Charitable Trusts: Lead or Remainder?

Charitable trusts continue to be extremely popular trust options for their diversity and their tax benefits. When you open one of these trusts, you increase your chances of lowering your yearly taxes without hurting your financial situation.

Your money goes to a good cause, and you can reap some of the rewards of your own goodwill, both in terms of joy over your contribution to society and in personal financial terms. The two most common charitable trusts come in the form of lead trusts and remainder trusts. Davidson Law Group offers this brief explanation.

Related Post: Why Should I Consider a Charitable Trust?

Charitable Lead Trust

In a charitable lead trust, you reduce the taxes of an estate by donating a portion of the property income to a charity of the trustee’s choice. The amount given to charity depends on the specific fixed agreement in the charitable trust, but the remainder of the trust then goes to beneficiaries. This often reduces the beneficiaries’ tax obligations to absolutely nothing.

If you worry more about the taxes on your trust, then this trust option might work for you. You want to choose this type of trust when your estate produces high income on a continuous basis. The lack of taxes on your high interest will make it worthwhile.  

Lead trusts, however, are considered irrevocable. This means that you cannot remove assets from the trust. You must know for certain that you wish to relinquish control over your assets before setting up a charitable lead trust.

Related Post: What to Know Before Setting Up a Charitable Trust

Charitable Remainder Trust

This type of trust allows you to split the actual revenue from the sale of your estate between beneficiaries and charities. Whereas in a charitable lead trust a substantial amount of the income goes to the charity and the interest primarily goes to the beneficiaries, the charitable remainder trust concerns itself little with interest and splits the actual income between the two parties.

This form of trust works particularly well with real estate and stocks that are worth a lot but provide limited regular income. Charitable remainder trusts are also irrevocable.

Choosing the Right Trust

It is not always easy to come to the right monetary decision. Settling on an irrevocable trust can be especially nerve-wracking, but Davidson Law Group can help you make this decision with confidence.

We understand the ins and outs of charitable trusts. We’ve been here before with other clients, and we know what to look for in your unique situation. Give us your ideas, and we will advise you as to how to follow them. Contact a wills and trusts attorney to get started on your charitable trust today.