Sometimes in charitable gift planning it’s necessary to design a gift plan to meet complex donor objectives.

For example: Donor wants to benefit CHARITY A and also provide an income for his son. The problem is that the son is only 49 years old and is severely disabled with a birth defect.

If Donor is thinking of a six-figure or larger gift, a charitable remainder trust (CRT) may make sense. But the CRT can’t, as a practical matter, pay directly to the son.

Let’s assume the son’s physician doesn’t expect the son to live more than another 20 years. In the real world, this simplifying diagnosis may not exist very often, but it does simplify our planning somewhat.

It leads to the idea of creating a 20-year term-certain CRT that will make its payout to a second trust. The second trust will be fashioned as a special needs trust to provide for the son. Great latitude will be allowed in designing the second trust; and its design will require an expert — perhaps an elder care lawyer steeped in designing special needs trusts.

There are several things to consider here:

• The second trust will be a taxable trust. The waters here can run fairly deep; and the services of a lawyer who is an expert in taxable trusts may be needed.
• The CRT can be designed to terminate on the son’s death if the son dies before the end of the 20-year term.
• The remainder interest in both the CRT and the second trust can be given to CHARITY A.

There’s more to consider in dealing with the situation presented.

We’ll continue with this situation next time.

Click here to read Part II.

by Jon Tidd, Esq