One of the joys that I have as an advisor for American Bible Society is helping our supporters choose how they will spend their Social Capital. Social Capital, you ask? Well, this is the amount of your estate that will be used for programs that will help others.

If you view your estate in two parts—Personal Capital and Social Capital—it becomes easy to understand. Personal Capital is the amount of your estate that will pass to family members. Social Capital is the portion of your estate that will be used to pay for social programs or benefit others. People can easily name who receives their Personal Capital, and can then allow the government to determine how their social capital will be used. But most people would rather decide how their money is used, rather than have the government decide for them.

How does the Government determine the portion of my estate that will be used socially? Through taxes: capital gains tax, federal estate tax and federal income tax. Wouldn’t it be nice if you could decide how that money is used instead?

Well, you can.

Through the use of a charitable trust, you can determine how your social capital will be used following your death. Through this trust, you can direct assets toward your church, toward qualified charities and toward American Bible Society. Because a charitable trust is a nonprofit entity, it may help you avoid capital gains tax on highly appreciated assets, can provide a nice tax deduction against federal income tax for assets transferred to the trust and can remove the taxable portion of your estate, thus helping you reduce and/or avoid federal estate tax.

And, best of all, you choose the remainder charitable beneficiaries of your charitable trust, thus controlling how your social capital will be spent for the benefit of others after your death. But, prior to your death, you will receive a portion of the earnings from the charitable trust each year in the form of trust income.

But what about my kids? If I give away a significant portion of my estate, what will my kids get?

The nice thing about charitable trusts is that the trust income can be directed toward a replacement trust, also called an irrevocable life insurance trust. This replacement trust replaces the assets for your kids that were given to the charitable trust. And, it’s also exempt from federal estate tax.

You get to decide how to use your money. Your estate wins, your kids win and your charitable concerns win.

Charitable Trusts aren’t a fit for everyone. But for the right situation, they are a valuable estate planning tool, enabling the individual to reduce taxes and help the causes closest to his or her heart.

Interested in learning more about the American Bible Society – and charitable trusts? Visit our “How to Give” page.

Please consult your tax advisor for the specific tax implications regarding your situation.