Tax Planning Strategy 189 | Increase Giving via Discretionary Trusts

This strategy involves a discretionary trust making pre-tax trust distributions to a tax-exempt beneficiary. If the beneficiary is tax exempt (a not-for-profit organization or church) then there will be no income tax paid on that income by the beneficiary. The beneficiary does not need to be able to receive tax deductible donations (i.e. be a deductible gift recipient). 

Example: To give $1,000 to your church you would firstly have to earn approximately $1,500 and pay $500 tax. In contrast if the gift was given by a discretionary trust, the trust could simply give the $1,500 (and the giving has increased by 50%).