the ability to recommend a charitable organization at a later date that will receive grants from the fund? Donor advised funds allow the donor to receive tax benefits, while still maintaining control over how the assets are invested, which charities receive grants, and when those grants are awarded.

Benefit of Donor Advised Funds

A Charitable Lead Trust (CLT) allows you to designate charities to receive an income stream during the term of the trust. At the end of the term, the ultimate beneficiaries are your heirs. In this sense, a CLT is basically the opposite of a Charitable Remainder Trust (CRT).

One of the main benefits of establishing a CLT is that the eventual transfer of the assets to your heirs will be made at a significantly reduced gift or estate tax cost. The reason for this circumstance is that your heir must wait until the end of the term of the trust before receiving the assets. The value of the gift is the estimated present value of the future gift, not the current market value. If the rate of growth on the investments exceeds the income paid to the charity, the value of the assets inside the trust will grow without additional tax being levied against your estate.

As with the Charitable Remainder Trust, payment to the charities can be in the form of an annuity (CLAT) or unitrust (CLUT). A CLAT pays a fixed dollar amount at least annually to the charity, based on the assets that are initially transferred to the trust. A CLUT pays a fixed percentage rate, varying the payout from year to year because it is based on annual fluctuations in the value of the trust's property. Since most CLTs are structured as a non-granter trust, the trust is taxed as its own entity and is not taxed as part of your estate.

Unlike a Charitable Remainder Trust, there is no income tax advantage for the payments made to charities. However, if your current charitable contributions do not allow you to make any further deductions, a CLT may allow you to avoid these limitations. The contributions made by the CLT to the charity will be offset by the CLT's income. This will not affect your personal limits for deducting contributions.


Charitable Remainder Trusts (CRTs) allow you to donate property and assets to a trust with the ultimate beneficiary as a charity, yet maintain an income stream from the trust for a specified term or your lifetime. The grantor or donor receives a current income tax deduction, which is equivalent to the present value of the remainder interest that will be transferred to the charity at the end of the term.

A Charitable Remainder Trust is particularly beneficial when transferring highly appreciated property. The trust can sell the donated property without paying capital gains tax and invest the proceeds in an income producing diversified portfolio. You will receive income at least annually and at the end of the specified term the charity receives the remaining balance in the trust. You obtain a current income tax deduction based on the present value of the charity's future interest. The term of the trust can be for a number of years (not to exceed 20 years), the life of the donor, or the lives of the donor and/or other income beneficiaries (generally the spouse). Charitable Remainder Trusts are often combined with an Irrevocable Life Insurance Trust (ILIT) to replace the value of the assets transferred to the trust.