Can I Include Charitable Donations

I recently had a client, Vincent, come to me absolutely distraught. He’d meticulously planned his estate for years, including significant bequests to his favorite wildlife sanctuary. He’d even drafted a codicil to his trust specifically outlining these gifts. But Vincent had waited too long to finalize the codicil, and a sudden illness left him incapacitated before it could be signed. His family, while honoring his wishes as best they could, faced a complicated and costly probate process to ensure the sanctuary received its intended donation. Ultimately, the delay and legal fees eroded a substantial portion of what Vincent wanted to give – a heartbreaking outcome after a lifetime of philanthropy. This is a common scenario, and preventable with proper planning.

How Do I Ensure My Charitable Gifts Are Actually Made?

Including charitable donations in your estate plan is admirable, and thankfully, there are several effective ways to ensure your wishes are carried out. Simply mentioning them in a will isn’t enough; that’s what tripped up Vincent. The key is integrating these gifts directly into the structure of your revocable living trust. As an attorney and CPA with over 35 years of experience, I’ve found the most reliable approach is to create a specific charitable remainder trust or dedicate a percentage of the trust assets to a charitable sub-trust. This legally establishes the gift within the trust itself, bypassing the potential hurdles of probate.

What Happens if I Forget to Fund a Charitable Portion of My Trust?

Even with a well-drafted trust, assets must be properly transferred (funded) into it. Signing the trust document is only step one—you must legally transfer assets to the trustee for the trust to exist, as stipulated by California Probate Code § 15200. If, after your passing, it’s discovered that a specific asset intended for charity was accidentally left out—say, a brokerage account—don’t despair. For deaths on or after April 1, 2025, California law provides a safety net. If the asset is your primary residence, valued up to $750,000, your heirs may be able to utilize a ‘Petition for Succession’ under AB 2016 (Probate Code § 13151) to formally transfer it according to your intent. It’s important to understand this is a Petition requiring a Judge’s order, not a simple Small Estate Affidavit.

What Are the Tax Implications of Charitable Giving?

As a CPA, I always advise clients to consider the tax benefits of charitable donations. Contributing assets directly from your trust can often allow you to avoid capital gains taxes on the appreciated property. This is because you’re essentially transferring ownership without triggering a taxable event. The charity, as a tax-exempt organization, is then not subject to those taxes. This “step-up in basis” can significantly increase the amount ultimately available for charitable purposes. Furthermore, with the OBBBA permanently setting the Federal Estate Tax Exemption to $15 million per person effective Jan 1, 2026, while tax minimization isn’t the primary driver for most Living Trusts, it’s still a valuable consideration.

How Does This Work with Business Assets, Like an LLC?

If your charitable giving involves contributions of business interests – say, membership units in an LLC – there are a few additional considerations. As of March 2025, the FinCEN 2025 Exemption stipulates that domestic U.S. LLCs held in a living trust are generally exempt from mandatory Beneficial Ownership Information (BOI) reporting. However, if the LLC is foreign-registered, the trustee is still obligated to file updates with FinCEN within 30 days to maintain compliance.

What About Access to Digital Assets for Charitable Purposes?

Many of my clients now have significant digital assets – online donation accounts, cryptocurrency earmarked for charities, or digital records documenting their philanthropic intentions. Without specific RUFADAA language (Probate Code § 870) in your trust, these assets can be incredibly difficult for your successor trustee to access. Service providers like Apple, Google, and Coinbase are legally permitted to deny access without proper authorization. Including a comprehensive digital asset section in your trust, with clear instructions and access credentials, is crucial.

What separates a successful California trust distribution from a costly battle over interpretation and accounting?

The advantage of a California trust is control and continuity, but this relies entirely on accurate funding and disciplined administration. Without clear asset titles and strict adherence to fiduciary standards, a private trust can quickly become a subject of public litigation over mismanagement, capacity, or undue influence.

• Asset Protection: Explore irrevocable trusts for asset shielding.
• Post-Death Creation: Understand trusts created by will.
• Policy Management: Utilize an irrevocable life insurance trust for estate taxes.

A stable trust administration relies on the trustee’s ability to balance investment duties, beneficiary communication, and tax compliance. When these elements are managed proactively, families can avoid the emotional and financial drain of litigation.

Verified Authority on California Trust Law

• Trust Validity (Probate Code § 15200): California Probate Code § 15200
  The foundational statute confirming that a trust requires property to be valid. This is the legal basis for the “funding” requirement—without transferring assets (deeds, accounts) into the trust, the document is legally empty.
• Revocability Presumption (Probate Code § 15400): California Probate Code § 15400
  Confirms that California trusts are presumed revocable unless stated otherwise. This grants the settlor the flexibility to change beneficiaries, trustees, or terms as life circumstances evolve.
• Primary Residence Succession (AB 2016): California Probate Code § 13151 (Petition for Succession)
  Effective April 1, 2025, this statute acts as a backup for funding errors. If a home (up to $750,000) is left out of the trust, this Petition avoids a full probate administration.
• Property Tax Reassessment (Prop 19): California State Board of Equalization (Prop 19)
  Essential for all trust creators. While the trust avoids probate, it does not automatically avoid property tax increases for heirs. Specific planning is required to navigate the “primary residence” requirement for children.
• Estate Tax Exemption (OBBBA): IRS Estate Tax Guidelines
  Reflects the OBBBA permanent increase to a $15 million per person exemption (effective Jan 1, 2026). This shifts the planning focus for most Californians from tax avoidance to asset protection and probate avoidance.
• Digital Asset Access (RUFADAA): California Probate Code § 870 (RUFADAA)
  Without this statutory authority included in your trust, your digital legacy (crypto, social media, cloud storage) may be permanently locked away from your family by service providers.