Giving to charity can be a great way to help others, but if you’re not certain about some of the legal and technical aspects of giving to a charity, learning more about a charitable trust could be beneficial. There are tax incentives that you can take advantage of as well as other pros to this type of trust.
How a charitable trust works
A charitable trust is made of assets, usually liquid, that are signed over into a trust. The people managing the trust use the interest to fund grants and other charitable donations. There are two types of charitable trusts: remainder trusts and lead trusts. A remainder trust is one where the assets are signed over to the trust for a particular amount of time. A lead trust is one in which the donor retains control of the assets, but the interest goes to a charity, or it can be split between a charity and beneficiaries.
The tax breaks aren’t just for the donor. While a lot of people set up charitable trusts during estate planning as a way of giving back to others, another reason to set up a trust is to take advantage of the tax breaks that you can pass onto your beneficiaries, such as your children and other family members. When you set up a lead trust, you’ll be able to have payments go to your favorite charity for a period of time; when the time is up, you’ll be able to give the remaining funds to your beneficiaries, and they’ll benefit from the tax breaks.
Charitable trusts are a solid option for people who want to be able to provide donations and grants to their favorite charities, but they’re also a good way to pass along assets to beneficiaries and get tax breaks. An estate planning attorney may help you learn more about charitable trusts to find out if setting up one is the right option for you.