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Sharkfin Charitable Trusts

Nashville Attorney for a Diverse Array of Estate Planning Needs

If you have never talked to an estate planning attorney about all of the tools currently available, you may be surprised to find out just how many different types of trusts there are. This statement is also true if you have only a very simple estate plan in place (such as a will and a power of attorney) or if your estate plan was made several years ago. Nowadays, there are many options available that can be of use in a number of different situations. There are trusts designed to help lower income individuals obtain certain governmental benefits, trusts that help to reduce the estate tax burden on large estates, and even trusts that can be used to provide for a loved one with special needs. There are also several different trusts that can be used to provide for charitable gifts, either during the trust settlor’s lifetime or after his or her death. Nashville estate planning lawyer Randy Ratliff can explain how these different types of trusts work, their relative advantages and potential disadvantages, and the effect that they might have in your particular situation.

To understand the nature and purpose of a sharkfin trust, a little background information is useful. All trusts, whether inter vivos (effective during the trustor’s lifetime) or testamentary (not effective until the trustor dies), are considered a separate legal entity from the trustor as an individual. The trust creates a fiduciary relationship through which a trustee manages the trustor’s assets (but only those specifically placed into the trust), for the benefit of certain individuals or organizations that are, in turn, referred to as “beneficiaries.” Some trusts are revocable – that is, they can be changed by the trustor to suit his or her future needs. Many are irrevocable and can only be modified in very limited circumstances, if at all.

The Purpose and Possible Appeal of a Sharkfin Trust

A so-called “sharkfin” or “shark fin” charitable trust can be characterized as a charitable lead trust that is used to provide a reliable stream of income to a charity of the trustor’s choice. Because the amount that is paid out each year is not the same fixed annual amount each year for the duration of the trust (as would normally be the case) but, rather, a series of relatively modest payments for several years with a typically much larger amount paid in the final year(s) of the trust, such a trust is sometimes referred to as a “balloon charitable lead annuity trust.”

Sharkfin charitable (“CLAT”) trusts have a fixed term, after which the principal of the trust is paid to someone other than the charity that has previously benefited from the income stream generated by the trust. There are several important tax consequences that may be available through the use of a sharkfin trust, including possible reduction of certain federal taxes. (In case you are wondering how the sharkfin trust got its rather usual name, imagine a graph of the payments that are made through a vehicle such as charitable lead annuity trust – the spike in the amount of payments due towards the end of the trust resembles the fin of a shark.)

Speak With an Experienced Will and Trust Attorney in Nashville

Because the purpose of many trusts is to take advantage of particular government rules, regulations, and laws, it is very important that a person who seeks to establish a particular kind of trust talk to a lawyer who regularly drafts such documents. The law can change over time, so keeping abreast of the latest developments is extremely important. Relying on information obtained from the internet or from a book can be very risky. Even if the information was accurate at the time it was originally written (which may be highly doubtful, depending on the source), changes in the law may have rendered a particular statement or document obsolete. Seasoned estate planning attorney Randy Ratliff works hard to keep up with the changes that occur regularly in this area of the law. To schedule an appointment to discuss whether a sharkfin charitable trust or other estate planning tool is right for your current situation, call us at 615-656-8282 or contact us online. We proudly serve those in and around both Davidson and Williamson Counties, including in those in Nashville, Antioch, Madison, Hermitage, Goodlettsville, Franklin, Joelton, Brentwood, and Cool Springs.