A discussion that occurs at nearly every board meeting (not to mention audit, grants and finance/investment committee meetings) of a private foundation is whether the investments and grants for the year can be “managed” to reduce the excise tax on net investment income to 1 percent. Since the enactment of the Tax Reform Act of 1969, when the tax on net investment income was first introduced, the rate of tax has been 2 percent which could be reduced to 1 percent if the percentage of the current year’s charitable spending exceeded the average of the prior 5 years’ spending.Continue reading
At Rodriguez, Horii, Choi & Cafferata LLP we have been drafting more charitable remainder trusts in the last year than had been the case for the past decade or so. Three things are driving client interest in a charitable remainder trust.
First, as the economy continues to recover, clients have seen their assets appreciate significantly in value. Second, tax increases at the federal level and in the state of California have significantly increased the taxes that would be due on the sale of an appreciated asset. Third, many donors have been reaching an age where they are looking to convert appreciated assets such as real estate or closely held stock into income for retirement.Continue reading