Your Guide to Forming a Charitable Trust

If you love the idea of contributing to society through philanthropic donations, consider setting up a charitable trust. Not only will giving back make you feel great, but you can also snag some considerable estate and income tax benefits.

The more money you give, the more you save. In fact, wealthy estates could save hundreds of thousands of dollars. 

Want to know more about charitable trusts? You are in the right place.

What Is a Charitable Trust?

A charitable trust is a group of assets that a person creates or signs over to a philanthropic foundation. The charity holds the money for a specific amount of time and uses the interest that the funds produce for their charitable purposes.

U.S. charitable gift trusts are not tax exempt. They are considered private foundations unless they qualify as a public charity.

Donors can choose from many different types of charities when creating this type of trust. If you are interested in setting one up, choose a subject that is close to your heart.

Now that we know a little more about them, let’s explore the two main types of charitable trusts.

Charitable Remainder Trusts

The first, and most common, is a charitable remainder trust. There are two kinds of charitable remainder trusts.

Charitable Remainder Annuity Trust

In this trust, the donor chooses a specified amount of money to pay their chosen charity at least once per year. The amount has to be equal to at least five percent of the assets and never changes. This happens for at least twenty years.

Charitable Remainder Unitrust

In this trust, the donor pays a fixed percentage, which changes each year based on the total value of the assets. This also happens for at least twenty years.

Charitable Lead Trusts

In a charitable lead trust, a donor sets up a schedule to make fixed donations to their charity of choice. After the term finishes, the assets go back to the donor, or to other chosen recipients.

For example, you could set up a charitable lead trust to make payments to your chosen charity for the duration of your lifetime. After the end of the term, you could ensure that your assets pass on to your children or another relative of your choice.

How to Set up a Trust

The best way to set up a trust is to hire an estate planning attorney. They will make sure your trust is set up correctly.

An attorney will give you individual attention, remove the risk of errors, and ensure that you get the most efficient tax breaks possible. Without the help of a professional, your assets could end up in the wrong hands.

Feel Good About Your Charitable Trust

A charitable trust will keep your assets safe and help you secure considerable tax breaks. But, most importantly, it will change the world for the better.

If you have the means to set up a philanthropic trust, do not delay. Use the information above to figure out which option is best for you.

Want to get started? Contact us today. We are here to help!

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