Maybe you’ve heard of a charitable trust before but you’re not sure what it is. Maybe you are passionate about a particular charitable cause and would like to help fund it but aren’t sure how. At Davidson Law Group, our estate planning attorneys will help you sort through your options to determine which one is most fitting and profitable for your individual needs.
What Is a Charitable Trust?
A charitable trust is an irrevocable trust that is established for charitable purposes. This type of trust gives you the ability to set aside assets for one or more charities. There are two different types of charitable trusts: charitable remainder trusts and charitable lead trusts. The main difference between these two types of charitable trusts is when the beneficiaries receive their payments.
Charitable Remainder Trusts (CRTs) – With this type of charitable trust, certain people will receive the income interest for a particular amount of years or for your lifetime. At the end of the trust term, one or more charities will receive the assets that remain.
Charitable Lead Trusts (CLTs) – Conversely, with this type of charitable trust, the charity you designate will receive the income interest for a particular amount of years or for your lifetime. At the end of the trust term, individuals will receive the assets that remain.
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What Are the Benefits of Having a Charitable Trust?
There are several notable benefits of creating a charitable trust. They include the following:
- Reduce the amount of taxes your estate has to pay upon your death. Once you fund a charitable trust, those assets will be removed from your estate, which will reduce the amount of taxes your estate has to pay when you die.
- Donate anonymously. By drafting a charitable trust with your wills and trusts attorney, you are giving yourself the ability to give to charities you love anonymously. For some people, this may be very important, while for others, they may not want to be anonymous. Regardless, it’s an important factor to be aware of when you create a charitable trust.
- Decrease your income tax. By creating a charitable trust, you can benefit from income tax deductions, as the value of any charitable donation can be deducted from your taxable income. If you work with a wills and trusts attorney to establish a CLT, he or she may help you set it up in a way that allows you to benefit from an upfront charitable tax income tax deduction within the year it is funded.
- Maintain control of what your money is used for. Many donors want to make sure their money is being used for the purpose they actually care about. With a charitable trust, you can allocate money to be used for specific projects or purposes within a charitable organization.
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Speak to an Estate Planning Attorney Today
If you’re interested in learning more about creating a charitable trust, our estate planning attorneys are ready to assist you. Please contact us in Fort Worth, Allen, or Tyler, Texas to schedule your consultation with an attorney today.