Is a Charitable Trust Right for Your Estate Plan?

Charitable trusts are a gift that keeps on giving.  Not only can they fund a good cause, but they can also reduce estate taxes and capital gains taxes in the process.   To review how a trust works: A trust is a legal arrangement in which a person, called the grantor, gives control of property to a person or institution, called the trustee, to manage for the benefit of beneficiaries.

A charitable remainder trust is the estate planning tool used more often than the lesser known charitable lead trust.  A charitable remainder trust will have two beneficiaries. Normally, the grantor, the person creating the trust, is one beneficiary, and the other a qualified charity or tax-exempt organization.  During the grantor’s lifetime, they receive a set percentage of income from the charitable trust.  Once they pass away, the charity then receives whatever is left over.  It’s important to note that charitable trusts are irrevocable, meaning the trust terms cannot be altered nor terminated once the trust is created.

The Benefits of a Charitable Trust

Why would someone set up a charitable trust rather than simply donating money to a charity?  There can be a significant tax break, particularly for an asset like stocks which can appreciate and lead to capital gains issues and estate taxes if sold or passed on to beneficiaries.

If you wish to make smaller donations to fund numerous causes that are meaningful to you, then donations or bequests within a will may be a better estate planning option.  But if you wish to fund a cause with a significant asset that can offer a tax break while fulfilling a purpose, then speak with a trust attorney regarding this estate planning tool.

More Questions?

For more information on Trusts, consider attending one of our estate planning workshops or contact our office for more information.