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Charitable Trusts

What is a Charitable Trust?

A charitable trust is a collection of assets that a donor contributes to create a charitable foundation. The trust holds and manages the assets for a designated period of time or lifetime with current interest or deferred assets going to charity depending on the type of trust. The interest can be in the form of an annuity, or permanently specified amount. Or, the trust can be in the form of an unitrust where yearly interest payments are calculated based on a percentage of the trust’s value in a specific year, making it subject to change.

What are Benefits of Having a Charitable Trust?

Charitable trusts can become substantial components of any estate planning program, not just for the wealthy. They allow an individual to make substantial gifts to a favorite charitable organization(s) without giving up all rights to the property at a current or later time.

Through a charitable trust, a person can make a pre-designated future gift to a charity and claim a current income tax deduction for the gift. Income tax is only required for the revenue the property produces. This is an unique exception to the general rule that a person cannot claim a current tax deduction by making a limited or postponed gift.

Thus, a charitable trust is a win-win situation for charities that receive needed funding and donors who access otherwise unavailable tax breaks. In addition, after a trust expires and passes onto a charity or donor beneficiary, estate and gift taxes are significantly reduced.

What Type of Trust Should “I” Use?

There are several different types of trusts that help a client meet their financial, estate and charitable objectives. Please contact us for a free consultation on your unique situation and determine an appropriate course of action.