J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

14.13 Donations Through Trusts

Outright gifts are not the only way to make deductible gifts to charities. You may transfer property to a charitable lead trust or a charitable remainder trust to provide funds for charity.

A charitable lead trust involves your transfer of property to a trust directed to pay income to a charity you name, for the term of the trust, and then to return the property to you or to someone else. A charitable remainder trust is one that provides income for you or another beneficiary for life, after which the property passes to a charity.

Trust arrangements require the services of an experienced attorney who will draft the trust in appropriate form and advise you of the tax consequences.

Deductions for gifts of income interests in trust.

Current law is designed to prevent a donor from claiming an immediate deduction for the present value of trust income payable to a charity for a term of years. In limited situations, you may claim a deduction if either: (1) You give away all of your interests in the property to qualifying (14.1) organizations. For example, you put your property in trust, giving an income interest for 20 years to a church and the remainder to a college. A deduction is allowed for the value of the property. Or (2) you create a unitrust or annuity trust, and are taxed on the income. A unitrust for this purpose provides that a fixed percentage of trust assets is payable to the charitable income beneficiary each year. An annuity trust provides ...