The Charitable Trust is not for everyone. Our recommendation is not to use Artificial Intelligence or a late-night-television-sponsored company to direct you in this important project. It’s a reasonable place to start gathering ideas, but consult an Attorney for guidance.
Financial planners call the Charitable Trust a “split-interest vehicle” because it typically divides the gift into two parts. There is an income benefit and there is a remainder benefit.
Creating the Charitable Trust in this was allows the person creating the trust, the donor, to provide for provide income for themselves or their heirs now, or by leaving a legacy to heirs, and benefiting charity by interim or final gifts of money or property. There are several considerations, including practical concerns and gifting considerations, and there is no one, all-inclusive trust that fits all situations. Read on:
Technically, the two most often used types of charitable split-interest trusts are called the Charitable Remainder Trust (CRT) and the Charitable Lead Trust (CLT).
The CRT is used if you want income today while maintaining charitable gifting intent. You transfer cash, mutual funds or appreciated securities into the CRT. You arrange to receive income during your lifetime and avoid immediate capital gains taxes. The CRT is a contract, as is any other trust, and when you pass away the remaining assets go to the charity that you direct under the terms of the CRT.
The CLT, or Charitable Lead Trust, directs charitable giving at the time that the CLT is created and leaves a legacy for your family later. The CLT charity receives income first — typically for 10, 15 or 20 years — and then your heirs inherit the remainder. CLTs can also help reduce gift and estate taxes. There are different types of CLTs and the selection is based upon tax, financial and other considerations. Your accountant/tax consultant is an important contributor to this process.
Your goals initially drive the decision-making: Do you need or want steady income, the opportunity to maximize charitable giving, or to preserve wealth for future generations.
This is not for everyone. Individuals and families with significant assets will look to use Charitable Trust to combine philanthropic interests and tax planning. Most people will consider donating directly to their charity of choice. But Charitable Trusts offer additional benefits beyond simply the charitable deduction.
Start with a discussion with your Attorney. If you have questions, it would be our pleasure to discuss the Charitable Trust concept with you. Reach out here: https://mshermanlaw.com/contact/
