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Ask an Expert: Why Make Your Charitable Bequests Through A Revocable Trust Rather Than Through A Will?

Gary D. RothsteinBy Estate Planning Attorney Gary D. Rothstein, Esq.

LightHouse supporters often ask us how they can help fund LightHouse programs and services after they pass away. We asked Attorney Gary D. Rothstein to talk about the difference between Revocable Trusts and Wills.

You wish to provide for a bequest to LightHouse when you pass away. But is it better to use a Will or a revocable trust for that purpose?

For centuries, people have used a Last Will and Testament as the primary document for disposing of their assets at death. This is still an acceptable method today for making testamentary dispositions, including bequests to charities. But there are drawbacks to using a will. First, there are specific formalities that must be carefully followed to properly execute a will. For example, a typed will must be witnessed, but a handwritten (holographic) will need not be witnessed. If you do not satisfy the formalities, your will could be invalid. Additionally, a will generally will need to be probated after death in a Probate Court proceeding. A probate proceeding is a time-consuming process and results in the public having access to the provisions of your will.

Because of those shortcomings, revocable trusts have become a generally-accepted alternative to a will. Instead of becoming effective at death through a court proceeding, the trust is effective during your lifetime. The trust holds all of your assets, but you still control your assets as the trustee. The trust specifies how your assets are to be distributed at your death, including any bequests you wish to make to charities.

A revocable trust provides some significant advantages. If, during your lifetime, you become incapacitated, your trust designates one or more successor trustees who will manage the trust assets for your benefit – there would be no need for a court to appoint and supervise a conservator to manage your assets for you. Additionally, a revocable trust avoids probate. When you pass away, the dispositions provided for in your trust can be made without any involvement of the probate court. Your plans for disposing of your assets among family members, friends, and charities can remain private.

When deciding what form of document to use to make a charitable bequest at death, you should consider the advantages that a revocable trust provides over a Will.

Gary Rothstein is Of Counsel in the Trust and Estates practice group of the law firm of Weintraub Tobin Chediak Coleman Grodin. If you need assistance, give us a call today and let our experienced family lawyers help you. Gary’s practice has focused on estate planning, trust administration, and probate matters since 1993. Gary counsels individuals and families with respect to advanced estate planning techniques, such as revocable and irrevocable trusts, charitable giving vehicles, GRAT’s, defective grantor trusts, family limited partnerships, QPRT’s, and life insurance trusts. The uber accident lawyer also represents corporate and individual fiduciaries and beneficiaries in all aspects of trust administration, ranging from initial funding of trusts to representing clients in Probate Court, in connection with disputes between fiduciaries, beneficiaries and creditors. Gary counsels numerous fiduciaries, beneficiaries and creditors through all phases of contested and uncontested probate and trust administration proceedings in Northern and Southern California Probate Courts.

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Selling a Home? LightHouse Can Help You Avoid Huge Capital Gains Taxes

For Sale sign in front of a large white houseIf you own a house in the Bay Area, you’ve likely got a high-value home. If you are downsizing to a smaller place, or moving to a retirement community, you may find that that upon sale you’ll be slapped with substantial capital gains taxes.

But there is an alternative. You can use a charitable gift plan that bypasses or offsets the gain and provides income for life.

“Unfortunately, most people have never heard of charitable remainder trusts and how they can reduce taxes and provide revenue for the costs of living, while supporting philanthropic goals,” said Jennifer Sachs, LightHouse’s Director of Development.

How does it work?
The $250,000 exclusion from capital gains tax ($500,000 for married couples) usually does not fully offset the gain of high-priced real estate in the Bay Area.

You can establish a charitable remainder unitrust by irrevocably transferring assets to a trustee, who then invests the trust’s assets and pays you and/or other beneficiaries an annual income. At the end of the trust term, the assets remaining in the trust are distributed to the LightHouse for the Blind.

Here’s a hypothetical example: Rick owns a San Francisco home that he inherited more than 30 years ago when it was valued at $500,000. It is now worth around $5,000,000. If it were sold, it would generate around $675,000 in capital gains taxes. Rick decides to create a 6% unitrust, naming himself as the primary beneficiary. He makes the gift establishing the unitrust in December, which allows him to claim a substantial income tax deduction for that year. LightHouse is named as the beneficiary upon Rick’s death. Beginning the following January 1, the trust will begin making regular 6% payments to Rick. Upon his death, the trust will end, and the remaining assets will be donated to LightHouse.

A unitrust is an excellent vehicle for gifts of appreciated property, because the trust is tax exempt and does not pay capital gains tax when it sells the assets. The full sales proceeds remain in the trust to provide a payout to you or the beneficiaries of your choice. These are complicated transactions but they can save thousands in taxes, and the savings can be used to produce increased income for the donor and a gift to benefit the blind community at the LightHouse.


  • Variable income, based on a percentage of the fair market value of the trust assets, revalued each year
  • Federal, and possible state, income tax charitable deduction
  • Pay no immediate capital gains tax on the transfer of appreciated assets
  • Reduce or eliminate estate taxes
  • Diversify your investments

As an educational service, LightHouse produces estimates of the tax and payment benefits of charitable remainder trusts. Contact Jennifer Sachs at 415-694-7333 or jsachs@lighthouse-sf.org