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Part 1 of our Article addressed why a charitably-inclined client should make a gift to charity in the year of business sale.
Having completed the analysis of when it is best to make a gift, some clients may hesitate to make a large charitable gift in the year of the liquidity event because it may not allow them to meet other objectives, such as providing for children or retaining funds for themselves. These clients can meet these “split” objectives of providing benefits for themselves or family members with a “split-interest” trust. A charitable lead trust allows a current charitable income tax deduction, while providing a benefit for children. A charitable remainder trust allows a current income tax deduction, while also permitting the client to retain access to income.