Are you looking for an estate plan that allows you to care for your loved ones and your favorite charity?
What kind of impact could the tax breaks have on your retirement plan?
Use this opportunity to learn about the benefits of a charitable trust and how you can leave a legacy with your estate plan.
After setting up a charitable trust, everyone can benefit. Find everything you need to know to get started in the sections below.
What Is a Trust?
It’s common to form trusts while making a will. You have the right to create a legal document that outlines assets you wish to pass to a beneficiary.
The two basic types of trusts include irrevocable and revocable trusts.
An irrevocable trust accomplishes what its name suggests: you cannot make changes after its creation. Neither the trustee nor the beneficiaries may remove anything from the trust. Larger estates may choose this option, but that doesn’t mean it’s only for the wealthy.
You can change or revoke a revocable trust anytime during your life. You may have heard this called a living trust in the past. This document accomplishes:
• Creating an initial trustee
• Transferring the title for a property to a trust
• Providing the flexibility to remove property during your lifetime
What Is a Charitable Trust?
A charitable trust gives you the option to leave part or all your assets to a non-profit organization. If you have nonessential assets that you would like to donate to charity, common choices include:
• Money
• Stocks
• Real Estate
• Other valuables (artwork, jewelry, etc.)
You also have the flexibility to establish an estate plan that benefits yourself, beneficiaries, and a favorite charity.
How Do Charitable Trusts Work?
The grantor of a charitable trust transfers control of property or assets into an irrevocable trust. You also name an organization to take responsibility and serve as the trustee. It’s common for that board to invest the property to generate regular income.
For a charitable trust, you can donate to a 501(c)(3) organization.
The two main types include charitable remainder trusts and charitable lead trusts.
What Is a Charitable Remainder Trust?
You may have heard this trust called a split-interest trust. Income from the trust goes to one or more beneficiaries, and the rest goes to a charity.
What Is a Charitable Lead Trust?
A charitable lead trust establishes an amount of the trust’s income to donate to a 501(c)(3) organization. The rest of the dividends can either go to beneficiaries or stay within the trust.
When the payment period ends, all assets transfer to either the beneficiary or a charity.
Need More Information?
Now that you know the basics, what can you do if you’re interested in creating a charitable trust?
Outline the assets or property you would like to transfer and call a trusted attorney in your area. You don’t want to delay planning and have your estate wind up in probate.
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