‘Forbes’: a Charity Pitch for Divorced Donors

A few charities have started to offer a new twist on charitable remainder trusts: They are suggesting to donors that the trusts can provide a way to obtain significant tax benefits, support good causes, and pay alimony at the same time, says Forbes magazine (April 30).

“Often a husband can’t make his steep alimony payments from current income without compromising his lifestyle,” the magazine notes. “So he has to sell some stock or other assets and gets hit with a capital-gains tax. But when you put appreciated assets into a charitable remainder trust, the trust can sell them without paying gains taxes.”

Charitable remainder trusts can be set up to pay the donor, or someone he or she designates, income for up to 20 years or for a lifetime. The donor gets an immediate deduction for the donation and the charity ends up with whatever is left in the trust once the payments have been made.

Under the deals now being suggested by some charities, the donor could set the payments to be the amount of alimony, or could direct the payments to the former spouse. For the partner receiving alimony, the arrangement has some appeal: Payments would be guaranteed to be complete and timely.

In a hypothetical example offered by Joseph Bull, a fund raiser at Ohio State University, a donor who put $813,000 of appreciated stock into a charitable remainder trust could finance nine years of alimony payments of $9,000 a month and meet the legal requirement that the charity end up with at least 10 percent of the amount put into the trust. The donor would get to deduct $81,000 immediately.

To be sure, for such arrangements to be appealing at all, a divorced person needs to have been already interested in finding a way to make a sizable gift to a charity, the magazine notes. The tax benefits add to the appeal, says the magazine, as does the possibility that “each time your ex cashes that check from a charitable trust, she’ll be forced to consider that maybe you aren’t so bad after all.”

The article is available at http://www.forbes.com.