USA – CALIFORNIA Law and Practice Contributed by: Jennifer Jordan McCall, Ashley Huh and Matthew Perotti, Pillsbury Winthrop Shaw Pittman LLP
10.2 Common Charitable Structures Charitable Trusts
Donor-Advised Funds (DAFs) DAFs provide donors with an investment account solely for the goal of charitable giving. This irrevoca - ble charitable gift is tax deductible and any invest - ment growth within the account is tax free. Unlike private foundations which are required to distribute a minimum of 5% of their assets each year, a DAF may continue indefinitely, despite the charitable contribu - tion deduction having been received upon transfer of assets to the DAF.
A charitable remainder trust (CRT) allows the benefi - ciary of the trust to receive payments for a set number of years or for the remainder of their life. At the end of the term, the remaining assets are transferred to the public charity of the donor’s choice. A charitable lead trust (CLT) enables the charity to receive income from the trust for a set term, after which the remaining assets are distributed to the non- charitable beneficiaries. Charitable trusts offer immediate tax deductions on the assets contributed. Additionally, highly appreci - ated assets can be transferred to a trust and diversi - fied, while deferring some of the capital gain tax.
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